Home Credit repair Your right to cancel a credit repair contract

Your right to cancel a credit repair contract

Federal law gives you three business days to walk away from a new credit repair contract, at no charge. Here is what the law requires before and after you sign.

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The three-business-day cancellation right

A business owner who signs a credit repair contract has a short window to change course. The CFPB says you can cancel a new credit repair contract for any reason within three business days at no charge.

The reason does not matter. Maybe you found a cheaper option. Maybe you read the contract more closely at home. The law does not ask you to justify walking away inside the window.

What must happen before you sign

The Credit Repair Organizations Act sets rules that come before you sign anything. It requires a written disclosure statement before you sign any contract. That statement must come as its own paper. It cannot be tucked into the contract or any other papers they hand you.

The law also says the company may not start work without a written, dated contract that you have signed. No signed, dated contract means no work should start.

What the contract must contain

The FTC's page on the Credit Repair Organizations Act says these contracts must be in writing. CROA goes further and lists what the writing has to say.

The contract must state the terms and conditions of payment, including the total amount of all payments. It must describe the services in full detail. It must also list every promise the company makes about results. It must also give the company's name and its main business address.

Near the place where you sign, the contract must have a bold statement. It must tell you that you have the right to cancel. A contract missing any of these pieces does not follow the law.

The Notice of Cancellation form

Each contract must be accompanied by a duplicate form headed Notice of Cancellation. This is the paper you use to cancel within the window. It should come with the contract itself, not as a follow-up.

Check that the form is there before you sign anything. A company that leaves it out is skipping a step the law requires. Our page on credit repair scams covers the warning signs the CFPB names.

When a contract is void

The law has a sharp penalty for companies that ignore these rules. The Credit Repair Organizations Act says a services contract that does not comply with the law is void and may not be enforced.

So a contract that skips any of these may be void. The law says it may not be enforced against you. That is what the statute says, not a negotiating tactic.

You can often handle this yourself

Here is the part many business owners miss. The CFPB says you can dispute errors in your credit reports yourself for free under the Fair Credit Reporting Act.

A dispute is for mistakes. Accurate, timely negative items stay, and no one can have them removed. Our guide on how do I repair my own credit walks through the steps.

Some owners still want help with the process. If that is you, read up on assistance with credit repair first, and know what the law requires of anyone you hire. For how the law treats business credit, see our page on business credit repair.

What to check before you sign

Run through this list before any signature.

  • Is there a separate written disclosure statement, apart from the contract?
  • Is the contract written and dated, and have you signed it?
  • Does it state the payment terms and the total of all payments?
  • Does it describe the services in full, with any guarantees of performance?
  • Does it name the company and its main business address?
  • Is there a bold statement near the signature space about your right to cancel?
  • Is the Notice of Cancellation form attached?

A missing item means the contract may be void. A company that will not hand over these papers before you sign is telling you something. The CFPB says a new credit repair contract can be cancelled for any reason within three business days at no charge.

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