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All consumers should check their credit report annually for accuracy. When doing so, keep these common problems in mind. If you find a violation and are not satisfied, please contact me.

 

1.  Carefully review all of your personal information. If your name is misspelled, your credit report lists incorrect addresses or a wrong social security number for you, or someone else's name, these are FCRA violations and should should be addressed.

 

2.  Find the full name and contact information of any company listing tradelines on your credit report. If it hasn't given its full company name and correct contact information, this is a FCRA violation and the tradeline should be corrected or removed altogether.

 

3.  Lingering Tradelines. Look at the date of last activity (DOLA) for each tradeline. Any negative tradelines older than 7 years or positive tradelines older than 10 years have to be removed. If they are not, this is a FCRA violation.

 

4.  Reaged Accounts. Reaged Accounts are tradelines with incorrect dates of last activity, that allow the tradeline to be included on a credit report for a longer period of time than the legal 7 or 10 years mentioned above. Companies that do this may be guilty of willful FCRA violations.

 

5.  Medical debt. Tradelines may not list the name of the health care institution where care was received. If an institution where medical care was provided is listed, it violates recent changes to the Act and the tradeline must be removed.

 

6.  Debts that were not validated. If you mailed a debt validation letter but did not receive a response validating the debt after 30 days, and the tradeline remains on your credit report, a violation of the FCRA has been committed.

A Judge Jeffrey Arlen Spinner, of the Supreme Court of New York's Suffolk County gave a Brookhaven, New York consumer whose loan servicer, IndyMac Mortgage Services, had obtained a judgment of foreclosure and sale a holiday reward for trying to work things out with the lender, while giving the lender ashes and switches for its misconduct.   The lender had badly delayed participation in a settlement conference required by New York law for sub-prime loans.  When a bank officer finally did appear, she was condescending, unwilling to discuss a sale to the borrower's daughter for fair market value, or a reasonable modification.  In addition she used inconsistent numbers to describe the debt.  The Court considered IndyMac's behavior to be outrageous.  Since foreclosure is a special remedy not just a request for money, the Court decided the case under rules that require a party seeking the equitable relief of a foreclosure to come into court with "clean hands"--something the servicing company lacked.  In the end, the Judge got so angry that he decided sanctions would not teach IndyMac a lesson and extinguished the borrower's debt altogether.  If you want to read a great story about a bank getting a beat-down, see here:  http://livinglies.files.wordpress.com/2009/11/indymac-bank-fsb-v-yano-horosky.pdf

 

      NBC News has reported that credit card companies are experimenting with annual fees for certain card holders to make up for lost revenues. http://today.msnbc.msn.com/id/33335064/ns/business-consumer_news/

 

      If your bank indicates an intention to impose a fee for your credit card, raise a fuss, and if you can afford it, consider closing your account to make a point. But not all consumers can or should do that, because as noted in the news story, credit scores can be adversely affected by closing and reopening credit card accounts. Savvy consumers will think twice before closing their accounts, but now is the time to make your point if you so choose. Let the card company know in writing why you're cancelling the card--so there will be no doubt in its corporate mind.

      Introduced July 14, 2009 to the House of Representatives, America's Affordable Health Choices Act of 2009, otherwise known as HR 3200 (the lengthy text of which can be seen here: http://thomas.loc.gov/cgi-bin/bdquery/z?d111:H.R.3200) provides many health care coverage improvements for Americans. Some of the provisions are smart and simple improvements of protections for consumers of health care insurance. One might be tempted to us as an example minimum standards for health insurance programs. However, as with all regulatory action, minimum standards must be regulated, and that reduces flexibility and adds costs which ultimately will be borne by consumers either in their premiums or through taxation. A better approach would be to rely on user-friendly, standardized, disclosures that present a menu of benefits, so that consumers could price shop in light of fair disclosures and evaluate what omissions and inclusions may be driving a plan's premium costs. Why not standardize the minimum benefits? An easy answer might focus on elective procedures that involve moral issues. On strictly religious grounds, some consumers may not want their premium payment to cover abortion services. Another example might focus on the age or gender of a consumer: an elderly man might choose not to have coverage for obstetrical or gynecological services, whereas a younger person might choose to omit coverage for geriatric services. The question is, do we want one size fits all policies, or mightn't consumers benefit from accepting certain risks in order to save premiums. Less controversial consumer protections would be requirements that coverage must be provided for a price that is not based on preexisting conditions, increased transparency, disclosures and clear notices.

