If you decide to hire a credit repair company, you shouldn’t have to worry about them breaking the law.
Yet that is exactly what countless consumers have found themselves dealing with in the credit repair industry over the years. Fortunately, the Consumer Financial Protection Bureau (CFPB) is on it, taking action against shady credit repair companies accused of violations. Take a look at what the CFPB says they’re doing wrong so that you know what to avoid.
Recent CFPB actions against credit repair companies
On June 27, 2017, the CFPB took action against three California-based credit repair companies, all owned by the same individual:
- Prime Credit, LLC – offered credit repair services from summer 2012 through fall 2014; this company has also been known as Prime Marketing, LLC, and Prime Credit Consultants
- IMC Capital, LLC – offered credit repair services in 2012
- Commercial Credit Consultants – offered credit repair services from summer 2009 through summer 2012; this company has also done business as Accurise
Founder Blake Johnson – who is also the majority owner of these three companies – is included in the complaint, as is Eric Schlegel, the president and a minority shareholder in Prime Credit and Commercial Credit Consultants.
The CFPB also took action against a fourth California-based company – Park View Law – which has ties to Johnson’s Prime Credit. As explained in the CFPB news release:
“From March 2013 through September 2014, Prime Credit marketed and sold credit repair services to consumers using Park View Law’s name, and provided credit repair services to consumers who entered into contracts with Park View Law. Park View Law continued to offer and provide credit repair services through a similar arrangement until as late as June 2015.”
Park View Law owner Arthur Barens is included in the complaint.
What these companies allegedly did wrong
The CFPB says Prime Credit, IMC Capital, Commercial Credit Consultants, and Park View Law:
1) Charged upfront fees
In the credit repair industry, it’s a big no-no to request or charge consumers before services have been provided. Yet that is exactly what these credit repair companies allegedly did, charging:
- Fees to review credit reports during initial consultations
- Set-up fees totaling hundreds of dollars
- Monthly fees of $89.99
2) Failed to disclose limitations on money-back guarantees
It’s nice to know you can get your money back if a credit repair company doesn’t deliver as promised. But it doesn’t help much when that guarantee has limits that are not disclosed to you. In fact, the CFPB says consumers were surprised to learn they only got their money back if they had paid for at least 6 months of service. If they paid for anything less than that, consumers were out of luck and out of whatever money they’d sunk into the program.
3) Misled consumers about what they could do for them
Though there are effective techniques that can be used to repair credit – through a company or on your own – there are no guarantees that they will actually work. But the CFPB says these credit repair companies told a much different story:
- Assuring consumers that they could remove negative listings from credit reports
- Promising big jumps in credit scores
These alleged illegal practices are in violation of the Dodd-Frank Act Wall Street Form and Consumer Protection Act, and the Telemarketing Sales Rule.
What the CFPB wants done about it
The CFPB is asking the court to approve its proposed final judgments:
- A civil penalty of $1.5 million to be paid by Prime Credit, LLC; IMC Capital, LLC; Commercial Credit Consultants; Blake Johnson; and Eric Schlegel
- $500,000 in relinquished funds to the U.S. Treasury, to be paid by Park View Law (formerly known as Prime Law Experts, Inc.) and Arthur Barens
- 5-year ban on Johnson, Shlegal, and Barens (or their companies) from doing business in the credit repair industry
- Permanent prohibition on Johnson, Shlegal, and Barens (and their companies) violating the Dodd-Frank Act or the Telemarketing Sales Rule
What credit repair companies cannot do (and what they must do)
These alleged violations serve as an important reminder if you are planning to hire a credit repair company – know your rights. The Credit Repair Organizations Act (CROA) outlines strict rules for how credit repair companies must behave.
Credit repair companies are prohibited from:
- Making untrue or misleading statements
- Advisingyou to make untrue or misleading statements
- Advising you to change your identity or lie about your credit history
- Demanding upfront payment for services that have yet to be completed
Credit repair companies are required to:
- Disclose to you the “Consumer Credit File Rights Under State and Federal Law,” outlining consumer rights that include the following:
- Your right toget copies of your credit reports on your own (i.e., without the help of a credit repair company)
- Your right todispute listings on your credit reports on your own (i.e., without the help of a credit repair company)
- Your right to cancel credit repair services
- Your right to sue a credit repair company that violates your consumer rights
- Provide to you a written contract outlining the services you are paying them to do for you
- Honor your requested cancellation of services, provided it comes within 3 business days of your signing the contract
How to protect yourself
You have one of two options:
1) Repair your credit yourself
There is no special expertise needed to repair bad credit. You don’t need the help of a credit repair company, or anyone else. All you need is the knowledge and the resources to get the job done. You also need some time, but not a ton. (See a sample credit repair schedule that takes just 2 or 3 hours a month). Sound interesting? It gets better. With the exception of the price of postage (and any debt settlements you negotiate), repairing your own credit is free.
