S. 4144 — ESCRA Act

This section revises the definition of credit repair organization under the Credit Repair Organizations Act by (1) excluding payments received for representing a consumer in preparation for or during litigation from the "payment of money or other valuable consideration" that triggers the definition; (2) limiting existing exclusions to an entity or individual acting in good faith and not for the purpose of evading the Act; and (3) adding a new exclusion for any attorney 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 the Bankruptcy Code or the Consumer Credit Protection Act, if provided by an attorney within the same law firm.

This section revises prohibited practices under the Credit Repair Organizations Act (CROA), which regulates companies offering to improve consumers' credit records or ratings for a fee. Specifically, it (1) amends CROA Section 404(a)(1) to prohibit knowingly making (or advising consumers to make) untrue or misleading statements about a consumer's creditworthiness to the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC), or federal, state, local, or tribal law enforcement agencies (directly or via online portals for complaints, disputes, or fraud reports), in addition to consumer reporting agencies and creditors; (2) amends Section 404(a)(2) to extend the prohibition on statements intended to alter a consumer's identification to conceal accurate, non-obsolete adverse credit information to the CFPB or FTC; (3) replaces Section 404(b) to prohibit credit repair organizations from receiving any fee for services represented to improve credit until providing the consumer a consumer report (issued no earlier than 180 days after service completion) from a consumer reporting agency demonstrating the represented results were achieved (previously, no payment before full performance of any agreed service); and (4) adds Section 404(c) to prohibit "jamming," or submitting multiple disputes of the same information under Fair Credit Reporting Act Section 611 unless the consumer reporting agency or data furnisher had adequate time to investigate the prior dispute, provided results to the consumer (absent material changes in the resubmission), and the resubmission includes a specific description of inaccuracies.

This section revises disclosure and record retention requirements for credit repair organizations under the Credit Repair Organizations Act. Specifically, it (1) inserts into the required written consumer disclosure the statement "Credit repair organizations do not provide any services that you cannot do yourself for free," updates the regulatory reference to state that the Federal Trade Commission and the Bureau of Consumer Financial Protection regulate credit repair organizations, and adds Bureau of Consumer Financial Protection contact information; and (2) requires retention of any recordings of telephone communications with the consumer, in addition to the consumer's statement, for 5 years (from 2 years), with the retention period beginning when the statement is signed or the telephone recordings are created.

This section revises contract copy requirements under the Credit Repair Organizations Act (15 U.S.C. 1679e(c)) to also require credit repair organizations to provide consumers with copies of all communications sent on the consumer's behalf at the time sent, in addition to copies of the completed contract, disclosure statement, and other signed documents previously required. (Thus, consumers who contract with these organizations—which offer paid services to improve credit reports or histories—receive immediate duplicates of any correspondence sent to creditors, credit bureaus, or others.)

This section amends the noncompliance provisions of the Credit Repair Organizations Act by adding two new subsections: (1) subjecting credit repair organizations to the Act 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); and (2) prohibiting any person from acting as a credit repair organization without a state license on or after January 1, 2026.

This section establishes requirements under new section 408A of the Credit Repair Organizations Act (15 U.S.C. 1679 et seq.) for disputes and communications submitted by credit repair organizations—nonprofits, creditors, and certain financial institutions excluded—to persons who furnish information to consumer reporting agencies. The requirements are as follows: (1) mailed disputes must use first-class mail with the credit repair organization's name and state license number (if applicable) on the envelope; (2) disputes must list the credit repair organization's name, state license number (if applicable), and the consumer's name; (3) additional communications must identify material changes from the initial dispute and include the information in (1) and (2); (4) blank dispute forms provided to consumers must include the credit repair organization's name, address, and state license number (if applicable); (5) credit repair organizations must respond in writing within 15 business days to a furnisher's request for clarification, verification of consumer engagement, or denial of the claim; (6) attorney credit repair organizations must certify that communications are consistent with reliable consumer-provided information; and (7) disputes must disclose that they are submitted by a credit repair organization. This section also makes a conforming change to the Act's table of contents.

This section modifies the civil liability damages calculation under the Credit Repair Organizations Act—which regulates for-profit entities offering to improve consumers' credit reports or scores for a fee—to the greater of (A) actual damages sustained, (B) amounts paid to the organization, or (C) $500 for each violation of the Act (previously, the greater of (A) or (B)). (Thus, consumers may recover statutory damages of at least $500 per violation even absent actual damages or payments to the organization.)