 

      The similar Senate Bill, Affordable Health Choices Act S. 1679 (seen here: http://thomas.loc.gov/cgi-bin/bdquery/z?d111:S1679:) now contains a variety of amendments that have been survived the committee hearing. A good summary of the recent proposed amendments can be see here: http://www.towersperrin.com/tp/showhtml.jsp?url=usa/service-areas/health-care-reform/health-care-reform-pulse.htm#

 

      Criticism of the bill has been mixed, and good points are raised on both sides of the aisle. However, it is clear that America is suffering due to a cost of health care coverage. Both sides of the debate should focus on developing core areas on which we can all agree, and locking improvements into a bill we can all agree on.

      Virginia consumers frustrated by arbitration clauses in Federal claims against powerful corporations may get relief soon. Yesterday, the Department of Defense Appropriations bill was amended by a provision to limit forced arbitration in employment contracts with defense contractors. The vote was 68-30, and now moves on to a conference committee for reconciliation with the House version.

 

      The Defense Appropriations bill may seem an odd place for consumers to begin getting relief, but that is a function of the fact that claims against defense contractors are more likely to be large, and the injustice arising from forced pre-injury arbitration more stark. For example, there is the case of Jamie Leigh Jones, who after being drugged, raped, and confined in Iraq tried to pursue a lawsuit against her employer. She was denied due to a forced arbitration clause.

 

      Jamie Leigh Jones is testifying today in support of the bipartisan Arbitration Fairness Act (S. 931 / H.R. 1020). The Act would ensure that the decision to arbitrate is made voluntarily and after a dispute has arisen, so corporations cannot manipulate the system in their favor at the expense of consumers and employees.

 

      Virginia has an Arbitration Act that strongly favors arbitration clauses, even if they are buried in small print in the back of a contract. If you don't think its fair for companies to slip these into their contracts with consumers, let your state Senator or Delegate know you want change.

In a New York Times article last week (seen here: http://www.nytimes.com/reuters/2009/09/23/us/politics/politics-us-financial-regulation-cfpa.html?_r=1&scp=7&sq=consumer%20watch%20dog%20agency&st=cse), the recent White House proposal for a consumer financial protection agency is discussed. As with any new agency, it will take some time to become effective. Although it will have a huge influence on the financial sector, and should provide valuable protections, politicians are right in being keen not to reduce the competition, and the ability of consumers to make their own decisions, in the financial sector.

Although the economy is currently showing signs that it is beginning to turn around, there are still many consumers struggling to make ends meet. There is also a lot of tension surrounding an individual or family's ability to continue paying on a mortgage. There are many people on the brink of foreclosure, and many who are in the process of being foreclosed upon. Unfortunately, there are companies and individuals who are scamming these vulnerable persons. There are a number of ways in which this fraud is perpetrated.

 

In one such scam, the rescuer says that if you sign the house over to them, the foreclosure will appear on their record and not against you. Of course, all you're doing is signing your house over, which is what you're trying to prevent from being foreclosed upon in the first place.

 

Another trick is for the rescuer to say that they will cure the default if you pay them money. In theory, this method may work, but there are so many contingencies (not the least of which is whether the company will, in fact, cure the default) that it make the approach very questionable.

 

Yet another fraud is companies who say they will represent you through the foreclosure process. Many such representatives are not licensed and have little or no training. Others simply take the money and run.

 

Finally, another way unscrupulous rescuers defraud people in the midst of foreclosure is to offer to buy the house with the option to buy it back at a later time. The reality here is that you will have a LARGER loan and likely a greater interest rate than your current situation, which makes the likelihood of buying back the home very low.

