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Hello, This page was prompted by my desire to make the FTC (Federal Trade Commission) rules for disclosure and regulations of credit repair organizations very clear to everyone who purchases my book. Below you will find 5 documents provided by the FTC that are designed to help consumers make smart choices regarding credit repair. Feel free to contact me if you have any questions regarding these documents. Best Wishes, Improve Your Credit Company
Copyright 1999-2008 - Improve Your Credit Company. CHAPTER 2--CREDIT REPAIR ORGANIZATIONS(1) SEC. 2451. REGULATION OF CREDIT REPAIR ORGANIZATIONS. Title IV of the Consumer Credit Protection Act (Public Law 90-321, 82 Stat. 164) is amended to read as follows: TITLE IV--CREDIT REPAIR ORGANIZATIONS'' Sec. SEC. 401. SHORT TITLE.(2) This title may be cited as the 'Credit Repair Organizations Act'. SEC. 402. FINDINGS AND PURPOSES.(3) (a) Findings.--The Congress makes the following findings: (1) Consumers have a vital interest in establishing and maintaining
their credit worthiness and credit standing in order to obtain
and use credit. As a result, consumers who have experienced credit
problems may seek assistance from credit repair organizations
which offer to improve the credit standing of such consumers.
(1) to ensure that prospective buyers of the services of credit
repair organizations are provided with the information necessary
to make an informed decision regarding the purchase of such services;
and For purposes of this title, the following definitions apply: (1) Consumer. -- The term 'consumer' means an individual. (2) Consumer credit transaction. -- The term 'consumer credit transaction' means any transaction in which credit is offered or extended to an individual for personal, family, or household purposes. (3) Credit repair organization. -- The term 'credit repair organization'-- (A) means any person who uses any instrumentality of interstate
commerce or the mails to sell, provide, or perform (or represent
that such person can or will sell, provide, or perform) any service,
in return for the payment of money or other valuable consideration,
for the express or implied purpose of-- SEC. 404. PROHIBITED PRACTICES.(7) (a) In General.--No person may-- (1) make any statement, or counsel or advise any consumer
to make any statement, which is untrue or misleading (or which,
upon the exercise of reasonable care, should be known by the
credit repair organization, officer, employee, agent, or other
person to be untrue or misleading) with respect to any consumer's
credit worthiness, credit standing, or credit capacity to-- SEC. 405. DISCLOSURES.(9) (a) Disclosure Required.--Any credit repair organization shall provide any consumer with the following written statement before any contract or agreement between the consumer and the credit repair organization is executed: 'Consumer Credit File Rights Under State and Federal Law You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ''credit repair'' company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for 10 years. You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next 60 days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud. You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organizations. You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the date you signed it. Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur. You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then reinvestigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau. If the credit bureau's reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you. The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact: The Public Reference Branch (b) Separate Statement Requirement.--The written statement required under this section shall be provided as a document which is separate from any written contract or other agreement between the credit repair organization and the consumer or any other written material provided to the consumer. (c) Retention of Compliance Records.-- (1) In general.--The credit repair organization shall maintain
a copy of the statement signed by the consumer acknowledging
receipt of the statement. (a) Written Contracts Required.--No services may be provided by any credit repair organization for any consumer-- (1) unless a written and dated contract (for the purchase
of such services) which meets the requirements of subsection
(b) has been signed by the consumer; or (1) the terms and conditions of payment, including the total
amount of all payments to be made by the consumer to the credit
repair organization or to any other person; (a) In General. -- Any consumer may cancel any contract with any credit repair organization without penalty or obligation by notifying the credit repair organization of the consumer's intention to do so at any time before midnight of the 3rd business day which begins after the date on which the contract or agreement between the consumer and the credit repair organization is executed or would, but for this subsection, become enforceable against the parties. (b) Cancellation Form and Other Information. -- Each contract shall be accompanied by a form, in duplicate, which has the heading 'Notice of Cancellation' and contains in bold face type the following statement: 'You may cancel this contract, without any penalty or obligation, at any time before midnight of the 3rd day which begins after the date the contract is signed by you. To cancel this contract, mail or deliver a signed, dated copy of this cancellation notice, or any other written notice to (name of credit repair organization) at (address of credit repair organization) before midnight on (date) I hereby cancel this transaction, ( date ) ( purchaser's signature ).'. (c) Consumer Copy of Contract Required.--Any consumer who enters into any contract with any credit repair organization shall be given, by the organization-- (1) a copy of the completed contract and the disclosure statement
required under section 405; and (a) Consumer Waivers Invalid.--Any waiver by any consumer of any protection provided by or any right of the consumer under this title-- (1) shall be treated as void; and (c) Contracts Not in Compliance.--Any contract for services which does not comply with the applicable provisions of this title-- (1) shall be treated as void; and (a) Liability Established.--Any person who fails to comply with any provision of this title with respect to any other person shall be liable to such person in an amount equal to the sum of the amounts determined under each of the following paragraphs: (1) Actual damages.--The greater of-- (1) the frequency and persistence of noncompliance by the
credit repair organization; (a) In General.--Compliance with the requirements imposed under this title with respect to credit repair organizations shall be enforced under the Federal Trade Commission Act by the Federal Trade Commission. (b) Violations of This Title Treated as Violations of Federal Trade Commission Act.-- (1) In general. -- For the purpose of the exercise by the
Federal Trade Commission of the Commission's functions and powers
under the Federal Trade Commission Act, any violation of any
requirement or prohibition imposed under this title with respect
to credit repair organizations shall constitute an unfair or
deceptive act or practice in commerce in violation of section
5(a) of the Federal Trade Commission Act. (1) Authority of states. -- In addition to such other remedies
as are provided under State law, whenever the chief law enforcement
officer of a State, or an official or agency designated by a
State, has reason to believe that any person has violated or
is violating this title, the State-- Any action to enforce any liability under this title may be brought before the later of-- (1) the end of the 5-year period beginning on the date of
the occurrence of the violation involved; or This title shall not annul, alter, affect, or exempt any person subject to the provisions of this title from complying with any law of any State except to the extent that such law is inconsistent with any provision of this title, and then only to the extent of the inconsistency. SEC. 413. EFFECTIVE DATE.(17) This title shall apply after the end of the 6-month period beginning on the date of the enactment of the Credit Repair Organizations Act,(18) except with respect to contracts entered into by a credit repair organization before the end of such period.''.
