Murkowski, Coons introduce legislation to protect Americans from credit repair scams

Murkowski, Coons introduce legislation to protect Americans from credit repair scams

Washington, DC-U.S. Senators Lisa Murkowski (R-AK) and Chris Coons (D-DE) introduced the Ending Scam Credit Repair Act (ESCRA) today to crack down on fraudulent credit repair organizations that exploit consumers with high fees, false promises, and deceptive practices.

Credit repair organizations (CROs) often claim they can improve a consumer's credit score by disputing negative information on credit reports or negotiating with creditors. While some legitimate counselors help consumers navigate credit issues, too many bad actors charge upfront fees, promise results they cannot deliver, and take advantage of people already facing financial hardship.

The Ending Scam Credit Repair Act would strengthen protections for consumers by prohibiting CROs from collecting payment until six months after they have provided proof that a consumer's credit score has improved. The bill would also require CROs to register with a state, increase civil penalties for violations, require stronger disclosures to consumers, and prohibit "jamming," a tactic in which CROs flood financial institutions with duplicative disputes that can prevent legitimate credit report issues from being addressed.

Companion legislation was introduced in the House by U.S. Representatives Sarah McBride (D-DE and Young Kim (R-CA).

"There are too many predatory operators in the credit repair industry exploiting financially vulnerable Americans with deceptive practices and exorbitant fees," said Senator Murkowski. "Rebuilding financial stability and improving one's credit score is often a grueling, time-consuming process. This legislation establishes long-overdue guardrails and accountability to stop bad actors from profiting off those trying to get back on their feet."

"Americans are already stretched thin. Improving a low credit score is hard enough without having to navigate predatory companies seeking to lie to you and rip you off," said Senator Coons. "The Ending Scam Credit Repair Act would protect Americans trying to restore their financial foundation while making it easier for honest businesses to succeed."

The legislation responds to widespread abuse in the credit repair industry, where some companies exploit loopholes in current law to charge consumers without delivering any meaningful results. A common warning sign of a scam is when a company asks for payment before providing services or guarantees that it can remove accurate information from a credit report or raise a credit score by a specific amount. Under ESCRA, credit repair organizations would be required to disclose that they do not provide any service that a consumer could not do themselves for free. The bill also creates new standards for communications with furnishers of consumer information in order to streamline legitimate credit repair efforts and reduce abuse.

Additionally, ESCRA would:

• Prohibit CROs from requesting or receiving payment until they provide documentation from a consumer reporting agency issued at least six months after completing their service showing that the consumer has been successfully represented.
• Prohibit CROs from "jamming" financial institutions with duplicative disputes.
• Require all CROs to register with a state.
• Increase civil liability to $500 per violation, if greater than the consumer's actual damages or the amount paid to the CRO.
• Require CROs to disclose that they do not provide services consumers could not do themselves for free.
• Establish requirements for CRO communications with furnishers of consumer information.

The Ending Scam Credit Repair is endorsed by the National Consumer Law Center, American Financial Services Association, National Association of Consumer Bankruptcy Attorneys, American Bankers Association, National Association of Consumer Advocates, Consumer Bankers Association, Delaware Community Legal Aid Society, Delaware Community Reinvestment Action Council, American Fintech Council, Consumer Action, and the AARP.

"As financial fraud becomes more sophisticated, AFSA supports bipartisan legislation from Senators Chris Coons and Lisa Murkowski to combat credit-repair organization scams, which increasingly harm consumers by charging hundreds of dollars with no positive results. This bipartisan effort will prohibit credit repair organizations from jamming financial institutions with duplicate requests and prevent these entities from taking advantage of consumers who are seeking better financial footing," said Michael Grimes, Vice President of Congressional Affairs at the American Financial Services Association.

"AARP is committed to ensuring older Americans are financially secure in retirement so they may retire with dignity. Unfortunately, older Americans who have errors or negative marks on their credit report are often locked out of access to credit as they try to address these issues on their credit reports. Making matters worse, credit repair organizations (CROs) may claim to help them erase or fix items on people's credit reports but instead exploit customers with the promise of a quick credit fix… AARP is pleased to support [this] legislation, which would introduce new rules to shield consumers from misleading and fraudulent practices," said the AARP.