 

To find our more about foreclosure fraud, see the following links to the Federal Trade Commission and Freddie Mac:

 

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre42.shtm

 

http://www.freddiemac.com/avoidfraud/

 

Lastly, to find out some tips about how to avoid mortgage fraud, see the following Federal Reserve website:

http://www.federalreserve.gov/pubs/foreclosurescamtips/default.htm

Even in this economy, fraudulent mortgage lending is alive and well in Virginia. But with sub-prime lending the principal cause of our present economic woes, targets and tactics have changed dramatically. Lenders are now only interested in credit-worthy borrowers. But that doesn't mean all lenders are worthy. Consumers with good credit who are trying to refi, need to be on the look out for unscrupulous lenders and tactics.

In June and early July, with rates low, consumers with excellent credit had an opportunity to refinance and reduce their interest. Just such a friend told me what happened to him early this month. He was looking to refinance his mortgage, and contacted both a lender and an unrelated loan broker to find out if they were interested in making a loan. To his dismay, both played fast and loose with his business by representing their commitment to his loan, and then watching the market to see if rates would rise or fall after they had made their deal so they could reap more profit or get out of the transaction altogether. My friend had worked in real estate in the 1980s and is a lawyer. He was able to quickly recognize the issues and see through the scam. But common sense, relying on one's intuition, careful observation and a stubborn streak can help you too to avoid being a victim.

Here is my friend's description of what happened in his own words:

I applied for a refinancing with two different mortgage specialists. One a direct lender and one a broker. In both instances they acknowledged my credit history was spotless and I had plenty of net worth and equity in my home to quickly accomplish the refinance. I filled out all of the paperwork, they both had my house appraised. The appraisals reflected plenty of equity in order to refinance. Both were solicitous of the business as they saw it as a slam dunk refi and they would reap the fees with no hassles.

About 10 days after my applications rates spiked upwards. The lender never got back with me despite my calls and emails. Incidentally, he also never cashed my check for the appraisal, even though he had my home appraised. I guess this was their "insurance policy" so to speak. If rates had gone down or stayed the same, the lender would have closed. Since rates went up they walked away.

The mortgage broker was more egregious. Since they offered the lower rate (4.75% with no points), I was more active on them. It was supposed to be a very quick closing. I was told I was fully approved and locked, but after rates spiked and a couple of days before the scheduled closing, they called and told me there had been a mistake. The loan didn't get locked due to a fluke in that the State of Virginia hadn't gotten the title company what they needed in order to issue the commitment and since the lender didn't have the final piece of the package (the title commitment) in a timely manner, the lock was blown. When I informed them that the State of Virginia had nothing to do with the title commitment, they hemmed and hawed. They did come back and tell me they could lock the loan at 5% and would I like to proceed with that. I said no and we have been going back and forth since then. They told me last week they could do it at 4.75%, but there would be a 0.375% point. I said I wouldn't pay it, so they pumped the estimated closing costs by a couple of thousand dollars and tried to backdoor me that way. They also sent me a new application to sign which in the fine print had a lot of exculpatory language to get them out of their previous commitment to me. I crossed it all out (by the way, this was a different application commitment entirely from what I had signed before).

To make a long story short, both the lender and the broker have played a heads they win, tails I lose game. If rates go down or stay the same, they close on their earlier commitment. If rates go up, they wiggle out of it. I plan on not letting this go and will let you know how I come out.

Virginia consumers beware: read your credit card account statements carefully to make sure you understand all of your charges. A stark example of the kind of error computers can generate is one by Visa that frightened 13,000 Visa prepaid cardholders who on Monday found charges like the $23,148,855,308,184,500 charge below on their statements.

Josh Muszynski of Manchester, New Hampshire found the 17-digit debit on his bill, and not surprisingly, he was charged an overdraft fee. His debt exceeded the world GDP and was incurred in one charge at a nearby Mobil gas station.

The same thing happend to Jason Bryant of Memphis, Tennessee, whose overdraft fee was later reversed. The reversal of the charge was not soon enough. Bryant told CNN he would be taking his money out of the bank and keeping it in a safe at home.

Muszynksi asked the Mobile station where he incurred his charge "Can I buy Europe on pump 4?"

Visa later that the said the rogue charges affected "fewer than 13,000 prepaid transactions" and resulted from a "temporary programming error at Visa Debit Processing Services ... [which] caused some transactions to be inaccurately posted to a small number of Visa prepaid accounts."

