By Randy Hutchinson
President of the BBB of the Mid-South
Reprinted from The Jackson Sun
How prevalent are credit repair scams? In the span of just three months this year, the FTC shut down three companies that took in almost $240 million with false promises they could repair consumers’ credit records. And some of the services they offered went beyond your garden-variety credit repair scam.
The three companies are Turbo Solutions Inc., doing business as Alex Miller Credit Repair; The Credit Game, formerly called Wholesale Tradelines; and Financial Education Services, also operating as United Wealth Services. The FTC alleged the companies illegally collected upfront fees of as much as $1,500 with bogus promises that they could get negative information removed from consumers’ credit files and boost their credit scores in as little as 40 days.
The companies used social media, telemarketing, and sales agents to promote their services in English and Spanish. In some cases, all they did was furnish consumers with form letters to send to credit bureaus disputing negative items that were legitimate and rarely removed. Alex Miller Credit Repair and The Credit Game had consumers file bogus identity theft reports with the FTC and then tell the credit bureaus the negative information in their credit reports was the result of identity theft.
The Credit Game said it could help consumers improve their credit scores through “credit piggybacking,” in which consumers pay to be added as an authorized user on the credit card account of someone with better credit. They can’t actually use the account, but its good payment record is reflected in their credit report. The actual accountholder gets paid a fee.
Two of the companies recruited consumers to buy into a business opportunity whereby they would sell bogus credit repair services to other people. The Credit Game said people could make tens of thousands of dollars monthly and encouraged them to invest their government COVID benefits in the scheme. One ad used the headline “Free Credit Repair From The Government.”
Financial Education Services’ program was a classic pyramid scheme. It required people to pay hundreds of dollars to join the business and incentivized them to recruit new agents to sell the credit repair services. Agents had to pay for the credit repair service for themselves even if they didn’t need it and most lost money in the scheme.
Financial Education Services also sold an ineffective rent payment product that would supposedly send information to the credit bureaus indicating consumers paid their rent on time to improve their credit records. Credit bureaus don’t generally report rent information and wouldn’t accept it directly from consumers anyway.
Finally, the FTC alleged that the companies failed to provide required disclosures to consumers, including a detailed description of the services they’d perform, the consumers’ three-day right to cancel without charge, the total costs, how long it would take to get results, and any guarantees.
You can do most of what a credit repair company offers to do yourself for free. If you think information in your credit file is inaccurate, ask the credit bureau and creditor to investigate it. They must do so free of charge and remove any information they determine is inaccurate. If you don’t agree with their findings, you can ask them to include a statement regarding your position in your file.