Most people are looking for ways to improve their credit score. Some, unfortunately fall prey to credit repair scams because they are desperate to improve their financial situation and to get a loan, buy a car or house, or obtain a lower interest rate on their current debt.
There are many credit repair companies that claim they can help you improve your credit score. However, most of these companies use illegal methods to boost your score. They might tell you to create a new credit identity or they might instruct you to dispute accurate information on your credit report, even if you know it’s accurate. These methods will not only hurt your credit score, but they can also result in legal action.
Consumers Can Protect Themselves
There are a few things to watch out for if you’re considering using a credit repair service. First, beware of any company that asks for payment upfront. Any reputable credit repair service will work on a contingency basis, which means they only get paid if they are successful in helping you improve your credit score. Second, be wary of companies that make grandiose promises and guarantees, such as erasing all of your debt or increasing your credit score rapidly. These are simply impossible claims.
Finally, don’t give any credit repair company access to your bank account or debit card information until you have fully vetted them out. Some scammers will set up auto debit payments from your account without your knowledge or permission.
Andy Spears, a consumer advocate who writes about credit issues, notes,
“Most of the services credit repair companies offer can be done for free. Consumers can access credit reports at annualcreditreport.com and file disputes for any inaccurate information. Unfortunately, the only thing that repairs credit from accurate negative entries is time.”
Regulatory Activity On Credit Repair Increasing
Credit repair scams have gotten so out of hand that consumer protection agencies have begun working together to take action in a handful of high profile cases. In the latest, a lawsuit filed in the Middle District Court of Florida (Case No.3:22-cv-00487-TJC-MCR) against a credit repair company called ‘The Credit Game.’
The Federal Trade Commission said the company and its owners allegedly charged consumers hundreds and sometimes thousands of dollars for credit repair services of little to no value.
In some cases, the company’s “services” included filing false identity theft reports with the FTC and encouraged consumers to take actions that were unlawful. The illegal credit repair company claimed their services were “guaranteed,” but routinely refused to give people refunds, according to records.
The FTC alleges the defendants’ deceptive tactics violated the FTC Act, the Credit Repair Organizations Act (CROA), the Business Opportunity Rule, the Telemarketing Sales Rule (TSR), and the COVID Consumer Protection Act (CCPA).
Business Violations Include:
- Deceptive Marketing: The defendants mislead consumers in numerous ways, including lying to consumers about whether their products are legal, whether their products are effective, and whether consumers can get refunds when requested.
- Credit Piggybacking: The complaint alleges that the defendants pitch a practice known as credit piggybacking. In a piggybacking scheme, a consumer seeking to raise their credit scores pays to be added as an “authorized user” to a credit card account belonging to someone with higher credit. However, the consumer is an “authorized user” in name only and does not have actual access to the account or line of credit.
- Filing False Identity Theft Reports: As part of their efforts to remove accurate but negative information from consumers’ credit reports, the defendants filed thousands of false identity theft reports on behalf of consumers with the FTC. Knowingly filing a false identity theft report with the FTC is unlawful.
- Bogus Business Opportunity: In addition to selling the bogus credit repair services, the defendants also pitch consumers on a supposed business opportunity that consists of reselling the defendants’ own unlawful credit repair services. They use outlandish earnings claims as part of the sales pitch, telling one undercover FTC investigator they could make “tens of thousands” of dollars every month.
- Illegal Advance Fees: The defendants charge consumers for their credit repair services upfront, often thousands of dollars, using high-pressure sales tactics and failing to give consumers required information before they are pressured to buy. Charging advance fees for credit repair services is illegal.
FTC Takes Action Amidst Consumer Complaints
The FTC also asked the federal court to immediately halt the Florida credit repair company’s illegal operations, appoint a receiver, and freeze the defendants’ assets in a temporary restraining order. The court agreed.
“We’re grateful that the court shut this scheme down and disrupted this web of deception,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
Over the last two years, more than 100 consumers who purchased credit repair services, coaching programs and “proprietary” digital educational products from ‘The Credit Game‘ filed administrative complaints with the Better Business Bureau. The credit repair company rejected many of the complaints, stating that the 100% money back guarantee offered in it’s contracts with credit repair consumers excluded digital programs. The BBB has since given the company an “F” rating.
Fix for Fee Credit Repair Scam
Consumers should beware of anyone promising to fix their credit with a “Money Back Guarantee” for a Fee. There are no simple, quick, or magical fixes for a bad credit report. Anyone who says they can remove accurate and timely information from your credit report is probably a scam artist. If you have been the victim of a credit repair scam, you can file a complaint with the FTC.
Depending on your situation, you may want to consult with an experienced attorney who handles consumer protection and credit repair fraud. This attorney can assist you in resolving your issue, and can provide you with comprehensive legal advice and assistance. You may also want to report the credit repair scam to your state’s Attorney General’s Office and local consumer protection agency.
This article is for informational purposes only and is not legal advice. You should consult an attorney for individualized advice regarding your particular situation. Follow us on Twitter.