The company has indicated that the problem has been fixed and that all falsely issued fees have been voided. "Erroneous postings have been removed ... this incident had no financial impact on Visa."

Virginia consumers may not know it, but most of the contracts they sign with credit card companies, banks and retail lenders contain mandatory arbitration provisions that keep any dispute out of the courts. Disputes arising under the contract are resolved by a supposedly neutral arbitrator.

One of the largest arbitration agencies, the National Arbitration Forum, goes so far as to hold itself out to the public as operating like an impartial court system. Yesterday, Minnesota Attorney General Lori Swanson alleged that this is all a lie in a suit filed against NAF contending that it has "extensive ties to the collection industry--ties that it hides from the public."

The lawsuit claims that NAF, while trying to appear impartial, works behind the scenes to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and to appoint it to decide their disputes. The lawsuit alleges NAF does this to generate business--arbitration filings--which translates to revenue for itself.

How it allegedly did this is through a complicated web of interrelated corporations. Beginning in 2006 and through 2007, Accretive--a family of New York private equity funds--set up two transactions. In the first, it formed several equity funds that invested $42 million in NAF. In the second, three major debt collection law firms--Mann Bracken of Georgia, Wolpoff & Abramson of Maryland, and Eskanos & Adler of California--merged into one large national law firm called Mann Bracken. Accretive then purchased a majority interest in a debt collector called Axiant, which acquired the collections operations of Mann Bracken. Thus, Accretive gained control of one of the largest debt collection enterprises in the country and at the same time became affiliated with NAF. Accretive principals allegedly remained actively involved with NAF. What makes this worse is that in 2006, the NAF processed over 214,000 consumer collection arbitration claims. Of those 125,000, or nearly 60 percent, were filed by the three law firms that became Mann Bracken.

In short, the lawsuit assets complex financial relationship between NAF and the collection industry whose cases its arbitrators decide.

One executive wrote in an email attached to the complaint that "We remain deeply concerned about walling any deal off any deal from Mann Bracken. The shared ownership issue concerns us on many levels." No kidding. He also spoke of a Chinese wall, which presumably would separate Mann Bracken information from NAF, but that would hardly matter if NAF went about selecting arbitrators based on their performance favoring creditors. Unfortunately, the lawsuit suggests that's just what happened when Richard Neely, an NAF arbitrator--and newly retired Chief Justice of the West Virginia Supreme Court of Appeals-- stopped receiving cases after he denied attorneys' fees for creditors believing they were not allowed under West Virginia law.

If you've lost a case in an NAF forum, let me know.

Virginia credit card users should be delighted. On May 20, 2009, the House of Representatives passed the Credit Cardholders' Bill of Rights, sending it to President Obama's desk. The new law will ban most interest rate increases on existing balances and requires better notice of interest rate hikes going forward on new purchases. Of particular note to Virginia consumers, It includes freshman Congressman Tom Perriello's provisions to require credit card companies to have a 6-month minimum on promotional - or "teaser" - rates.

Perriello noted that he has "talked to too many 5th District families who have been blindsided by these teaser rate gimmicks and unfair fee hikes." The Credit Cardholders' Bill of Rights attacks unfair practices of the credit card industry and seeks to protect consumers from tactics that have driven Americans deeper and deeper into debt.

Among its many provisions, the new legislation will require that bills be sent 21 days before the due date. It will prohibit charging fees just to pay a bill by phone, mail or web, and will bans over-the-limit fees unless a consumer opts-in in advance. It contains measures to prevent due-date tricks, and requires payments to be applied fairly to the highest interest rate balance first. Finally, it should strengthen credit card protections for young people.

My last post (Scams Use Email As First Contact Over Half the Time According to Top Ten Frauds Report) about the FTC Consumer Sentinel Network's (CSN) publication of its 2008 Databook focussed on the catagories of fraud and nationwide prevalence of the categories. In this post, I'm looking at the prevalence in Virginia of scam categories.


All told, Virginians reported 16,114 fraud claims to CSN agencies. For the 85% of these reports that included information about the amount of their payments, the grand total was $31,066,922, resulting in an average payment (or loss) based on fraud of $2,276.


