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 state:
"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 credentials.
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 fraudulent enterprise.
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 report."
"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 your advantage."
"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 removed."
"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 information removed.
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 documents.
If you decide to respond to a credit repair offer, beware of companies that:
|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 number.|
|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 creditors.
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 be thrashed."
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 Christensen.
Many credit counselors are 'sharks'
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 reporters.
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 reported Tuesday.
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 facts.
"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 said.
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 Toronto.
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 said.
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."