Fraudulent Credit Repair
/ Debt Consolidation Agencies
I Just Want Some Money
Like most individuals, you have probably been swept up in the
indulgences of our affluent society and have managed to outspend
your income. Your credit cards have frighteningly high balances
and you owe money to a finance company for various, absolutely
necessary, items such as your big screen TV and reclining chesterfield.
You've been late on a few payments and the reminder calls and
letters suggest you'd better do something to improve your credit
rating so you can apply for a new credit card or loan to allow
for your continued spending on a deferred payment basis.
You notice several ads on the radio and in the papers which boldly
"Are you experiencing credit problems? Regardless
of your credit record, you can now wipe your credit report clean
of bankruptcies, judgments, foreclosures, liens, and late payments!
AND IT'S 100% LEGAL!" "Credit problems? No problem!" "We
can erase your bad credit-100% guaranteed."
"CREDIT REPORTS CLEARED LEGALLY Whatever the negative
for whatever the reason WE GET IT DONE. Affordable/
100% Money Back Guarantee."
"Call 1-800-YES-CREDIT, to obtain information about
our credit repair program in order to receive a "confidential
analysis" regarding your credit history."
When you call they offer you a "credit analysis" in
exchange for an up-front fee, typically $95, payable to them either
by "phone cheques" or "demand drafts" using
your bank account information.
"We're a credit information company and our analysis program
includes the resources on how you may correct your personal credit
profile, obtain mortgages, car loans and settle collection matters."
They charge and receive payment of the $95 fee prior to conducting
a "credit analysis" or performing any other services
on your behalf.
"The first step is to provide you with a personal credit
analysis. We assign a trained credit analyst to your case who
will provide you with information with respect to your profile,
so that you may attempt to re-establish your credit."
" .. . if we can't qualify you, the $95 is refundable
within three business days. So, all we need to do is to get some
general information from you and a credit analyst will review
your case and get back to you within two weeks with your results."
During the course of the conversation, you are persuaded to provide
your checking account numbers to them. You may decline to purchase
their "credit analysis" or you may agree to purchase
it, but then phone back later the same day and notify them that
you are withdrawing your authorization to issue a debit on your
account. Regardless, you later discover that they have processed
a debit on your checking account for $95.
Shortly after the initial phone call, a "credit analyst" calls
you back and solicits you to purchase their "educational program." The
promised and prepaid "credit analysis" is not performed
nor discussed with you.
Whether you agree to purchase the materials or not, they then
send you a large package of materials which typically includes
instructions on how to obtain credit, credit information and referrals,
credit bureau form letters, a description of their services, a
disclosure/agreement form bearing your name pre-printed on the
form and also bearing a line for your signature, a notice regarding
payment terms bearing a line for signature by the "applicant",
a credit authorization sheet, and several applications for unsecured
and secured credit cards which require application fees or deposits
of $50 to $100.
The fee they charge for this "educational program" ranges
anywhere from $300 to $1,400, and is payable in monthly installments
via "phone checks" or conventional checks.
As part of their "educational program," they provide
you with form letters and instruct you to mail handwritten copies
of the letters to each of three credit bureaus in order to receive
current credit reports.
They encourage you to call their customer service line if you
do not receive responses from the credit bureaus or if you have
questions. They also send you instructions encouraging you to call
the National Business Reporting Bureau ("NBRB") to obtain
a report or reference on their company which will verify their
They imply that NBRB is an independent,
third party reporting organization that provides objective and
reliable reports that accurately describe its members' business
practices. The report states, among other things, that they have
received a "Triple AAA Rating" from NBRB.
They do not provide a service that will assist you in establishing
or reestablishing credit; rather, they merely sell a package of
educational materials and rarely, if ever, provide actual assistance
to consumers seeking to establish or reestablish credit.
The NBRB was not an independent consumer
protection agency which will provide objective and reliable reports
that accurately describe actual business practices; rather, it
was a commercial enterprise designed to provide good references
to consumers on behalf of any company who pays them a fee.
Please Note: Sadly, even though this scam
operation no longer operates as an institutional "singer" it
has effectively besmirched the name of an actual National
Business Reporting Bureau that wished to provide an alternative
to the services provided by the BBB. Bogus reporting
operations generally do not have publicly accessible databases
and are themselves referred to only at the suggestion of the listed
The Law Is On Your Side
Okay, so you figure you picked the wrong type of company to help
you out. What you need is a true "repair" company, one
that can remove all those bad things they have on your credit file.
