Phony Credit Repair Firms Empty Promises





						Phony Credit Repair Firms Empty Promises by Kevin DeMarrais Phony credit repair firms are among the lowest of the low, because they prey on the weak and wounded. And they seem to be out in force in these difficult times. That's why it was encouraging to hear that the Federal Trade Commission, working with regulators in New Jersey and 21 other states, had cracked down on 33 operations that seemed more intent on collecting fees than in living up to their promises to help consumers get out from under a debt load and clean up their credit records. Consumers are struggling. Unemployment is high, raises are low or non-existent, and bills can quickly pile up. The result is that more of us are getting in over our heads in debt or are late in paying bills. That can start a domino effect, leading to reduced lines of credit, canceled credit cards, higher interest rates and lot of fees. Naturally, those affected look for solutions, and the easy fixes offered by the companies targeted in the FTC's "Operation Clean Sweep" sound so appealing. Several of the companies cited said they would remove negative information from consumers' credit reports, even if that information is accurate and timely. Unfortunately, that won't happen. Credit repair companies can negotiate a repayment plan and might even get fees removed, but they don't have a magic wand to make your past woes disappear. "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." The FTC and the state agencies involved in Operation Clean Sweep, including the New Jersey Division of Consumer Affairs, acted in response to thousands of complaints from consumers throughout the nation. The federal cases were similar to a five-count complaint filed by New Jersey in state court in Monmouth County. The suit alleges that United Credit Adjusters and three related enterprises, Bankruptcy Masters Corp., United Counseling Association Inc. and Credit Bureau Controls Corp., required payment in advance during initial consultations, but failed to provide credit counseling, credit repair or bankruptcy services. Also, contrary to promises, they did not raise consumers' credit scores or eliminate negative information from their files, the state said in its suit. "The company was one of the biggest players in the area, and certainly one of the most egregious in what they were promising," David Szuchman, director of Consumer Affairs told me last week. The company, which had an office in Clifton, advertised throughout the tri-state area, especially on radio and cable television. "The bottom line is, they were just flat-out scamming people," he said. "We received 118 consumer complaints, from people all over the metropolitan area." The cases the FTC announced were similar, with the companies charged with violating state or federal law by making false and misleading statements and charging fees for credit repair services in advance. What's most disturbing is how many of these bogus credit repair outfits are out there, taking money from desperate consumers. They operate nationwide, and use the Internet and inexpensive advertising outlets to offer hope to vulnerable consumers - and then pull the rug out from under them. "We really believe this is one of the most important areas the division can be in," Szuchman said. So what's a consumer to do when your debt is soaring and your credit score is plummeting? There are some honest companies around, but you need to watch for warning signs from the scammers, the FTC says. Avoid any credit repair company that: Wants you to pay for credit repair services before they provide any services. It is against the law. Will not tell you your legal rights and what you can do - yourself - for free. Tells you not to contact a credit reporting company directly. Advises you to dispute all of the information in your credit report. 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, and following this advice could make you subject to prosecution for fraud. Only time, a conscious effort, and a personal debt repayment plan can improve your credit report.One aspect of the United Credit case is encouraging: How it came about. The first complaints came into the Monmouth County Consumer Affairs office, and it tried to settle the matter, Szuchman said. When the company balked, Monmouth officials forwarded the complaints to the state. In addition, the New Jersey chapter of the Better Business Bureau, which has done little of note in recent years, got involved, and it was the joint effort of the three entities that led to the suit. "I'm personally thrilled about it," Szuchman said. "It's a perfect example of how government should work." Copyright 2008 North Jersey Media Group Inc., All Rights Reserved The Record (Bergen County, NJ), October 26, 2008, www.northjersey.com/, Byline: KEVIN DeMARRAIS, North Jersey Media Group, Enjoy "Your Money's Worth" every day with our blog at: http://njmg.typepad.com/moneyblog/. 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