Credit Repair Firms
Chris Gunn
WASHINGTON, DC (1996102) -- Firms that promise to fix bad credit and ask to
be paid up front are misleading consumers, breaking the law and pocketing
millions of dollars in the process, officials warned.
"Nothing but time can clean up negative but accurate information from
consumers' credit records," said Jodie Bernstein, director of consumer
protection at the Federal Trade Commission. Ms. Bernstein announced that
her agency and 10 state attorneys general have brought federal cases
against 15 "credit repair" firms on charges of violating a provision of the
FTC's new telemarketing rule.
Aimed at putting credit repair firms out of business, the rule prohibits
them from seeking payment until six months after they deliver the promised
service. The theory is that since they can't ever deliver, the firms won't
ever be able to collect any money.
Credit repair scams are an old, but a growing problem, Ms. Bernstein said.
An estimated 1,100 such firms operate nationwide, raking in millions of
dollars from the unsuspecting and the uninformed, she said.
"The fact is, credit repair firms cannot deliver on their promises to
remove accurate, up-to-date information from consumers' credit records,"
Ms. Bernstein said. "And if they can't deliver, they can't collect, and
that means they're out of business."
But Catherine Rose didn't know the services are phony. Working two jobs
after the breakup of her 20-year marriage, medical problems and personal
bankruptcy, the Charlotte, N.C., woman was intrigued by a credit repair ad.
"I thought, being desperate, that this was the solution and it wasn't,"
said Mrs. Rose, explaining that she lost $695 believing the firm's promise
to remove the bankruptcy from her record. "All it did was put me in deeper
financial problems," Mrs. Rose said.
Federal law allows credit bureaus to report all truthful information about
a person's credit background -- even if it's negative -- for seven years.
Bankruptcies stay on the record for 10 years. The FTC rule also allows
state attorneys general to win injunctions in federal court that apply
nationwide, instead of just in their state.
"This is a highly skilled group of scam artists," said Charles Burson, the
Tennessee attorney general. "Once they get you on the telephone, chances
are you're going to lose some money."
Ms. Bernstein also said consumers who have been victimized, or know of
someone who has been, should contact the National Fraud Information Center
or the FTC at 1-202-326-2222.
Log on the WebSite at http://www.fraud.org, or call 1-800-876-7060.
If you spot obviously illegal operations on the E-Ways, please
forward copies of the messages to NFIC at frau...@psinet.com.
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