You call one up but this time you ask a lot more questions to ensure
you are getting the real goods and not just some worthless manual.
"Hi, I understand you can fix my credit bureau file."
"That's right. We legally improve your credit report no
matter how bad you may think it is."
"The thing is I'm quite behind in some of my bills."
"No matter what kind of negative ratings you can possibly
have, there are legal ways to take those items off your credit
report and it can be done without you even paying off that account.
Even tax liens or judgments can be removed from your report legally
without you having to pay it off."
"You mean I could be a real deadbeat and you could fix that."
"I'll repeat this again: It doesn't make a difference
what kind of negative item you have on the report, whether they're
paid or unpaid accounts, they can legally be removed from your
"What do you really do, blow up their computer?"
"We use the Fair Credit Reporting Act, which was passed
by Congress in 1970 to protect consumer rights. It forces the
credit bureaus to remove certain types of negative information
from your credit report."
"Even the really bad stuff?"
"Yes, you see this law says information on your credit
reports must be accurate and verifiable or else it must be deleted.
We can use that law to force the credit bureaus to delete negative
information from your credit report if they can't get proof from
the creditors that it is true. The point is that it is very difficult
for a creditor to verify disputed items. So, if you know how
to force credit bureaus to perform a true verification, you have
a very good chance of having the negative information permanently
removed from your credit reports.
"But just how do you force them to do it?"
"We've honed and formulated a system to challenge virtually
anything on a credit report, they have it removed or re-rated
to a status that's non-negative in nature. It's extremely effective.
It's a pretty quick function and it's quite cost-effective."
"Just how effective is it?"
"I would say 95% of the information we work on comes off. And
that's fairly conservative."
"When will my file be cleaned up then?"
"You can expect to start seeing results within about 45
days, and the complete credit repair process takes between only
six and eight months."
"So even someone with a bankruptcy can be helped?"
"A discharged bankruptcy is actually not a bad situation
at all. It's bad from a credit reporting standpoint. But from
a credit restructuring standpoint it actually makes my job a
little bit easier. Typically, something like that, removing a
credit card default and a bankruptcy, would take a minimum of
three months and a maximum of six months . . . worst case scenario
. . . as opposed to the alternative of ten years. Because, keep
in mind, a discharge on a federal level such as a bankruptcy
has a ten-year statute of limitations. So, I mean, you know,
in comparison, six months to save ten years is definitely to
"Yeah, I'm not quite there yet, but it's still pretty bad."
"We want to help you clean your credit reports so you
can turn your life around."
"But what's all this going to cost?"
"It's an eight hundred dollar fee. You put two hundred
down, some people put more down, then you can pay the balance
in payments over six months. If you pay it all at one time, you
make one payment of seven hundred dollars and save a hundred
dollars that way."
"Gee, that's quite a bit?"
"Compared to not being able to get a loan for the next
seven years it's quite a small price to pay"
"Yeah, I suppose you're right about that. How do I get started?"
"First of course you have to send us the $200. Do you
have your bank account information handy? Then we have you request
your credit files."
"So I have to call and ask for them myself?"
"When the reports are issued they go to your home. You
make a copy, mail or fax a copy back to us. Again, we challenge
it. We continue to do that until we're able to get everything
"It just seems so incredible that you can really do this?"
"We know how to force the credit bureaus to perform a
true verification and get the negative information permanently
removed from your credit reports."
"I just want to make sure I'm getting something for my money
because I just got burned with some other company."
"We have been successful with our clients in all manners
of disputes including bankruptcies, judgments, tax liens, and
late payments. The simple fact remains that the bureaus are unwilling
or unable to invest in adequately investigating the information
that appears in their databases. It doesn't matter what the disputed
entry is, the bureaus will delete the information if they are
not willing to invest in the investigation."
The Reality of Relief
These companies promise you that they can restore your credit
worthiness for a fee and purport to guarantee they can remove negative
information from your credit reports —even if the negative
information is accurate and timely.
In truth, they cannot substantially improve most peoples' credit
reports or profiles by permanently removing bankruptcies, charge-offs,
late payments, and other negative information from your credit
reports, especially when such information is accurate and not obsolete.
