October 27, 2008
States and FTC Crack Down on Credit Repair Scams
33 operations accused of deceiving consumers
The Federal Trade Commission (FTC) and 24 state agencies have launched a
crackdown on 33 "credit repair" operations. The companies are accused
of deceptively claiming they can remove negative information from
consumers' credit reports, even if that information is accurate and
timely.
In the seven actions, the commission seeks to stop the defendants' allegedly unlawful business practices, prohibit further violations, and make them pay consumer redress and give up their ill-gotten gains.
"Companies that promise they are able to scrub your credit reports of accurate, negative information for a fee are lying -- plain and simple," said Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. "Under federal law, accurate, negative information can be reported for up to seven years, and some bankruptcies can be reported for up to 10 years."
In response to thousands of complaints from consumers throughout the nation, the FTC launched "Operation Clean Sweep" with 24 state agencies in 22 states. As part of the operation, the commission charged seven operations with violating the FTC Act and the Credit Repair Organizations Act (CROA) by making false and misleading statements, such as claiming they can substantially improve consumers' credit reports by removing accurate, negative information from their credit reports.
The agency also claim the defendants violated the CROA by charging an advance fee for credit repair services. The 26 state actions include alleged violations of state laws and the CROA.
Examples of the complaints filed by the FTC include:
• Nationwide Credit Services, Inc. and James R. Dooley, based in Florida, advertise their credit repair services on www.ehappyhour.com and in the Yellow Pages, stating, for example, that bankruptcies, judgments, slow pay history, repossessions, and collection accounts "CAN BE LEGALLY ERASED!" The defendants charge from $300 to $1,000, including an advance fee ranging from $75 to $150, and a monthly fee that they often debit from consumers' bank accounts.
After paying the fees, consumers find that the defendants rarely, if ever, deliver the promised results. In many instances, they take consumers' money without providing any services. Consumers often find their cancellation requests ignored, and their refund requests are almost always denied.
• Clean Credit Report Services, Inc., Ricardo A. Miranda, Daniel R. Miranda, and Ruthy Villabona, based in Florida, advertise on radio, television, and www.ccrstoday.com, which has testimonials, such as one purportedly from an Atlanta woman, stating, "When I lost my job and simply didn't pay my credit cards and when I needed to get my car loan they said I needed at least a 600 credit score but I had a 480. I got into the CCRS club and did what they told me to do...When I pulled my report online I realized that I had a 621. I couldn't believe this really works.'
Consumers who responded to the defendants' ads on syndicated radio talk shows were told that the defendants would help remove all the negative remarks that appear on their credit, and that even current debt could be removed.
Once consumers pay $400 in advance for services, the defendants often debit the money from their bank accounts before receiving a signed contract, and then do little, if anything, to fulfill their promises. When consumers reach them to complain, they're told a variety of excuses, and those who persist are sometimes hung up on, put on hold, or ignored.
State law enforcement efforts involved the attorney general offices in Arkansas, California, Colorado, Florida, Illinois, Louisiana, Maine, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, and West Virginia; the justice departments of North Carolina, Oregon, and Wisconsin; Idaho's Department of Finance; Louisiana's Office of Financial Institutions; Vermont's Department of Banking, Insurance, Securities & Health Care Administration; and Wisconsin's Department of Financial Institutions.
"Especially in today's credit market, gaining and maintaining good credit is an increasingly important part of financial stability," said Colorado Attorney General John Suthers. "Unfortunately, several disreputable businesses prey on consumers whose credit is less-than ideal, and we will continue to hold them accountable for their deception."
"People trying to improve their credit need straight answers, not empty promises," said North Carolina Attorney General Roy Cooper. "We'll continue to go after companies that make promises they don't keep."
Advice for Consumers
How can you avoid turning credit repair into credit despair? Here are a few suggestions:
• Avoid any company that wants you to pay for credit repair services before they provide any services. It is against the law.
• Avoid any credit repair company that will not tell you your legal rights and what you can do, yourself, for free.
• Avoid any credit repair company that tells you not to contact a credit reporting company directly.
• Avoid any credit repair company that advises you to dispute all of the information in your credit report.
• Avoid any company that suggests creating a 'new' credit identity -- and then, a new credit report -- by applying for an Employer Identification Number to use instead of your Social Security number. That is against the law. If you follow illegal advice and commit fraud, you also may be subject to prosecution.
The FTC advises that only time, a conscious effort, and a personal debt repayment plan can improve your credit report. The first step is to learn what information is in your credit report. If you find errors or mistakes, federal law gives you the right to have them corrected -- free of charge.
Federal law requires that the nationwide consumer reporting companies -- Equifax, Experian, and TransUnion -- provide you with a free copy of your credit report once every 12 months, if you ask for it. To order your free report, visit annualcreditreport.com, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form.
