Operation Clean Sweep targets ‘credit repair’

Tuesday, October 21, 2008

On Oct. 23, the Federal Trade Commission, in cooperation with 25 state agencies in 23 states, will hold a press conference to announce a crackdown on operations that deceptively claim they can remove negative information from consumers’ credit reports – even if that information is accurate and timely.

We are in a difficult time in the economy, when many people are facing lay-offs, tighter lines of credit and increased interest rates for people with poor or damaged credit. Consumer Action wants to take this opportunity to alert consumers to the fact that there are no legitimate "advance fee" credit repair offers—none!

Everyday, credit repair companies pitch consumers with poor credit histories, saying that they can clean up your credit report. But after you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report. Some use illegal tricks but most simply vanish with your money.

Scam artists:

• Ask you to pay for credit repair before they provide any services.
• Do not tell you your legal rights and what you can do for yourself for free.
• Tell you never to contact a credit reporting company directly.
• Suggest that you invent 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.
• Advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity.

Check your credit report

You can get free copies of your credit report from all three of the major credit reporting bureaus each year at Annual Credit Report.com. If you find any accounts that don't belong to you, or any other mistakes or inaccuracies on the report, follow the directions to dispute the information.

The Credit Repair Organizations Act

This federal law gives you the power to protect yourself because it requires that the company must conduct itself in a certain way and disclose specific information about its services. The law states that credit repair organizations cannot:

• Make false claims about their services.
• Charge you in advance before they have accomplished the services.
• Perform any services until they have your signature on a written contract and have completed a three-day waiting period. During this time, you can cancel the contract without paying any fees.

All credit repair organization contracts must specify:

• The payment terms for services, including their total cost.
• A detailed description of the services to be performed.
• How long it will take to achieve the results.
• Any guarantees offered.
• The company’s name and business address.

If you are a victim

Many states have laws regulating credit repair companies. State law enforcement officials may be helpful if you’ve lost money to credit repair scams.

If you’ve had a problem with a credit repair company, report it. Laws are in place to protect you. Contact your local consumer affairs office or your state Attorney General (AG). Many AGs have toll-free consumer hotlines. Check the Government section your phone book or visit www.naag.org to find your AG.

It is also helpful to report the scam to the Federal Trade Commission (FTC). The FTC does not address individual complaints, but will bring enforcement actions against companies who are breaking the law.