"This fraud is particularly appalling because it preys on
consumers who already find themselves in financial difficulty as
a result of layoffs, divorce, or heavy medical expenses. Credit
repair scams literally kick consumers when they are down, fostering
and exploiting false hopes of building a better credit history
after suffering through tough times financially."
Although there are legitimate, not-for-profit credit counseling
services, the FTC has never seen a legitimate
credit repair company. You must understand that no one can erase
negative credit information if it is accurate and current, and
anything that is inaccurate can be corrected at little or no cost.
Federal law allows credit bureaus, which compile your credit history
information, to report all truthful information, including negative
information for seven years (bankruptcies can be reported for ten
years), and the credit repair operators cannot and do not get the
Only time, a conscious effort, and a personal debt repayment
plan will improve your credit report. It generally takes
six years for a bad debt to come off a file, regardless of any
activity from a credit clinic.
Everything a credit repair clinic can do for you legally, you
can do for yourself at little or no cost. You are entitled
to a free copy of your credit report if you've been denied credit,
insurance or employment within the last sixty days. If your application
for credit, insurance, or employment is denied because of information
supplied by a credit bureau, the company you applied to must provide
you with that credit bureau's name, address, and telephone number.
You can dispute mistakes or outdated items for free. Ask the credit
reporting agency for a dispute form or submit your dispute in writing,
along with any supporting documentation. Do not send them original
If you decide to respond to a credit repair offer, beware of companies
||want you to pay for credit repair
services before they provide any services. Under the Credit
Repair Organizations Act, companies cannot require you to pay
until they have completed the promised services.
||don't tell you your rights and
what you can do "yourself" for free.
||recommend that you not contact
a credit bureau directly.
||suggest that you try to invent
a "new" credit report by applying for an Employer
Identification Number instead of using your Social Security
||advise you to dispute all information
in your credit report or take any action that sounds questionable,
such as creating a new credit identity. If you follow illegal
advice and commit fraud, you may be subject to prosecution.
||offer a second mortgage or home
equity line of credit. While these loans may allow you
to consolidate your debt, they also require your home as collateral.
09/02 Two Southern California debt-negotiation
companies, Jubilee Financial Services Inc. and Jabez
Financial Group Inc., used advertisements, spam and telemarketers
to attract debt-ridden consumers with promises to reduce their
unsecured debt by 40 to 60 percent, then kept up-front fees, which
could total more than $1,000 for an individual case.
Jubilee and Jabez, housed in the same building in the Los Angeles
suburb of Downey, told their clients to stop payment on all unsecured
debt so that it would put the individuals in a "hardship" condition,
strengthening their position in negotiating a settlement with their
But consumers complained that the company simply took their money
and did little or nothing in return, ruining their credit and exposing
them to lawsuits by their creditors.
Jubilee President John Gustavsen 70, said that many of the charges
were phony, defended his company and blamed the FTC action on pressure
from bank and credit card lobbyists in Washington, who, he said,
lose money when Jubilee negotiates repayment of debt.
It is true that Jubilee told clients to stop paying their bills,
Gustavsen said, because it couldn't negotiate with creditors if
payments were being made and added that his company warned clients
that "when you're in the program, your credit is going to
The court-appointed receiver for Jubilee and Jabez, said he has
been unable to find $2 million that was supposed to be held in
trust to pay the clients' debts and believes that much of the money
went to cover Jubilee's expenses, including rent and salaries though
Gustavsen's 2001 BMW 325 convertible was also seized and sold for
administrative and legal expenses.
Woman sentenced for telemarketing fraud
A U.S. district judge has sentenced Lanette Black,
a former manager of Amansco Credit Services in
Fort Lauderdale to 46 months in prison, three years of supervised
release and $87,202.30 in restitution for her part in a telemarketing
fraud, the government said.
A federal jury found
Black guilty Oct. 17 of conspiracy to commit wire fraud in
1997 and 1998.
Amansco and a company named Franklin Credit Services,
which claimed to be in the debt consolidation business, defrauded
more than 5,000 customers nationwide of more than $2.7 million.
Before Black's trial, the government said eight Franklin sales
people pleaded guilty, including the person the U.S. District Attorney's
office identified as the scheme organizer, James Michael
Many credit counselors are 'sharks,' Coleman says
03/24/04 - Vowing to "clean up the garbage," U.S. Sen.
