Court Shuts Down Credit Repair Scam that Targeted Latinos
News Report by George White, New America Media At the request of the Federal Trade Commission, a court has halted the operations of a company that allegedly posed as an affiliate...
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News Report by George White, New America Media
At the request of the Federal Trade Commission, a court has halted the operations of a company that allegedly posed as an affiliate of the FTC to market bogus credit repair services to Spanish-speaking consumers, legal action that is prompting new discussions about fraud in the credit counseling industry.
The U.S. District Court in Los Angeles this week is expected to obtain depositions and hear arguments on whether to extend a March 27 injunction that halted the operations of a Los Angeles-area company called First Time Credit Solutions. The injunction was the court’s response to an FTC complaint that alleges that the company marketed itself as FTC Credit Solutions and used its false affiliation with the agency to sell fraudulent credit repair services to Spanish speakers.
Claiming that their company is licensed by the federal agency, FTC Credit Solutions guaranteed consumers a credit score of 700 or above within six months or less, the complaint says. The defendants also told some consumers that the company could change negative reports that are accurate, according to the FTC complaint.
“Peddling lies under the name of the Federal Trade Commission to target consumers who are in difficult financial situations is appalling,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.
“This scam used the promise of a fresh start to hurt consumers when they most needed help, so we are pleased the court has taken a first step to ending it for good.”
Consumer complaints about scammers claiming federal affiliations have been rising. In 2014, the number of such complaints was nearly 24 times larger than the number of such reports in 2013, according to the FTC. However, the vast majority of those complaints involved scam artists impersonating IRS officials as part of identity theft schemes.
The FTC complaint against First Time Credit Solutions, based in the city of Bell in Metropolitan Los Angeles, is generating a buzz in the credit counseling industry. For example, the National Association of Credit Service Organizations (NASCO) last week issued a statement designed to disassociate its members from credit repair scammers.
“NACSO supports regulatory enforcement efforts to root out ‘bad actors’ posing to be legitimate providers of credit repair services,” the statement said. “The alleged egregious behavior is unlawful and it appears the FTC appropriately responded swiftly. NACSO represents the professional credit repair industry and its standards of excellence and code of conduct is centered on ethics and integrity in serving consumers.”
FTC Credit Solutions produced misleading radio advertisements that claimed an affiliation with the Federal Trade Commission, the FTC complaint says. The agency used undercover investigators to probe the company.
One company employee told an FTC investigator that the company “works under the Federal Trade Commission, which is a law that was signed by the president in 2010,” the complaint says. That employee falsely promised that the company could “delete” and “get [the investigator] a pardon” for $19,000 in debt, the FTC says. The agency also alleges that FTC Credit Solutions falsely claimed that it could delete individuals’ bankruptcy records.
In addition, the company unlawfully charged consumers fees in advance of providing the promised credit repair services, the complaint says. The company charged $2,000 per person, according to the FTC.
The Federal Trade Commission files court complaints when it has “reason to believe” it has identified violations of law. The FTC Credit Solutions case will be decided by the court. Under the terms of the court’s restraining order, the company has temporarily ceased operations and the defendants’ assets are frozen.
How to Avoid Credit Repair Scams:
The following is based on advisories from the Federal Trade Commission.
No one can legally remove accurate information from a credit report. You can ask for a free investigation of information in your file that you dispute as inaccurate or incomplete. Some hire a company to investigate for them. However, anything a credit repair company can do, you can do for yourself. Here are some of your rights and options:
• You are entitled to a free credit report if a company takes adverse action against you such as denying your application for credit, insurance or employment. You have to ask for your report within 60 days of receiving notice of the action.
• If you discover inaccurate information, inform the credit reporting company in writing and include copies of any documents that support your position. Credit reporting companies must investigate the items you question within 30 days.
• Under law, credit repair companies are not allowed to intentionally misinform you about what they can do for you and they are prohibited from charging you before they’ve performed their services.
• The Credit Repair Organization Act, enforced by the FTC, requires credit repair companies to provide a contract that explains your legal rights, the following information among them: details on the services they’ll perform, your three-day right to cancel without any charge, and the total cost you will pay.
• Most credit counselors offer services through local offices, online and/or on the phone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions and housing authorities offer nonprofit credit counseling programs. Your financial institution, local consumer protection agency and friends and family also may be good sources of information and referrals.
• Many states have laws regulating credit repair companies. If you have a problem with a credit repair company, report it to your local consumer affairs office or to your state attorney general.
• You can also file a complaint with the Federal Trade Commission. The FTC can’t resolve individual credit disputes but it can take action against a company if there’s a pattern of possible law violations. You can file your complaint online at ftc.gov/complaint or call 1-877-FTC-HELP.
This column is part of New America Media’s joint project with the Federal Trade Commission (FTC). For more information about how to avoid fraud and scams, go to consumer.ftc.gov.