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Home > Credit Repair >
Credit Repair Services > Combating Online Credit Repair Services Scams
Combating Online Credit Repair Services Scams |
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Credit repair services scams have been around for long. Federal Trade Commission (FTC) spokesperson Steve Baker reveals that the number of people falling victim to these scams is in thousands. The Internet is the new medium that dubious credit repair services companies use to lure the unsuspecting. The FTC is now adopting harsher methods to curb these illegal practices. In its war against credit repair services frauds, the Credit Repair Services Organizations Act aids the FTC. It lays down extensive federal regulation of credit repair services, including prohibition on counseling consumers to get a new credit identity. This is a major tactic of these fraudulent companies, misleading consumers with claims of erasing bad credit and creating a new credit file in no time. However, the new law is not likely to sound the death knell for too many credit repair services. Baker finds them brazen, explaining that with the most severe regulation of credit repair services in the country, California accounts for more than half of the nation's credit repair services. Credit repair services companies offer instructions at charges varying from $29.99 to $399.99, which guide the users in substituting federally issued nine-digit employee identification numbers or tax identification numbers for Social Security numbers. The illegal use of these numbers results in new credit profiles for customers so that they can avail credit that they would be denied otherwise. The firms allege that this process, also called "file segregation" is entirely legitimate, but using false identification numbers for credit applications is certainly a crime for which one can be prosecuted. Any decrease in this form of credit repair services fraud comes as administrative relief, albeit to an extent, for creditors. It also lessens the chances of them being targeted for fraud themselves, due to bogus credit applications. The legislation mainly aims to reduce fraud by the credit repair services organizations, whose targets are a group of consumers who are in the worst position to lose money to a scam. It could also benefit creditors indirectly due to the methods of operation used by credit repair organizations. Baker points out that they lack criminal jurisdiction. Nevertheless, two sweeps were conducted in the last six months making it possible for consumer protection groups to get civil action on injunctions and restrictions on over 60 different enterprises. There was a crackdown on credit repair services companies in February 2004 by the FTC and the National Associations of Attorneys General. About 43 legal actions were filed against defendants by 17 law enforcement agencies. The guilty parties in file segregation have been listed by the FTC on the Internet at www.ftc.com. They are mainly injunctions against fraudulent cases, money back for victims of these credit repair services kits and notifying consumers of the illegal nature of the instructions being purchased. The Internet and e-mail have aided the spread of credit repair services considerably. America Online (AOL) identifies credit repair services schemes as accounting for the largest chunks of unsolicited commercial emails, explains Jodie Bernstein, director of the FTC's Bureau of Consumer Protection. Two years ago AOL began to sue credit repair services companies for sending junk email to its users as going against AOL conduct. However AOL spokesperson highlights the difficulty of keeping the Internet free of these dubious firms with AOL's efforts at blocking junk emails being thwarted. When an address behind the emails is blocked, they simply switch to a new one. In the opinion of attorney Robin Leonard, who wrote Credit Repair, the Fair Debt Collection Practices Act is an old one with third-party collectors continuing to violate it. Therefore, credit repair services are likely to follow suit. Nevertheless she is in favor of a federal law, as the state laws prove inconsistent in preventing credit repair clinics to operate across state lines. Though Baker was unable to state the aggressiveness of the FTC's enforcement, he is aware that for credit repair services scams, the FTC often collaborates with other law enforcement agencies including state attorneys general or postal inspectors, with several cases being filed simultaneously in federal and state courts throughout the country. |
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