Norm Coleman on Tuesday issued a report sharply critical of abuses
in the nation's $20 billion credit counseling industry.
While operating as nonprofit educational entities, many credit
counselors are in reality little more than boiler-room telemarketers
that use high-pressure sales tactics to sign up consumers for debt
management plans that generate millions in fees for the counseling
agencies, the Minnesota Republican said in a conference call with
The Senate Permanent Subcommittee on Investigations, which Coleman
chairs, will hold a hearing today on credit counseling abuses.
Meanwhile, a record number of consumers were late with credit
card payments during the holiday season, the American Bankers Association
About 4.43 percent of all credit card accounts were 30 days or
more past due in the last quarter of 2003, the ABA said. That beat
the previous high of 4.09 percent in the third quarter of 2003.
With the average American household carrying nearly $7,000 in
credit card debt, Coleman said, those who fall behind are easy
prey for "sharks" who take advantage of their distress.
"They're not sure how they're going to feed their families," Coleman
said. "They're vulnerable, and they're being subjected to
these high-pressure pitches for debt management plans."
AmeriDebt Inc., one of the nation's largest credit counselors,
is facing legal action by the Federal Trade Commission and six
states, including Minnesota. The company is accused of false advertising,
deceptive trade practices and consumer fraud.
AmeriDebt is accused of holding itself out as a nonprofit source
of help for troubled consumers while being run for the benefit
of a few owners who raked in millions of dollars from a web of
interlocking business enterprises that sell, process and service
debt management programs.
Coleman suggested that the practice is common in the industry,
and his subcommittee's report accused two other large counseling
agencies of using their nonprofit status to generate lucrative
business for related profit-making entities.
Officials of one company, Massachusetts-based Cambridge Credit
Counseling, angrily accused Coleman of attacking them before hearing
their side of the story.
"We were told this was going to be a fair and open hearing,
that we'd be met with open minds," said Cambridge spokesman
Montieth Illingworth. "Now, on the eve of the hearing, we
find that the subcommittee staff has reached its conclusions and
written its report prior to hearing from us directly."
Coleman's report, Illingworth said, is "riddled with legal
misjudgments, and it contains a body of information at odds with
"The issue here, quite frankly, is not that we've broken
the law, but that somehow we represent something in the political
judgment of this subcommittee which they don't like," Illingworth
Coleman said he doesn't know what the next step should be, although
he said the IRS needs more enforcement resources to tackle industry
abuses. But he stopped short of proposing legislation.
"Right now, we're cleaning up the garbage," he said. "We
have to do that first."
John Reinan, Star Tribune
Boiler Room Raids Net Financial Aid Fraudsters
02/07 - (Quebec) - Five Montrealers working in a "boiler
room" in Park Extension were arrested yesterday as part of
a crackdown on a telemarketing fraud scheme that targeted people
with poor credit ratings.
The raid was carried out by the Royal Canadian Mounted Police
in conjunction with Ontario Provincial Police and the Barrie, Ont.,
municipal police. Simultaneous raids were conducted in Barrie and
Five people were in an office on Ogilvy Ave. when the RCMP arrived
yesterday morning. All five were arrested and later released.
They could face charges of fraud and defrauding the public, said
Cpl. Elaine Lavergne, an RCMP spokesperson. She could not say when
the five would appear in court.
Boiler rooms, the term for rented offices filled with fraudulent
telemarketers and banks of phones, were run out of Montreal, Toronto
and Barrie, about 90 kilometres north of Toronto.
All the targets of the telemarketing fraud were Americans, Lavergne
The complaints that sparked the inquiry came from the United States
Federal Trade Commission.
The telemarketers said they represented a company called Select
Management. Through telephone interviews, people who owed large
amounts of money and had bad credit histories were identified and
offered a way to buy their way out of debt.
The gullible shelled out $675 to the fraudsters, who said they
had a special arrangement with credit card companies for their "clients" to
consolidate their debts under one card. The targets were promised
low interest rates of between 4.74 and nine per cent.
The clients were promised savings up to $2,500, otherwise their
$675 would be refunded.
Once the client paid the $675 and returned a document with details
on all his or her debts, the telemarketers would set up a three-way
call with the client and a supposed representative of a credit
card company - and the request to lower the interest rate would
be declined. The $675 was never returned.
According to Lavergne, these telemarketers were "really,
really good at what they did."