-------------------------------------------------------------------------------- 1. Pub. L. No. 104-208, 110 Stat. 3009 (Sept. 30, 1996). The amendments to the credit statutes are in Title II of the Act, entitled "Economic Growth and Regulatory Paperwork Reduction." The footnotes in this copy of the Act are not part of the Act, but are cross-references inserted by the FTC staff for the convenience of the reader. 2. To be codified as 15 U.S.C. § 1679. 3. To be codified as 15 U.S.C. § 1679a. 4. To be codified as 15 U.S.C. § 1679b. 5. Truth in Lending Act § 103(f) states in pertinent part: "The term 'creditor' refers only to creditros who regularly extend, or arrange for the extension of, credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, whether in connection with loans, sales pf property or services, or otherwise. . . ." 6. TILA § 103(e) states: "The term 'credit' means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment." 7. To be codified as 15 U.S.C. § 1679c. 8. Fair Credit Reporting Act (FCRA) § 603(f) states: "The term 'consumer reporting agency' means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports." 9. To be codified as 15 U.S.C. § 1679d. 10. To be codified as 15 U.S.C. § 1679e. 11. To be codified as 15 U.S.C. § 1679f. 12. To be codified as 15 U.S.C. § 1679g. 13. To be codified as 15 U.S.C. § 1679h. 14. To be codified as 15 U.S.C. § 1679i. 15. To be codified as 15 U.S.C. § 1679j. 16. To be codified as 15 U.S.C. § 1679k. 17. To be codified as 15 U.S.C. § 1679l. 18. The statute was signed by the President on September 30,
1996. Consumer Finance Scams Susan Grant Consumers who face financial troubles, such as heavy debt, poor credit, or the need for substantial help for educational or personal finances, usually can least absorb the economic injury caused by fraud. Fraud promoters know that these consumers are willing to pay small amounts of money to process loans, arrange financing, or help locate sources of credit that promise to cure their financial woes. Recent FTC law enforcement efforts demonstrate that fraud promoters who promise financial services or assistance for a several-hundred-dollar fee generally do not deliver. Instead, they take millions of dollars from consumers without providing any services at all. Advance-Fee Loan Scams Consumers often respond to ads in the classified section of newspapers or magazines that promise loans or credit cards regardless of an applicant's financial situation or credit history. A fraudulent telemarketer typically tells them that they must pay a fee in advance --ranging from $25 to several hundred dollars--for the loan or the credit card. Consumers are reassured that they have nothing to lose because they will get a refund if they are turned down. However, consumers generally receive nothing, even after paying the fee. Sometimes, they are referred to other companies that require additional payments. These "turn down rooms" do not make good on their promises to deliver refunds, either. Credit Repair Scams Credit repair is an especially pernicious fraud that preys on consumers who have run into financial trouble and as a result, have bad credit reports. Thousands of firms across the country claim that they can restore consumers' creditworthiness for a fee. Most credit repair firms claim that if information on a credit report is not 100 percent accurate, they can challenge it and have it permanently removed from a consumer's credit report. The fact is that accurate negative information stays on consumer credit reports for seven years--10 years in the case of bankruptcies. Credit repair firms can challenge the accuracy of information on consumers' credit reports, but consumers can do the same thing for themselves for free.