Topping all reports, whether identity-theft or other types of fraud, were 3,091complaints concerning third-party or creditor debt collection activities. Given our national propensity for debt, and the hyper-stressed economy, the prevalence of these claims is not at all surprising, and I would expect to see these numbers go up as banks seek to improve their balance sheets and collect "bad" debts before consumers bankrupt or are foreclosed upon.


The total number of identity theft, fraud and other consumer complaints filed by Virginians was 31,044. Of those, 6,349 involved identify theft in some form. Here are how the categories break down:


Top 10 Fraud and Other Complaint Categories Reported by Virginia Consumers

Rank	Identity Theft Type	Complaints	*Percentage
1	Third Party and Creditor Debt Collection	3,091	13%
2	Shop-at-Home and Catalog Sales	1,533	6%
3	Internet Services	1,385	6%
4	Credit Bureaus, Information Furnishers and Report Users	1,056	4%
5	Foreign Money Offers and Counterfeit Check Scams	1,038	4%
6	Prizes, Sweepstakes and Lotteries	965	4%
7	Banks and Lenders	700	3%
8	Auto Related Complaints	601	2%
9	Television and Electronic Media	563	2%
10	Computer Equipment and Software	553	2%

*Percentages are based on the total number of CSN fraud and other complaints from Virginia consumers (24,695).


Top 8 Identity Theft Categories Reported by Virginia Consumers

Rank	Identity Theft Type	Complaints	Percentage
1	Credit Card Fraud	1,475	23%
2	Phone or Utilities Fraud	996	16%
3	Government Documents or Benefits Fraud	683	11%
4	Bank Fraud	673	11%
5	Employment-Related Fraud	480	8%
6	Loan Fraud	287	5%
7	Other	1,674	26%
8	Attempted Identity Theft	429	7%

In February, the FTC's Consumer Sentinel Network (CSN) published its annual Data Book for January-December 2008, identifying the top ten fraud complaints, identity theft complaints and other complaints that plagued this nation in 2008. This year for the first time, the report includes "other complaints" in addition to fraud and identity theft. It is based on over 1.2 million complaints collected by the Network during calendar year 2008: 52% fraud complaints; 26% identity theft complaints; and 22% other types of complaints. Of those complaints reporting the initial means of contact, fifty-two percent (52%) said that method was email. The Internet was reported as the initial means of contact only eleven (11%) of the time and telephone only seven percent (7%).


After Identity Theft, the complaint categories by broke down as follows nationally Third Party and Creditor Debt Collection (9%); Shop-at-Home and Catalog Sales (4%); Internet Services (4%); Foreign Money Offers and Counterfeit Check Scams (3%); Credit Bureaus, Information Furnishers and Report Users (3%); Prizes, Sweepstakes and Lotteries (3%); Television and Electronic Media (2%); Banks and Lenders (2%); and Telecom Equipment and Mobile Services (2%).


Credit card fraud was the most common form of reported identity theft at twenty percent (20%), followed by government documents/benefits fraud (15%), employment fraud (15%), and phone or utilities fraud (13%). Other major categories of identity theft reported by victims were bank fraud (11%) and loan fraud (4%).


Credit cards were also the principal form of payment (35%) for whatever it was that consumers purchased in reported scams. Wire transfers (24%), bank account debits (19%) and checks (10%) were other preferred means used by consumers to pay their losses.
 

The FTC's CSN gathers complaints provided directly to the Federal Trade Commission, state and local law enforcement agencies and other data contributors, who include: particpating Better Business Bureaus, the Internet Crime Complaint Center, Phonebusters, the U.S. Postal Inspection Service, the National Fraud Information Center, and the Identity Theft Assistance Center.  All told, the network consists of 91 Federal agencies, 1,572 state and local agencies, three Canadian, and 26 other internationalgencies representing 23 countries.


For detail on Virginia numbers, see my next post (Third Party and Creditor Debt Collection Tops Virginia Consumer Complaints to CSN).

