Credit Basics
Credit Reporting &
Scoring
Credit, Information &
Privacy
Credit & Debit Cards
Mortgages & Home
Equity Loans
Debt Management
FreeCreditReport
Rate Your Credit
Test Your Credit IQ
Ask The Expert
|
| FTC Cracks Down on Credit Repair Companies |
 |
They are seen or
heard everywhere from newspapers and radio to television and the
Internet. These ads offer to erase negative information on your
credit file-for a price. Have you read any advertisements like
these that guarantee to fix your credit report? "Credit
problems? No problem!" Or, "we can remove bankruptcies,
judgments, liens, and bad loans from your credit file
forever!" If you thought they sounded too good to be true, you
may have been right.
Credit repair
companies can do no more for your credit legally than you can. And
though they can't provide you with a clean report, some may
encourage you to violate federal law. These credit repair operations
work by seeking out consumers who have been denied loans or credit
based on their poor credit histories, or people who have filed for
bankruptcy. These repair companies promise to provide consumers with
instructions on how to develop a new credit identity. This method of
credit repair is called "file segregation."
In this file
segregation scam, the so-called credit repair companies recommend
that you get an Employee Identification Number (EIN) or Individual
Taxpayer Identification Number (ITIN) and they encourage you to use
it in place of your true Social Security number, which is
illegal.
To learn more about file segregation you can
refer to the Credit, Information & Privacy article "Credit Repair Scam Could Lead You to Commit Fraud."
Sting Operation Targets Credit Repair Frauds
In February of 1998, the office of the
Treasury's inspector general for tax administration arranged over
one hundred investigations of credit repair companies and
individuals that sold or used the employer identification numbers to
defraud creditors. This sting operation resulted in numerous charges
such as misrepresenting a Social Security number, mail fraud and
conspiracy.
The Federal Trade
Commission (FTC) and the National Association of Attorneys General
announced legal action against many of these credit repair companies
and are warning consumers to use their better judgments before
paying for such useless services. Be wary of any company that claims
they can provide you with a "brand new" credit
file.
The Treasury's
inspector general for tax administration has conducted over one
hundred investigations of individuals who sold or used employer
identification numbers to defraud creditors. This investigation has
resulted in 58 charges stemming from misrepresenting a Social
Security number to mail fraud and conspiracy. The office is still
investigating over two hundred additional people who have illegally
submitted information in regards to obtaining an EIN number as the
credit repair company instructed them to do.
These scam tactics
are expensive for both businesses and consumers. The
Treasury's tax administration inspector general has estimated
that nearly $400 million in fraudulent loans and credit has been
established across the country, a cost that often is absorbed by the
businesses providing credit, and eventually by their
customers.
Remember that no one
can legally remove accurate information from your credit report.
But, the law does allow you to dispute information in your file that
is either inaccurate or incomplete. You must identify each item in
your report that you want to dispute, explain the reason why you are
disputing the information in question, and then request a
re-investigation into your file.
If all the
information turns out to be accurate, the only cure for negative
information on a credit report is time and keeping your payments
current. The accurate but negative credit information will be
removed from your credit report after seven years from the time it
first appears. In the case of bankruptcy, the information may remain
on your credit report for up to 10 years.
Your Rights According to the Credit Repair Organizations Act
This law prohibits credit repair companies from
charging a fee until their services have been performed. It also
requires them to tell you about your legal rights. They must provide
a written contract that details what services are to be performed,
how long it will take, the total cost of the service and any
guarantees that are offered. According to this law, these contracts
must also explain that consumers have a three-day grace period to
cancel the service at no charge.
Under this law, you
have the right to sue in federal court if the company defrauds you.
It allows you to seek your actual loss or the amount you paid the
company--whichever is more. You can also attempt to claim
punitive damages: an amount of money to penalize the company for
breaking the law.
The Credit Repair
Organizations Act also allows a class action suit in federal court:
cases where groups of consumers can file jointly with one lawsuit.
If you win, the other side has to pay your attorney's
fees.
Ways You Can Crack Down On Credit Repair Scams
Find out what your state laws are regarding
credit repair companies. Some may be helpful if you've lost money to
a credit repair scam.
If you've had a problem with a credit repair
company:
- Report them as
soon as you feel you are being scammed. Contact your local
consumer affairs office or your state attorney general (AG).
Many AGs have a toll-free consumer hotline.
- If you wish
to file a complaint with the FTC, contact the Consumer Response
Center by phone at 202-FTC-HELP (382-4357); if you're hearing
impaired you can reach them at 202-326-2502, or by mail at
Consumer Response Center, Federal Trade Commission, 600
Pennsylvania Ave, NW, Washington, DC 20580. There's also an
online complaint form at http://www.ftc.gov. Although the
Commission cannot resolve individual problems for consumers, it
can act against a company if it sees a pattern of possible law
violations
Don't become a
victim of a credit repair scam. You can do everything a company can
legally do, and you can do it for the cost of nearly
nothing.
|
|
|
