fix my credit

They go by many names- debt repair company; credit card consolidation service; credit consultants; even consumer credit counseling service. We had a client recently ask us, are these types of “services” legal in New York? Can they actually help you improve your credit score, or are they just scams?  A lawyer’s favorite answer is always “it depends.” And there’s no exception here.

New York State Law makes it illegal for credit repair services companies to charge consumers money upfront to help fix their credit.

   Debt reduction services have been around since the inception of the credit report. They all essentially work the same way: pay them a monthly fee, and they will help you fix your credit. And by “fix your credit”, they mean they give you a form letter for you to mail in yourself to the credit reporting bureaus like Experian, Equifax and Transunion to dispute entries on your credit report, even though these same dispute letters are available for free on line. Some even promise to monitor your credit report once every several months, and alert you if there appears to be any fraudulent entries on your credit report. Which is also something you can do yourself for free (for example, by visiting websites like

   So how do certain credit repair companies get away with having people sign up for long-term contracts, charging $49 to $79 a month for a service that consumers can do themselves for free? Well, the answer is, they don’t. Or at least, they just haven’t been caught yet.

Credit Repair Companies & New York State Law

The New York State Legislature has stated that it realizes how important it is to consumers to obtain and use credit, so it has no problems with consumers seeking assistance from credit services businesses that legitimately offer to improve the credit standing of New York consumers. As long as those companies do not charge consumers for their services, or do not charge until their credit is actually repaired.

A “Credit services business” is defined as any person who sells, provides, or performs, or represents that he can or will sell, provide or perform, a service for the express or implied purpose of improving a consumer’s credit record, history, or rating or providing advice or assistance to a consumer with regard to the consumer’s credit record history or rating in return for the payment of a fee. “Credit services business” does not include any person admitted to practice law in New York.

The distinction here is that New York State law makes it illegal for credit repair companies to charge consumers advance fees in exchange for its services. New York General Business Law § 458-e in fact, states that charging consumers advance fees to repair their credit is a Deceptive Business Act, making these types of credit repair companies liable for all the penalties available to consumers under GBL 349, New York’s Unfair & Deceptive Business Practices Act (which includes the recoupment of monetary fines and attorney’s fees).

So what happens if you paid a credit repair company in advance to help fix your credit?

Well, they violated the law. Luckily, New York General Business Law § 458-g states that your contract with the credit repair company is void and unenforceable as contrary to public policy.

But wait,….there’s more!

(GBL § 458-h) It’s also unlawful for a credit repair company to

  • misrepresent directly or indirectly in its advertising, promotional materials, sales presentation, or in any manner:  the nature of the services to be performed; the time within which services will be performed; the ability to improve a consumer’s credit report or credit rating;  the amount or type of credit a consumer can expect to receive as a result of the performance of the services offered;  the qualifications, training or experience of its personnel.
  • Make or counsel or advise any consumer to make any statement which is untrue or misleading and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading, to a consumer credit reporting agency or to any person who has extended credit to a consumer or to whom a consumer is applying for an extension of credit, with respect to a consumer’s credit worthiness, credit standing, or credit capacity.
  • Represent directly or indirectly in its advertising, promotional materials, sales presentation, or in any manner that it can procure or obtain a credit card for a consumer unless that credit services company has authority to issue the credit card being advertised.

So what can you do if you hired a Credit Repair Company, and they charged you money up front?

Well, are you happy with them? If so, great! But most likely, judging from the history of complaints filed regarding the credit repair industry, they charged you fees up front and did nothing to help you fix your credit. So what can you do?

  • You can sue the credit repair company under GBL § 349 & 350, get your money back + damages + have all of your attorney’s fees paid for you.
  • You can sue the credit repair company for damages under GBL § 458-I, allowing you to recover up to three times the actual damages, but in no case less than the amount paid by the buyer to the credit services business, plus your attorney’s fees.

Has anyone Sued Credit Repair Companies in New York Before?

Yes. All the time. As I come across cases, I will add them to this list.

  • Debt Reduction Services (People v. Nationwide Asset Services, Inc., 26 Misc. 3d 258) court found that a debt reduction service repeatedly and persistently engaged in deceptive business practices and false advertising in violation of GBL §§ 349, 350 (1) “ in representing that their services ‘ typically save 25% to 40% off ‘ a consumer’s total indebtedness “, (2) “ failed to take account of the various fees paid by the consumer in calculating the overall percentage of savings experienced by that consumer “, (3) “ failing to honor their guarantee “, and (4)
“ failing to disclose all of their fees.”


Murtha Law Group

Author Murtha Law Group

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Join the discussion 3 Comments

  • Kelly says:

    Interesting read! My friends recently went to a credit repair company. I was a bit worried about the advice they gave my friends, as it didn’t seem to make sense to me.

  • James Frost says:

    Excellent article guys! Very interesting to finally learn the actual laws on credit repair. There seem to be a lot of credit repair scams and it’s hard to differentiate between the genuine companies and scammers.

  • Stephanie Rodriguez says:

    Great article I worked for a credit repair company in Brooklyn, ny when I realized what was going on and started looking into things I was let go.

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