What the CFPB Wants You to Know About Credit Repair Services
The Consumer Financial Protection Bureau has filed federal complaints against four credit repair companies that promised to help customers raise their credit scores for a fee.
According to the CFPB, the four California-based companies — Prime Credit LLC, IMC Capital LLC, Commercial Credit Consultants and Park View Law — violated several federal laws.
The companies and their leaders are accused of charging consumers fees before they delivered on services, overselling the benefits of their services and failing to disclose the limitations of “money-back guarantees” they advertised to gain the trust of potential clients.
The CFPB recommends fining the companies a combined $2 million.
What the CFPB Says the Company Did Wrong
According to the CFPB, federal law requires companies like those named in the complaint to prove they are able to deliver on the promised results before they can collect any payment.
The CFPB accuses each of the four companies of charging hundreds of dollars just to review a customer’s credit history and sign them up for the service. Then, the companies would charge an additional $89.99 each month to continue the service without significantly increasing their customers’ credit scores, the CFPB says.
While the companies also offered money-back guarantees for unsatisfied customers, the CFPB says many were never able to collect because only those who stuck with the company for at least six months with no results qualified for the guarantee. Anyone who left sooner forfeited their rights under the guarantee, according to the complaints.
Finally, the CFPB says the companies often lured in customers who were struggling financially with the promise they would remove nearly every negative mark on their credit and dramatically increase their credit scores. Customers paid the high fees in hopes of leaving with significantly higher credit scores, but the companies lacked the evidence to support these claims, according to the complaints.
Thinking of Hiring a Credit Repair Company? Consider This First
While the companies named in the complaint and their clients were mostly based in California, other companies all across the country make similar claims about what they can do for your credit score.
While some may be helpful, we want to protect our Penny Hoarding family from the bad apples.
First, there is no good reason to pay any company just to review your credit history. You can use a service like Credit Sesame to calculate your credit score and monitor any changes for free.
If you want to skip hiring a credit repair company altogether, Credit Sesame also gives you tips on how to raise your credit score.
If you feel like you need outside help, here’s what the CFPB thinks you should know before paying for credit repair services.
1. If the Company Demands Upfront Payment, Run
Under the Credit Repair Organizations Act, a credit repair company cannot charge you any money until after it completes the service.
If the company uses telemarketing, it cannot request fees until it can produce a credit report at least six months after the promised results that shows it fulfilled its promises to you. So, if a credit repair company that uses telemarketing promised you a 100-point credit score increase in six months, it cannot collect its fee until it proves it fulfilled its promise 12 months later.
“Some companies will structure monthly payment plans to avoid this requirement, and you should know that no form of upfront payment is legal,” the CFPB said.
2. If it Sounds Too Good to Be True, it Probably is
If the company you’re considering hiring has promised a specific score increase in a short period of time, don’t believe it. Updating a credit report takes time, and no one can guarantee a specific score.
3. If the Company Can’t Clearly Explain its Process, That’s a Red Flag
We get it. The reason you would hire an expert is because this process can get complex. You’re paying them to be the experts so you don’t have to be one.
But if the company you’re considering hiring can’t clearly explain how it plans to repair your credit and raise your score, that is a sign something may be wrong.
Make sure you understand the process, know exactly how much the service will cost and have a written contract that outlines all of this. You’ll need that contract to determine if the company delivered on its promises and avoid any surprises when it’s time to pay.
4. If the Company Asks You to Lie, Don’t
The CFPB’s final word of caution: Never hire a company that asks you to misrepresent facts.
For example, a less-than-reputable company may advise you to create a new credit identity with an Employer Identification number instead of your Social Security number. The CFPB does not recommend following this shady advice.
If you hired one of the California companies or another company in any other part of the country and had a similar experience, report it to the CFPB.
Disclosure: Our friends stopped inviting us over because we were always digging for loose change between their couch cushions. We use affiliate links instead so we still get invited to a few parties.
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.