Credit Report Repair Companies Face Penalty For Their False Claims
People with bad credit are often duped by credit-report repair companies that falsely claim that they can remove
negative information from consumer's credit reports. The Federal Trade Commission (FTC) has charged six companies that sell credit-report repair services through multilevel marketing organizations with more than $1.15 million in damages to consumers.
The defendant credit-report repair companies and their nationwide network of approximately 50,000 sales representatives used to tell consumers that they could remove negative items such as bankruptcy, foreclosure, and late-payments from credit reports, even if the items were accurate, verifiable, and not obsolete. To convince consumers, the companies would allege that they had a one-of-a-kind computer disk that was able to identify inaccuracies in the data entry of credit-reporting agencies. This disk was said to be so unique and amazing that it was valued at more than $200 million in an independent appraisal. Consumers were also told that the credit-reporting agencies wanted this technology so badly that they offered the credit-report repair agencies more than $10 million. The FTC found that these representations about credit-report repair are false and deceptive.
The FTC's complaint further alleges that there is no such computer disk
or software program that can repair credit reports like the companies claim. The FTC also states that the companies's services credit report repair entailed only a challenge of each negative item that appeared on a consumer's
credit report in a dispute letter. Beyond this, the companies are unable to
to remove negative items from credit reports that are accurate, verifiable, and not obsolete.
The FTC further alleges that the companies violated federal law by
requiring consumers to pay in advance for the credit-report repair service, and this misrepresentation in terms of a 110% money-back guarantee was an untrue and misleading statement. The FTC also alleges that the companies failed to provide their customers with a written notice as required by federal law.
These charges were finally settled, and the credit-report repair companies must pay more than $1.15 million to consumers who used their services. The companies were further directed to distribute a notice that details the terms of the settlement to their national network of sales representatives.
In an effort to help raise consumer awareness and avoid credit-counseling and credit-report repair scams, the FTC has undertaken extensive educational efforts in conjunction with the IRS and state regulators. The agencies released a joint press release regarding CCAs that urged consumers to be cautious and provided tips for choosing a credit-counseling organization. Consumers should pay careful attention to the fees, contract terms, and nature of services that credit counselors and report repair agencies provide. Consumers should only consider working with agencies that offer actual counseling and education and do not simply enroll clients in debt management plans (DMPs).
