PERCA newly released study finds that implementation of the Credit Repair Organizations Act (CROA) discourages interested consumers from learning more about their credit reports and scores, creating conflicts with other federal laws and public policy objectives. The authors, from the Policy and Economic Research Council (PERC) and Take Charge America Institute (TCAI) at the University of Arizona, examined data from users of a credit education product offered by a national consumer reporting agency and found improvements in credit scores and consumers’ credit tiers materially outpaced those of a comparison group. Despite these benefits, few consumers completed the purchase process to learn how to improve their scores.

“This report finds that consumers who used an individualized credit education product experienced greater improvements in credit scores compared to those who received generic education materials,” said Dr. Michael Turner, president and CEO of PERC and one of the study’s co-authors. “Unfortunately, dated financial regulations create obstacles that deter significant numbers of consumers from using credit education products.”

The study looked at data collected by Experian on 1,365 consumers who purchased and used Experian’s Credit Advisor product during a 13-month period between March 2011 and March 2012. Among those who successfully completed the product’s counseling experience moved to a better credit risk tier at nearly twice the rate of those receiving educational materials only (22% vs. 13% for the VantageScore credit score, and 26% vs. 13% for the PLUS credit score). The report also examined survey data from consumers who interacted with the product to understand the factors that impacted their decisions. Significant numbers of interested consumers failed to complete the purchase process following exposure to the procedures required by CROA, with many citing the mandated 3-business day waiting period as a leading reason. For example, at a free price point, 46% of respondents who did not use the product said they would have if they could have done so immediately.

Credit reports and scores are an important factor in determining access to and the cost of credit for individuals and small business owners. Federal law and policy statements from elected officials and regulators encourage Americans to engage with the national credit reporting agencies to learn more about their credit reports and scores. Recent expansive court interpretations of CROA have resulted in the reclassification of core credit bureau services that have nothing to do with credit repair—credit monitoring, credit education, identify verification—as credit repair activities. These decisions have put CROA at odds with policy objectives in both the Fair Credit Reporting Act (FCRA) and the Fair and Accurate Credit Transactions Act (FACT Act) that envision significant financial education roles for the three nationwide consumer reporting agencies, Equifax, Experian, and TransUnion.

The report concludes with a call for Congress to amend CROA to exempt the nationwide consumer reporting agencies in order to eliminate the tension between the CROA and the FCRA and FACT Act. The report finds that exempting the nationwide consumer reporting agencies from CROA carries no risk of consumer harm as the agencies have an obligation under the FCRA to ensure maximum possible accuracy of data in their repository, and any other unfair or deceptive practices are already heavily regulated by the Federal Trade Commission Act and the broad powers of the Consumer Finance Protection Bureau (CFPB) that did not even exist when the CROA was passed nearly 20 years ago.

You can download the report on PERC’s website here: