FTC Cracks Down on 33 Credit Repair Companies

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Last week the FTC announced an effort to shut down 33 credit repair operations with the assistance of 24 state agencies. According to the FTC Release:

“In response to thousands of complaints from consumers throughout the nation, the FTC launched ‘Operation Clean Sweep’ with 24 state agencies in 22 states. In the cases announced today, the Commission charged seven operations with violating the FTC Act and the Credit Repair Organizations Act (CROA) by making false and misleading statements, such as claiming they can substantially improve consumers’ credit reports by removing accurate, negative information from their credit reports. The agency also alleged that the defendants violated the CROA by charging an advance fee for credit repair services. The 26 state actions include alleged violations of state laws and the CROA.”

Many consumers faced with overwhelming debt often consider the credit score consequences of the various debt settlement strategies available to them. If already behind on payments, you may have even looked into possible credit repair solutions.

Debt settlement, in many cases, involves the diversion of your monthly payments into a separate settlement account. It is difficult to avoid the negative impact of late payments, charge offs, and collections that result from this strategy, however, you do have options.

The FTC’s release can be misleading to those not intimately familiar with the credit repair industry.

First, accurate information is removed from credit reports all the time. The Fair Credit Reporting Act prevents creditors and the credit bureaus from reporting inaccurate information but does not require that accurate information be reported. It is not uncommon for consumers to negotiate a favorable payment status from a creditor or the deletion of a collection from a collection agency when making good on outstanding debts.

It is also clear, from the FTC’s release, that the primary issue with the companies being targeted has very little to do with credit repair. Rather, these companies are guilty of poor business practices. In almost every instance, the company being targeted took their client’s money, provided little or no service, and then refused to honor any refund requests. It was for those reasons that consumers complained to the FTC - triggering the “crackdown”.

Engaging the services of a reputable credit repair organization that can counsel you on how to enhance your credit score after going through a tough economic time is a wise move. Alternatively, there are plenty of free resources that you can utilize to educate yourself and make substantial improvements on your own.

About the Author:
Chris Rocks is the Founder and Executive Director of the Credit Advisory Alliance (CAA), a membership based organization helping those who have suffered a financial crisis restore their credit and reinsert themselves back into the credit-driven economy. Prior to founding CAA, Chris had successfully helped consumers achieve their financial goals as both a Financial Advisor and the Vice President of a Mortgage Origination Firm.

Post written by Chris Rocks