The
Scam
Every day, companies nationwide appeal to consumers
with poor credit histories. They promise, for a fee, to clean up
your credit report so you can get a car loan, a home mortgage,
insurance, or even a job. The truth is, they can't deliver.
After you pay them hundreds or thousands of dollars in up-front
fees, these companies do nothing to improve your credit report;
many simply vanish with your money.
The Warning Signs
If you decide to respond to an offer,
beware of companies that:
- want you to pay for services before any services are provided;
- do not tell you your legal
rights and what you can doyourselffor free;
- recommend that you not contact a credit
bureau directly;
- suggest that you try to invent a
"new" credit report by applying for an Employer
Identification Number to use instead of your Social Security
number; or
- advise you to dispute all information
in your credit report or take any action that seems illegal,
such as creating a new credit identity. If you follow
illegal advice and commit fraud, you may be subject to
prosecution.
You could be charged and prosecuted for
mail or wire fraud if you use the mail or telephone to apply for
credit and provide false information. It's a federal crime to
make false statements on a loan or credit application, to
misrepresent your Social Security number, and to obtain an
Employer Identification Number from the Internal Revenue Service
under false pretenses.
The
Credit Repair Organizations Act
By law, organizations must give you a
copy of the "Consumer Credit File Rights Under State and
Federal Law" before you sign a contract. They also must
give you a written contract that spells out your rights and
obligations. Read these documents before signing the contract.
The law contains specific consumer protections. For example, a
company cannot:
- make false claims about their services;
- charge you until they have completed
the promised services; or
- perform any services until they have
your signature on a written contract and have completed a
three-day waiting period. During this time, you can cancel
the contract without paying any fees.
Your contract must specify:
- the payment for services, including
their total cost;
- a detailed description of the services
to be performed;
- how long it will take to achieve the
results;
- any guarantees they offer; and
- the company's name and business
address.
If You Are A
Victim Where to Complain...
If you've had a problem with any of the scams
described here, contact your local consumer protection agency,
state Attorney General (AG), or Better Business Bureau. Many AGs
have toll-free consumer hotlines. Check with your local
directory assistance.
For
More Information
The
Federal Trade Commission
enforces a number of credit laws and provides consumers with
free information about them:
- The Equal
Credit Opportunity Act prohibits the denial of credit
because of your sex, race, marital status, religion,
national origin, age, or because you receive public
assistance.
- The Fair
Credit Reporting Act gives you the right to learn what
information is being distributed about you by credit
reporting agencies.
- The Truth
in Lending Act requires lenders to give you written
disclosures of the cost of credit and terms of repayment
before you enter into a credit transaction.
- The Fair
Credit Billing Act establishes procedures for resolving
billing errors on your credit card accounts.
- The Fair
Debt Collection Practices Act prohibits debt collectors
from using unfair or deceptive practices to collect overdue
bills that your creditor has forwarded for collection.