If you’d like to give it a go, check out our 20-Step Guide to DIY Credit Repair. There you’ll find everything you need to know to repair your credit like a pro, but here’s the gist of it:
- Request your credit reports. You may have some idea of what’s dragging down your credit score, but you need to know the details of every item specifically, and the only way of knowing that is to look through your credit reports. You can request them for free every 12 months through com. (Be sure to request all three – from Experian, Equifax, and TransUnion – as what’s on one credit report may not be on all of them.) If it’s been less than 12 months since you last used AnnualCreditReport.com, not to worry. There are plenty of other ways to see your credit reports for free.
- Look for errors on your credit reports. If you find inaccuracies on your credit reports, you have the right to dispute them – either with the credit bureaus, with the data furnishers, or both. Maybe it’s a late payment when you know you paid on time that month. Maybe it’s an outstanding balance on an account you know you have already paid in full. Or maybe it’s an account that you don’t recognize at all. Whatever the error, dispute it.
- Look for negative listings on your credit reports. If a negative listing is accurate and verifiable, then it cannot be removed from your credit reports. However, that’s no reason to ignore it. For instance, if you have an outstanding debt, you may be able to negotiate a pay-for-delete.
- Check the statute of limitations in your state. If it has passed, you cannot be required by law to pay the debt. That’s not to say you shouldn’t pay it; the statute of limitations may have run out, but the listing can stay on your credit reports up to 7 years. What an expired statute of limitations will do, though, is give you more leverage when negotiating a debt settlement.
- Request debt validation from debt collectors. Just because you get a letter or phone call saying that a new agency is handling a debt, that’s no reason to blindly believe it. Make them prove they have the right to collect on the debt. Request debt validation. Even if they are the right party responsible for the debt collection, there may be other reasons they fail to validate. In any case, if it’s not validated, their collection activity must stop and that particular collection listing must be removed from your credit reports.
- Pay your bills on time. You may not see results from timely payments right away, but over time it will go a long way toward negating the impact of the negative credit you are dealing with today.
- Monitor your credit. This is important for a couple of reasons. One, you need to be sure that items are being corrected or removed as promised. Two, you need to keep an eye out for future mistakes or fraudulent activity; the sooner you catch it, the sooner you can deal with it and minimize the damage.
2) Research credit repair companies carefully
There is nothing a credit repair company can do for you that you cannot do for yourself. That said, not everyone is comfortable with DIY credit repair. Though it doesn’t take a lot of time, and requires zero expertise, repairing your credit on your own may not sit right with you for any number of reasons. If that is the case, then, by all means, consider a credit repair company.
Just be sure to do your homework first.
Unfortunately, the credit repair industry attracts a lot of scammers. Your best means of protection is doing some research and knowing your rights (see the CROA do’s and don’ts section above).
Look for a credit repair company that:
- Has a good rating with the BBB
- Gives you a copy of the “Consumer Credit File Rights Under State and Federal Law”
- Informs you of your legal right to repair your credit yourself (for free)
- Gives you a contract outlining all fees, details of service, guarantees (if applicable), and a physical address and phone number
- Gives you time to look over your contract
Avoid any credit repair company that:
- Asks for advance fees before services have been provided
- Promises to remove all negative listings from your credit reports
- Says they can remove accurate listings from your credit reports
- Tells you not to contact the credit bureaus directly
- Advises you to create a new identity
- Makes misleading statements or advises you to make misleading statements
- Says they have a special relationship with someone “on the inside” who can get listings removed from your credit reports
Not sure what’s an illegal advance fee and what’s not? Learn how credit repair company billing structures work.
Where to start
If you want to give DIY credit repair a try, start here. If you’d rather find a good credit repair company, here’s a good example of a company that gets it right.