Crackdown on ‘Credit-repair’ Companies

It’s like credit-repair companies have realized how much debts and bad credit scores are a nightmare to everyone.  You can’t access a small loan, let alone a home mortgage. No wonder you’ve almost certainly heard of the highly praised “credit repair” services that swear to help you clear your debts, solve your credit problems or even go the extra mile to improve your credit scores.

Such come-ons are attention-grabbing, especially for people looking to purchase a home with the help of a mortgage but are likely to fail because of poor credit reports. The issuing banks often ask such mortgage applicants to better their credit reports– in most cases by sorting out the bad stuff in their records at the national credit bureaus, regardless of whether the data is accurate or not.

Credit-repair companies chip in to offer a helping hand, but it seems their promises are just another case of too good a deal; home buyers will have to think twice. Mortgage experts have warned that repair services could you more harm than good. Your application could even get rejected immediately.

In an attempt to hold down the fort, CFPB cited two laws both with over $2 million in penalty against fraudulent credit repair companies.  These two rules will act as a reminder to mortgage applicants on what to avoid when they need assistance with their credit.

Commercial Credit Consultants, Prime Credit LLC, Park View Law, IMC Capital LLC along with a few other firms appeared on CFPB’s list. These companies allegedly charged loan seekers an illegal advance fee, gave misleading details on the services they offer, and failed to clearly state the limits on their “money back guarantees.” Through their websites, these companies attracted the masses, at times targeting those looking to refinance.

According to the bureau, the companies allegedly violated the Telemarketing Sales Rule and Consumer Financial Protection Act. And though none of the defendants neither admitted nor denied these allegations, they agreed to the settlement.

The federal law prohibits credit repair companies from requesting upfront payments until they can put it down on paper that they have achieved notable improvements on a client’s credit score. Until then, the customer should not pay a cent. These companies purportedly sought to find their way round this law by adding a series of payments including; “consultation” charges, a “set-up fee and a monthly fee.

CFPB further claims that for typical clients, the companies wrote “dispute letters” to the national credit bureaus disputing much of what they considered negative information ( sometimes even for accurate data) in clients’ credit reports. No follow up was then made to see whether the credit bureaus accepted or turned down the claims, and in the end, these companies failed to determine whether they had raised the customer’s credit score.

Loan applicants should go for registered credit repair companies who operate legal merchant accounts with providers like eMerchantBroker. But most importantly, check the reputation of the company they choose to deal with. And in some cases, repair is not the best way to go with credits; you’ll need to settle a few debts.