FTC Declares Crackdown On Credit Repair Scams That Mislead Consumers |
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Consumers are still being bilked out of millions of dollars by bogus credit repair organizations, the Federal Trade Commission said today as it announced another project in its continuing effort to eliminate these illegal operations. Operation Eraser, a federal-state crackdown on fraudulent credit repair firms
, targeted 31 companies that promise consumers that they can restore their creditworthiness for a fee. Sometimes charging more than $1,000, these firms purport to guarantee consumers they can remove negative information from their credit reports--even if the negative information is accurate and timely. But according to the FTC, these credit repair companies cannot remove legitimate negative information and, where there are actual errors in credit reports, consumers have the legal right to have those corrected for free most of the time. In some cases, these credit repair companies are advising consumers to take actions such as using false Social Security numbers, which, if followed, would constitute felonies. This joint law enforcement sweep is the first combined effort to utilize the Credit repair Organization Act (CROA), a new federal law designed to help consumers combat fraudulent credit repair operations. Credit repair organizations that promise to clean up consumers' credit reports by removing accurate, up-to-date credit information are breaking federal law. This fraud is particularly appalling because it preys on consumers who already find themselves in financial difficulty as a result of layoffs, divorce, or heavy medical expenses. The new statute gives consumers and law enforcement agencies additional ammunition to fight these phony operations. Although there are legitimate, not-for-profit credit counseling services, the FTC has never seen a legitimate credit repair company. Along with our state and local law enforcement partners, we will continue to fight this fraud. Credit repair scams literally kick consumers when they are down, fostering and exploiting false hopes of building a better credit history after suffering through tough times financially. Now the FTC and the states are escalating efforts to strike back to end these rip-offs and educate consumers. Consumers must understand that no one can erase negative credit information if it is accurate and current, and anything that is inaccurate can be corrected at little or no cost to the consumer. Connecticut was the first state to bring a credit repair case under the CROA (Credit Repair Organization Act). The effort includes law enforcement actions initiated in federal courts across the United States by the FTC against 20 companies; with an additional 11 companies targeted by state law enforcers. Seven of the FTC's cases were referred to the Department of Justice for filing. In all of the FTC's cases, the agency charged that the defendant companies and their principal's violated Section 5 of the FTC Act by making deceptive claims about improving consumers' credit records. In all but one of these cases, the FTC also alleged violations of the CROA by seeking advance payment for credit repair services and misrepresenting the credit repair services that would be performed. In the remaining case being brought by the FTC, the complaint contends that the defendant is making false claims about their ability to help consumers obtain a new credit identity. These claims are being made widely throughout the country through unsolicited commercial e-mail, also known as Spam. The FTC has requested an injunction to prohibit the claims. In three cases, the defendants were charged with failing to provide to consumers, prior to the sale, required written disclosures of important information, including the right to a three-day cooling-off period. In 12 of these credit repair cases, the FTC asked for and the courts issued temporary restraining orders, asset freezes (in some cases, limited asset freezes) and, in some cases, appointed a receiver to take charge of the companies. Ultimately, in all cases the FTC is seeking permanent injunctions prohibiting the alleged deceptive practices and redress for consumers. So, if you are tempted to contact a credit repair company for help, use considerable caution. The FTC and a number of state attorneys general have sued credit repair companies for falsely promising to remove bad information from credit reports. Consider the following: contact your state attorney general, local Better Business Bureau, and state or local consumer affairs agency to check out the credit repair company. See if complaints have been lodged or legal actions taken against the company. Be alert if you are told that accurate information will be changed or erased or that only the credit repair company can remove old or inaccurate information. Such claims are false. Be especially wary if you are asked for a large sum of money in advance, before the credit repair Company completes the job it promises to do. Even a money-back guarantee will not protect you if the company is dishonest. |