Continue reading "Scams Use Email As First Contact Over Half the Time According to Top Ten Frauds Report" »

This 2009 session, Virginia's General Assembly is poised to expand the Consumer Real Estate Settlement Protection Act.  Presently the Act requires that consumers be given a statement explaining the role of a settlement agent, and indicating that they have the right to select their own settlement agents.  This is true, of course, and being given notice is all good and well, but notice alone lacks the teeth to really protect consumers.  This is because some lenders who want to avoid the effect of the law do so by including contractual language in their loan documents whereby consumers voluntarily give up or "waive" the right make their own selection of a settlement agent in exchange for getting a loan.  These lenders then introduce their own settlement agents into the transaction, often at a greater expense to consumers than the consumer might pay to a local settlement agent.  Such lenders' choices of settlement agents are normally companies that want lenders' repeat business, and that are willing to overlook the duties they owe to consumers if needed to keep the real client--the lender-- happy.

It looks like this loophole will be closed with the passage of HB 2568, a provision that will say the provisions of the Act "may not be varied by Agreement, and rights conferred by this chapter may not be waived.  The seller may not require the use of a particular settlement agent as a condition of the sale of the property."

The General Assembly is to be commended for plugging this gap in the statute.

This 2009 session, Virginia's General Assembly is poised to expand the Consumer Real Estate Settlement Protection Act.  Presently the Act requires that consumers be given a statement explaining the role of a settlement agent, and indicating that they have the right to select their own settlement agents.  This is true, of course, and being given notice is all good and well, but notice alone lacks the teeth to really protect consumers.  This is because some lenders who want to avoid the effect of the law do so by including contractual language in their loan documents whereby consumers voluntarily give up or "waive" the right make their own selection of a settlement agent in exchange for getting a loan.  These lenders then introduce their own settlement agents into the transaction, often at a greater expense to consumers than the consumer might pay to a local settlement agent.  Such lenders' choices of settlement agents are normally companies that want lenders' repeat business, and that are willing to overlook the duties they owe to consumers if needed to keep the real client--the lender-- happy. 

It looks like this loophole will be closed with the passage of HB 2568, a provision that will say the provisions of the Act "may not be varied by Agreement, and rights conferred by this chapter may not be waived.  The seller may not require the use of a particular settlement agent as a condition of the sale of the property."

The General Assembly is to be commended for plugging this gap in the statute.

To its great credit the Virginia General Assembly this 2009 session passed HB 2261, a bill  designed to expand the Consumer Protection Act's coverage of mortgage foreclosure prevention scams.  Unscrupulous foreclosure avoidance companies often require desperate consumers to pay in advance for their services and then do little or nothing to really help.  When the General Assembly first recognized this and other dangers in foreclosure prevention programs, which are often nothing more than schemes to milk consumers' last dollars before they take their homes, it treated them as illegal only if a fee was taken prior to a settlement on a sale of a consumer's residential real property.  The new provisions make  advance fees illegal even if there is no sale of the real estate.


Consumers should also be pleased that when the General Assembly passed the original legislation that brought prepaid foreclosure prevention schemes into the Consumer Protection Act, it prohibited mandatory arbitration clauses.  The legislature's recognition that all arbitration clauses are not good should give consumers hope that lawmakers will expand prohibitions or limitations of such clauses into other areas of consumer protection law.

To its great credit the Virginia General Assembly this 2009 session passed HB 2261, a bill  designed to expand the Consumer Protection Act's coverage of mortgage foreclosure prevention scams.  Unscrupulous foreclosure avoidance companies often require desperate consumers to pay in advance for their services and then do little or nothing to really help.  When the General Assembly first recognized this and other dangers in foreclosure prevention programs, which are often nothing more than schemes to milk consumers' last dollars before they take their homes, it treated them as illegal only if a fee was taken prior to a settlement on a sale of a consumer's residential real property.  The new provisions make  advance fees illegal even if there is no sale of the real estate.


Consumers should also be pleased that when the General Assembly passed the original legislation that brought prepaid foreclosure prevention schemes into the Consumer Protection Act, it prohibited mandatory arbitration clauses.  The legislature's recognition that all arbitration clauses are not good should give consumers hope that lawmakers will expand prohibitions or limitations of such clauses into other areas of consumer protection law.

