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Regulations Governing Credit Repair Companies |
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Credit repair companies often offer to sell a kit or package that advises consumers to apply for a new identification number from the IRS., Social Security Administration or credit reporting agencies. The consumers are advised to use that number instead of their Social Security number when applying for credit. Many consumers, unaware of the pitfalls of credit repair , do it, without knowing that this is a federal crime, subject to criminal prosecution. These credit repair companies frequently advise consumers on how to develop whole new credit profiles, for example, by getting new driver's licenses using the new I.D. number. Recently, there was a wholesale crackdown on credit repair scam artists, who promise consumers a new credit identity without telling them that it is a federal offence. But these credit repair con games are spreading like wildfire on the Internet and in unsolicited junk e-mail. The fraudulent credit repair actors place ads in newspapers, magazines or, increasingly, on the Internet, selling a service, they say can help consumers create a new credit identity. They target credit-impaired consumers, anxious to repair their credit profiles. And, use phrases like "Anyone can have a New Credit File virtually overnight"; "Wipe out all of the old bad credit on your old file" and "Credit Start Over to lure them." In the past five years, special agents in charge of the tax administration have seen a significant increase in the number of fraudulent schemes of credit repair companies. As a result, the administration is now stricter with illegal use of federal employer identification numbers. Individuals selling the idea to use IRS issued employer identification numbers, illegally, will be aggressively investigated and prosecuted. And as a consequence, seven complaints have been filed by the FTC. Another one has been filed by the Department of Justice at the FTC's request. These deal with alleged violations of the Credit Repair Organizations Act and the FTC Act. And, the FTC and the Justice Department have asked the U. S. District Courts to permanently enjoin the illegal claims and order consumer redress or civil penalties for the defendants. There are also, federal and state laws governing credit repair services, to ensure that they do not misrepresent their services. In California, the law requires credit services organizations to obtain a $100,000 bond and maintain it as long as they are in business and for two years after they cease doing business. They should also register with the Department of Justice and obtain a certificate of registration that should be made available to the consumer, if he asks. Also, these credit repair services are not allowed to accept any payment from you, until they have completely performed the services they promised, within six months. They are also required to advise you of your rights, under the Fair Credit Reporting Act. They also must provide you with a written contract, specifying the services agreed on. They also, need to inform the consumer that he or she has the right to cancel the contract, without paying anything, within 5 working days after signing. If you've decided to work with a credit repair company, there are certain other things that you need to know. One is that, you should contact the Better Business Bureau for a reliability report on the company, as soon as possible. Also, it's best if you inspect the credit repair company's certificate of registration. This certificate will inform you of any litigation or any complaints, filed with any governmental authority of California or any other state or with the federal government against the company. The certificate will also have details on how this complaint was resolved. This will give you an insight into the methods and reliability of the company. Also, find out in advance what the credit repair company will and will not do. So, be absolutely certain, regarding the services that they will or will not provide. And, if you take a copy of your credit report with you, you can ask them exactly what information they'll change or remove. Also, remember that the law requires a written contract. So, get one. Also, bear in mind that a credit repair company that promises to erase or change accurate information, from your credit report, is lying, as it's not legally possible. |
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