The Credit Repair Organizations Act (CROA) defines how credit repair organizations are allowed to operate.
It is a myth that credit repair organizations are illegal. That is only true in Georgia where operating a credit repair organization is a misdemeanor. In every other state, it is perfectly legal to be a credit repair company as long as it complies with the rules of CROA.
For example, a credit repair organization cannot bill you in advance for services that have not yet been rendered. They also have to disclose to you that you can challenge information on your credit reports for free.
The Federal Trade Commission is the enforcement arm for this law. In fact, the FTC closed down 34 credit repair organizations in 2008 for violations of CROA in what they referred to as “Project Clean Sweep.”