Home > Credit Repair > Legal Approaches For Credit Repair Scams
Legal Approaches For Credit Repair Scams |
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Credit
repair frauds are found in every form of media, which includes
television and radio advertisements, infomercials, and classified ads and on the Internet. Credit repair scams, usually, operate in two distinct ways. In the first method, the credit repair firms make false promises that all types of unfavorable information, such as late payments, charge offs, bankruptcies, and judgments, can be deleted from a consumer's credit report. But per federal law, credit bureaus that compile credit history information of consumers are bound by law to provide complete truthful information. This includes all negative information for seven years and bankruptcies for 10 years. Therefore, the credit repair firms cannot and do not get such information removed. In the second method, "file segregation," credit repair firms promise the consumers to create an altogether new credit history. In this method, consumers are asked to apply for an IRS Employer Identification Number. This number has the same number of digits as a Social Security number, and this number is then used in place of a Social Security number to apply for credit. But as a matter of fact, consumers who follow the advice of file segregation operations are committing crimes, as it is unlawful to use a Social Security number in the wrong manner and it also against the law to give out false statements to a federally insured financial institution when applying for credit. If the consumers want, they can easily put these fraud credit repair artists out of business. They can rectify any errors in their credit reports on their own most of the time. And there's nothing anyone can do about genuine, negative information; they have to learn to live within their budget and rebuild their credit one step at a time. Rather, the ultimate result of hiring such credit repair companies is more debt for consumers. In these past two years, the FTC has carried out extensive consumer education programs to update consumers about their rights under federal law. As a part of this drive, a booklet designed for consumers with bad credit, titled Getting Back in the Black, and a brochure, titled Credit Repair: Self-Help May Be Best has been published by the FTC. Additionally, the FTC has initiated several law enforcement efforts over the past decade: the latest being in April 1996, when the agency and nine state AGs and the District of Columbia brought 17 law enforcement actions against 13 credit repair firms. The Credit Repair Organization Act (CROA) is the first federal law to specifically handle credit repair scams. Effective since April 1, 1997, the FTC and state Attorneys General enforce the new statute. This law also allows consumers to bring lawsuits on their own in the federal court and claim damages, attorney's fees, and punitive damages. The most relevant new consumer rights under the statute include: Prohibiting credit repair firms from taking any money from consumers before the services are fully carried out. Requiring credit repair firms to provide consumers a written disclosure explaining their legal rights pertaining to their credit history, before any contract is signed. Requiring credit repair firms to provide consumers a written contract with all the terms and conditions of payment, a detailed description of the services to be performed, including any guarantees of performance, and an estimate of how long it will take to carry out the contract. Giving consumers a three-day cooling-off period, that is, a period within which they can cancel any agreement they sign with a credit repair firm. Making void any contract between a consumer and a credit repair firm that doesn't comply with the legal guidelines. Prohibiting credit repair firms from making misleading claims about credit repair services. But all this doesn't mean that all the credit repair agencies are fraudulent. There are may credit repair companies that stick to their morals and values. Such reputable companies empower consumers by providing principled and professional services to tackle your credit report issues in a legal manner. |
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