Beware of credit ‘repair’ companies, say consumer watchdogs

People struggling with loan repayments and declining credit scores may be tempted to seek a quick fix. But they should be wary of so-called credit repair companies that promise to clean up credit reports and improve credit scores for a fee, consumer watchdogs say.

The Consumer Financial Protection Bureau filed suit this month against Lexington Law and CreditRepair.com, two of the biggest credit repair brands, and a related network of interconnected businesses.

The lawsuit alleges the companies unlawfully billed customers for credit repair services in violation of the federal telemarketing sales rule. Under this rule, companies can charge fees for credit repair services sold through telemarketers only after they document that the promised results have been delivered.

The complaint also alleges that several of the companies, collectively referred to as Progrexion, used deceptive marketing to attract customers, in violation of the Consumer Financial Protection Act.

The lawsuit, filed May 2 in Utah federal district court, said people were paying hundreds of dollars to credit repair companies, seeking to improve their credit scores and gain better access to loans. under improved conditions.

But the companies used deceptive methods, including false advertisements, as “bait” to lure credit repair customers, the complaint alleges. Progrexion, for example, paid an affiliate that advertised non-existent home loans with down payments as low as zero percent, even to borrowers with “bad” credit. Interested consumers were then required to register for credit repair services, through Lexington law. “In fact,” the complaint states, “the affiliate made no loans at all.”

The Consumer Financial Protection Bureau did not respond to a request for comment on its lawsuit.

Eric M. Kamerath, a spokesperson for Lexington Law and Progrexion, which includes CreditRepair.com, emailed a statement in response to a request for comment on the lawsuit: “Lexington and Progrexion have helped millions of consumers to ensure that their credit reports are fair and accurate. and justified. We take the trust consumers place in us very seriously, we disagree with the allegations in the complaint, and we will vigorously defend ourselves and the valuable services we provide.

According to an analysis of the Consumer Bureau Complaint Database released this week by the US PIRG Education Fund, complaints about credit reports, credit repair services and other “personal consumer reports” accounted for 43 % of total complaints in 2018, up from around a quarter. complaints in 2016.

Andrew Pizor, an attorney with the National Consumer Law Center, said he welcomed the bureau’s lawsuit and warned that paying for credit repair was a waste of money.

“Avoid it completely,” Mr. Pizor said. Anything a credit repair company can do, he said — including challenging inaccurate information found on your credit report — people can do themselves, at no cost.

If the negative information on your credit report is correct – for example, you’ve stopped making payments on a loan or a credit card balance – there’s not much you can do to remove it quickly, says the consumer affairs office on its website. Negative information usually stays on your credit report for at least seven years.

“Beware of anyone who claims they can delete information from your credit report that is accurate, current and negative,” the bureau says. “Nobody can do that.”

Consumers can try to negotiate with lenders themselves, Pizor said, perhaps offering to make full or partial payment on a bad debt in return for the lender agreeing to stop reporting the account. overdue at the credit bureau. It may not work. But it won’t cost you anything. If you reach an agreement, he said, “get it in writing” before you make payment.

An alternative is to seek help from a reliable, nonprofit credit counseling agency, the bureau says. Credit counselors advise you on how to manage your money and can help you develop an affordable plan to pay off your debt. Some counselors offer advice for free or at low cost.

Here are some questions and answers about improving your credit:

How can I find a reputable credit counselor?

Federal Trade Commission attorney Michelle Grajales recommends finding an advisor who can meet with you in person. A good place to start looking is the Department of Justice website. (The site lists agencies approved to advise consumers who are considering filing for bankruptcy, but you don’t need to be considering bankruptcy to use them.)

Other potential sources are the National Foundation for Credit Counseling and the Financial Counseling Association of America.

After you identify counselors near you, Ms. Grajales said, check with your state’s attorney general’s office to see if any complaints have been filed against them and get a quote — in writing — for the fees charged, before you go. register for the Services.

How can I check my credit file for errors?

You can request a free copy of your credit report from each of the three major credit bureaus (TransUnion, Equifax and Experian) every 12 months. Credit counselors often suggest staggering applications and getting a report from a different bureau every four months.

If you find an error on your report – this is not uncommon – you must dispute the item in writing by contacting both the credit bureau and the lender. The Consumer Financial Protection Bureau offers tips for doing this on its website.

How can I improve my credit rating?

The best way to improve your credit score is to pay your bills on time and keep credit card balances low relative to the amount you’re allowed to borrow, said Joanne Gaskin, vice president of scores and analyzes at Fair Isaac Corporation, creator of the widely used FICO credit score. “Working to be current and trying to stay current,” she said.

This year, FICO representatives are visiting communities across the country and hosting free sessions on building and managing credit, in partnership with local credit counseling agencies. Information on upcoming dates is available on the FICO website.

FICO has also recently begun testing a new type of credit score called UltraFICO, which takes into account a borrower’s bank account balances and cash management practices in addition to a traditional credit score, which primarily takes account of your credit card debt and loan repayment record.

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