H.R. 306 — ESCRA Act

This section revises the definition of credit repair organization under the Credit Repair Organizations Act by (1) excluding from "valuable consideration" any payment received for representing a consumer in preparation for or during litigation; and (2) applying a "good faith and not for the purpose of evading this title" qualifier to all exclusions and adding a new exclusion for any attorney (or entity/individual) providing legal services rendered or to be rendered to a consumer in contemplation of or in connection with a case filed, or to be filed within 12 months, under title 11 (Bankruptcy Code) or title 15, U.S. Code, by an attorney within the same law firm. (Thus, attorneys assisting consumers with qualifying debt-relief litigation, such as bankruptcy, are exempt from CROA regulation.)

This section amends prohibited practices for credit repair organizations under the Credit Repair Organizations Act (15 U.S.C. 1679b) as follows: (1) requires that untrue or misleading statements or advice to consumers concerning their creditworthiness be made knowingly (previously prohibited without a "knowingly" standard) and expands the list of prohibited recipients to include the Consumer Financial Protection Bureau (CFPB) directly or through an online portal, the Federal Trade Commission (FTC) directly or through an online portal, or any federal, state, local, or tribal law enforcement agency directly or through an online portal (in addition to consumer reporting agencies and certain creditors); (2) for statements intended to alter consumer identification and conceal accurate adverse credit information, expands the list of prohibited recipients to include the CFPB or FTC (in addition to consumer reporting agencies and certain creditors); (3) revises the advance payment prohibition to bar requesting or receiving any fee for services represented to remove derogatory or inaccurate information or improve a consumer's credit until providing the consumer with a consumer report—issued no less than six months after the service—demonstrating achievement of the representation (previously barred charging before services fully performed); and (4) prohibits "jamming" by submitting multiple disputes of the same information under the Fair Credit Reporting Act (15 U.S.C. 1681i) unless the consumer reporting agency or data furnisher had adequate time to investigate the prior dispute, returned results to the consumer (absent material changes), and the resubmitted dispute includes a specific description of the inaccuracy.

This section revises disclosure and recordkeeping requirements for credit repair organizations under the Credit Repair Organizations Act. Specifically, it (1) amends the pre-contract written disclosure statement by adding that "Credit repair organizations do not provide any services that you cannot do yourself for free," inserting a reference to regulation by the Bureau of Consumer Financial Protection (CFPB) alongside the Federal Trade Commission, and including CFPB contact information; and (2) requires retention of telephone communication recordings with consumers and extends the retention period for specified records—including consumers' statements and such recordings—to 5 years (from 2 years). (Thus, the changes emphasize consumers' ability to dispute credit reports independently at no cost and enhance regulatory oversight and evidentiary requirements.)

This section requires credit repair organizations to provide consumers with copies of all communications sent on the consumer's behalf at the time each communication is sent. (Previously, such organizations were required to provide only copies of the completed contract, required disclosure statement, and other documents the consumer signs, at the time the contract or other document is signed.)

This section amends the noncompliance provisions of the Credit Repair Organizations Act (CROA)—which regulates entities offering to improve consumers' credit reports or histories for a fee, often to prevent abusive practices—by adding two new subsections. (1) Subsection (d) subjects credit repair organizations to CROA regardless of whether the organization is, or employs, an attorney who also provides legal services to a consumer, except for an attorney described in section 403(3)(B)(iv) (Thus, organizations may no longer evade CROA regulation by claiming to offer legal services.). (2) Subsection (e) prohibits any person from acting as a credit repair organization on or after January 1, 2026, unless licensed by a state.

This section establishes requirements for disputes and communications submitted to furnishers of information to consumer reporting agencies by or on behalf of credit repair organizations (i.e., entities that provide services to improve consumers' credit records, histories, or ratings). Specifically, such disputes must (1) if sent by mail, use first-class mail with the credit repair organization's name and state license number (if applicable) listed on the envelope; (2) list the credit repair organization's name and state license number (if applicable) and the consumer's name; (3) for additional communications, clearly identify material changes from the initial dispute and include the information in (1) and (2); (4) for any online or paper blank dispute form provided to the consumer, include the credit repair organization's name, address, and state license number (if applicable); (5) receive a written response from the credit repair organization within 15 business days if the furnisher seeks clarification, verifies consumer engagement, or denies the claim; (6) if submitted by an attorney credit repair organization, include a certification that the communication is consistent with consumer-provided information verified by reliable methods; and (7) disclose that it was submitted or prepared by a credit repair organization using specified language referencing the Credit Repair Organizations Act. This section also makes a conforming change to the act's table of contents.

This section revises the civil liability damages calculation under the Credit Repair Organizations Act—(i.e., a law regulating companies that charge fees to improve consumers' credit reports, histories, or scores)—to the greater of (A) actual damages sustained, (B) amounts paid to the credit repair organization, or (C) $500 per violation of the Act (previously, the greater of only (A) or (B)). (Thus, it establishes a statutory minimum recovery of $500 per violation.)