Credit Report Articles

FTC takes on phony credit repair organizations

Some credit repair companies leave consumers in worse financial shape than when they started.

The Federal Trade Commission is highlighting a case that should serve as a reminder to consumers to take some promises from credit repair companies with a grain of salt.

According to the FTC, a marketer who ran several credit repair companies would charge consumers up to $2,199 up front with the promise that he could remove negative items from their credit report, among other things. The information cited in such claims included legal judgments, foreclosures, tax liens, bankruptcies, and other things.

Another falsehood cited in the FTC complaint was the marketer's claim that his customers could cancel their contracts with him within three business days.

Some of these items can inflict serious damage on one's credit score. For example, bankruptcy can show on a credit report for 10 years, while credit delinquencies can affect a score for as long as seven years.

Further adding to the FTC's complaint was the defendant's practice of trying to remove the negative information from credit reports by claiming that the clients in question had been victims of identity theft.

Overall, this case contains a couple of major red flags that consumers should always be wary of when they seek out credit counseling or repair services. First, consumers are warned to be extremely cautious of companies that charge an up-front fee for their services, since this can be a sign of an outfit that will take money and then fail to deliver the promised services.

Also, companies can generally not remove information about bankruptcies, foreclosures and other such things from a credit report if the consumer was actually responsible for these things.

Consumers who want to learn more about their rights under federal law in this area can consult the FTC.gov website to read the Credit Repair Organizations Act.

The law's provisions include a ban on advising consumers to make untrue or misleading statements to credit reporting agencies, as well as a restriction against altering a consumer's identification with the intention of altering their credit history.

The FTC also notes that consumers do have the right to dispute incorrect information contained in their credit report, while pointing out that people have the right under federal law to obtain a copy of their report each year from the three major credit bureaus. Federal law also gives consumers the right to sue credit repair organizations that violate the terms of this law.