In an economy built on credit, Virginians with bad credit are exceptionally vulnerable to credit repair scams. Even unsophisticated consumers know that bad credit increases the cost of borrowing, or makes it impossible for them to obtain goods and services. Bad credit also leads to secondary problems when it squeezes a household budget, reduces the consumer's purchasing power, and jeopardizes the budget. This can happen when the interest rate on an existing debt is modified as a consequence of an adverse change in credit. And so, every year millions of consumers seek assistance from thousands of businesses that promise to help to improve or repair credit.  Not all of these are helpful, and many are money making scams.


There are three basic strategies employed by credit repair organizations.  Some companies offer credit repair or improvement services as their primary service. One example is the credit repair clinic--an organization that claims that it will--for a fee--contest negative information in consumers' credit reports resulting in fewer errors and a boosted credit score. Many of these "clinics" are over-priced and ineffective. Worse, if consumers follow illegal advice the clinic gives, they can get into legal trouble. In others schemes, credit repair is a collateral benefit of a program that attacks an underlying problem such as debt, through a mechanism--such as a debt management plan-- that resolves the first problem and may eventually result in improved credit. These organizations often offer to "re-age" your credit card accounts, to remove references to late payments, but in truth, it is the credit card company that does the re-aging, not the credit counselor.


Yet another category of credit repair service--one that doesn't really merit being referred to as a "service"--is the practice of selling a good, such as a laptop computer or a used car, together with a loan. If the loan is paid off under its terms, the timely stream of loan payments can indeed boost a sagging credit score.


The good news is that savvy consumers can avoid credit repair scams. Visit the FTC's website for some tips on how to determine whether you're dealing with a good organization or not. Smart shoppers for any service insist on a contract in writing that provides the payment terms for the services, including the total cost; a description of the services the company will perform; a statement as to how long it will take to achieve the result promised; and any guarantees offered. The law regulating credit repair organizations requires each o f these things and more. If you have been involved with the credit repair organization beyond the first three days of your membership, you should show the contact to an experienced consumer protection attorney. And if you're in the first three days, of the contract, you should be able to cancel the contract without the help of lawyer using the the three day "cooling off" period the act provides for.

In an economy built on credit, Virginians with bad credit are exceptionally vulnerable to credit repair scams. Even unsophisticated consumers know that bad credit increases the cost of borrowing, or makes it impossible for them to obtain goods and services. Bad credit also leads to secondary problems when it squeezes a household budget, reduces the consumer's purchasing power, and jeopardizes the budget. This can happen when the interest rate on an existing debt is modified as a consequence of an adverse change in credit. And so, every year millions of consumers seek assistance from thousands of businesses that promise to help to improve or repair credit.  Not all of these are helpful, and many are money making scams.


There are three basic strategies employed by credit repair organizations.  Some companies offer credit repair or improvement services as their primary service. One example is the credit repair clinic--an organization that claims that it will--for a fee--contest negative information in consumers' credit reports resulting in fewer errors and a boosted credit score. Many of these "clinics" are over-priced and ineffective. Worse, if consumers follow illegal advice the clinic gives, they can get into legal trouble. In others schemes, credit repair is a collateral benefit of a program that attacks an underlying problem such as debt, through a mechanism--such as a debt management plan-- that resolves the first problem and may eventually result in improved credit. These organizations often offer to "re-age" your credit card accounts, to remove references to late payments, but in truth, it is the credit card company that does the re-aging, not the credit counselor.


Yet another category of credit repair service--one that doesn't really merit being referred to as a "service"--is the practice of selling a good, such as a laptop computer or a used car, together with a loan. If the loan is paid off under its terms, the timely stream of loan payments can indeed boost a sagging credit score.


The good news is that savvy consumers can avoid credit repair scams. Visit the FTC's website for some tips on how to determine whether you're dealing with a good organization or not. Smart shoppers for any service insist on a contract in writing that provides the payment terms for the services, including the total cost; a description of the services the company will perform; a statement as to how long it will take to achieve the result promised; and any guarantees offered. The law regulating credit repair organizations requires each o f these things and more. If you have been involved with the credit repair organization beyond the first three days of your membership, you should show the contact to an experienced consumer protection attorney. And if you're in the first three days, of the contract, you should be able to cancel the contract without the help of lawyer using the the three day "cooling off" period the act provides for.