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Warning-Fraudulent Debt Repair Organizations

People who are looking to obtain a loan are often desperate to have a good credit rating so that they can qualify for a lower interest rate. They may fall prey to companies that promise to “clean up” their credit report. These companies generally will charge a fee before any service is performed. Once they get the fee, the company may challenge everything negative that is on the person’s credit report. The reporting agencies have 30 days to investigate the claims. If they do not hear back from the creditors within the 30 days, the challenged items may be removed. However, the creditors will eventually get back to the reporting agencies and when they do, the negative comments will be put back on the report. At that point all the money that was spent to clean up the report will have been wasted.

Credit repair companies are regulated by The Federal Trade Commission (“FTC”). The FTC has issued rules and regulations that provide, among other things, that credit repair companies cannot collect any money from their customers until they have fully performed the services that they have promised to provide the customer. They must also provide each customer with certain disclosures and a enter into a written contract. Below is a copy of some of the regulations that govern credit repair companies.

The FTC has filed suit against several companies for violation the Credit Repair Organization Act. It has recently settled lawsuits it filed against Successful Credit Service Corporation, Lee Harrison Credit Restoration and the companies’ principals on charges that they falsely claimed they could clean up consumers’ credit reports and collected up-front fees for their services in violation of federal law. Successful Credit Service will need to pay $8.3 million and the amount for Lee Harrison is almost $2.5 million.

Clients often ask me if I can repair their credit. They hear advertisements on the radio or see ads on TV and believe the companies that offer these services are credible. I always advise them not to waste their money. Nothing that is accurate on the report can be removed. If there is something on the report that is not accurate, the client can write to the reporting agency him or herself and ask that it be removed.

By: Laura J. Margulies