FTC Going After Credit Repair Firms

People across this county have seen their credit scores plummet at an incredible rate. Be it from credit card companies cutting your limits, or the more traditional manner of simply not being able to keep up with your payments; our country is facing a credit score nightmare. Of course whenever a problem arises, there are people out there that try and exploit the problem by offering an apparent easy way out or shortcut. During these times this has led to the emergence of so called credit repair firms that offer to fix people’s credit scores… for a small fee of course.

When people are looking to get a new residence or a new car and find out that their credit score is simply not good enough to get what they had dreamed off, they become desperate for ways to raise that credit score the few points that they need. Credit repair sounds like a tremendous option, here are these people offering to eliminate the negative things on your credit report so that you can get that great home or nice new car. In these situations its imperative to remember that if it sounds too good to be true, it probably is.

Fortunately for consumers, the FTC has now stepped in to try and at least regulate this unsavory practice. The Los Angeles Times has a great article this week entitled “FTC Targets Firms that Promise Quick Fixes for Consumer’s Credit Problems” that talks about this situation. The article mentions two new legal settlements, reached by the Federal Trade Commission, against firms that offered to eliminate negative information off their client’s credit reports.

Successful Credit Service Corp. in Woodland Hills allegedly promised clients that it could erase bankruptcies, missed payments, tax liens and other damaging credit file data permanently.

“We fix the credit 100% guaranteed whether it is a bankruptcy or a 30-day late,” said one of the company’s Internet ads cited by the FTC. “It does not matter how low or how big it is, anything that’s on there, we can remove.”

The firm could achieve these results, ads said, partly because of the “priceless relationships we have with every creditor, collection company, public records provider and credit bureaus. We deal directly with these institutions in order to eradicate the problem at the source.”

For this tremendous service, made possible by these supposed inside connections that they have, customer’s were changed anywhere from $3,000 to $4,000. This money of course had to be paid upfront.

If the company could indeed do what they claimed, that payment amount would seem like a pretty good deal. Based on the improved interest rate you can get with a good credit score, consumer’s could certainly save that amount right off the bat. Making the service more than worthwhile. Unfortunately, what they promised just isn’t possible.

The problems the FTC had with the company’s proposal, is that it is in fact pretty much just a straight up lie. It’s a violation of federal law for a credit repair company to collect their fees upfront before performing any service. It’s another violation for any of these company’s to tell you that they can remove negative information that is accurate and current. If these organizations could really do this, it would defeat the entire credit score system. To believe that the system could simply be manipulated like this is ridiculous.

It gets worse too. According to the FTC, after collecting the money from their clients, the company did “little, if anything, to fulfill the promises”. In my book, this is just straight up fraud. I’ll admit that their customer’s were fairly ignorant to think this proposal is even possible, but that still does not give them to the right to straight up rob them. “Customers” of this firm reported that they even found it next to impossible to speak with the account executives assigned to their case.

The settlement against this criminal enterprise included an $8.3 million judgement, as well as a ban against them from engaging in credit repair services. However, that $8.3 million has been suspended due to the firm not having the financial assets to pay the judgement. Like any criminal organization, they weren’t keeping the money they collected sitting in accounts. They were out their living the high life I’m sure.

The other settlement the FTC got was against two people in Texas who operated several different credit repair services. These companies basically did the exact same thing. They targeted customers who had filed for bankruptcy protection. Telling them “we will repair your credit so that this past event does not haunt your future. . . . We clean up your report’s history and increase your score.” Basically what they were promising to people was to take away any of the negative consequences associated with bankruptcy. If bankruptcy stuff didn’t stay on your credit report for 7-10 years, then everyone would be doing it. Our entire financial system would fail, because there would be no incentive to pay for anything. Well expect for not having to pay that annoying fee to these credit repair services.

What people need to realize and take from this is that there are no quick fixes for your credit score if the information is accurate. That’s not to say that the entire credit repair industry is a scam. Credit repair done the right way gets rid of information on there that might be wrongly attributed to you or simply reported inaccurately. There certainly is a whole lot of that going on. People of course can attempt to clean up the false information themselves, but as with any service its a whole lot easier if you hire a professional. Making sure all the information on your credit report is really you AND reported accurately is the service that legitimate credit repair organizations offer. Anyone offering you anything more than that, and wanting payment upfront to do it, is simply looking to take your money.