Some credit repair firms use a technique known as file segregation. These firms advise consumers to apply for an employer information number (EIN) from the IRS, which has the same number of digits as a social security number, and use it to build fresh credit. What they do not tell consumers is that this is a felony. To combat these problems, Congress has given law enforcement and the public two key tools to address credit repair fraud. In addition to the TSR, which became effective December 31, 1995, Congress also enacted the Credit Repair Organizations Act (CROA)(20) in September 1996 to ensure that the public has information necessary to make informed decisions about using credit repair firms--including those that do not principally telemarket their services--and to give the FTC, the states, and individual consumers legal remedies to combat credit repair fraud. The CROA takes effect March 30, 1997. Scholarship and Educational Finance Schemes The cost of higher education has far outstripped the rate of inflation, producing a wider pool of families receptive to guarantees of "free money for college." Fraudulent scholarship search companies typically promise consumers that they will find or obtain thousands of dollars in grants and scholarships for fees ranging from $10 to $300. The scams "guarantee" a full refund if students do not acquire a specified amount of financial aid. Some fraudulent companies say they award scholarships to students; others claim they will match students with available funding sources. The reality is that students receive a list of scholarships and grants to which they can apply on their own--information that is available free in schools and libraries. More often than not, the scholarships and grants that scam artists "list" have expired deadlines, specify conditions that make the consumer ineligible, or simply do not exist. The promised "money-back guarantee" has conditions that are impossible to meet and most student victims are left with a smaller bank account and no financial aid. FTC Actions Consumer finance scams keep their fees low enough so that even consumers facing heavy financial burdens can afford them. Scam artists can generate enormous profits by mass marketing their services to million of these consumers. Indeed, the FTC sued one fraudulent scholarship service in 1996 that sent more than a million allegedly deceptive mailers in six months to parents of college-age children. Given the aggressive marketing techniques used by consumer finance scam artists nationwide, more coordinated law enforcement is necessary. Project Loanshark The FTC targeted companies that promised loans and credit cards to anyone in return for a fee paid in advance. In June 1996, the FTC and 15 state Attorneys General initiated 13 lawsuits in federal district courts and state courts, naming 45 corporations and individuals operating out of the U.S. and Canada. Project Payback The FTC used coordinated federal-state efforts against telemarketers who promoted credit repair scams. In April 1996, the FTC, nine state Attorneys General, and the District of Columbia government brought 17 law enforcement actions against 13 credit repair firms across the country. Many of the actions invoked provisions of the Telemarketing Sales Rule that specifically address credit repair. Project $cholar$cam In August 1996, the FTC launched Project $cholar$cam, a massive consumer education and law enforcement effort highlighting scams that target high school and college students in search of money to finance their education. Since the start of Project $cholar$cam, the FTC has filed lawsuits against seven scholarship services located in Atlanta, New York, Ft. Lauderdale, Baltimore, and Seattle that targeted millions of high school and college students across the country. The FTC estimates that these seven companies brought in more than $15 million over the last five years from more than 100,000 consumers. Aside from putting a stop to the fraudulent practices of these companies, Project $cholar$cam was responsible for a huge surge in public awareness about this type of fraud. The FTC's action was covered in more than 100 newspapers in 40 states, as well as in national publications like the New York Times, Washington Post, USA Today, Smart Money, and US News & World Report. The FTC also produced creative consumer education materials that have been distributed to high schools and colleges throughout the country, including bookmarks and posters targeted to high school and college students and their parents, posters distributed to thousands of college bookstores, and flyers for college financial aid offices and high school guidance offices. The FTC worked with many partners in the private sector to ensure that the "scholarship" message got out to students and families. Members of the Interactive Services Association's Project Open, a program to encourage safe and productive experiences for all online and Internet users, launched a campaign with the FTC featuring alerts about scholarship scams through their on-line members. The National Association of Student Financial Aid Administrators, the College Board, and Sallie Mae were among the organizations that publicized Project $cholar$cam and provided links to the Scam Alert on the FTC's home page. With fraud promoters targeting millions of consumers coping with financial burdens, a multi-faceted anti-fraud approach is clearly necessary to make headway in shutting down such fraud. New legislation, such as the Credit Repair Organizations Act, provides a further basis for collaborative efforts in fighting consumer finance fraud. Credit Repair: Self-Help May Be Best February 1998 You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims: "Credit problems? No problem!" This brochure explains how you can improve your credit worthiness and lists legitimate resources for low or no-cost help. The Scam The Warning Signs Want you to pay for credit repair services before any services
are provided, Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the promised services. The Truth You are entitled to a free copy of your credit report if you’ve
been denied credit, insurance or employment within the last 60
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. When the reinvestigation is complete, the credit bureau must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address, and phone number of the provider. You also should tell the creditor or other information provider in writing that you dispute an item. Many providers specify an address for disputes. If the provider then reports the item to any credit bureau, it must include a notice of your dispute. In addition, if you are correct—that is, if the information is inaccurate—the information provider may not use it again. If the reinvestigation does not resolve your dispute, have the credit bureau include your version of the dispute in your file and in future reports. Remember, there is no charge for a reinvestigation. Reporting Negative Information Bankruptcy information can be reported for 10 years; make false claims about their services; the payment terms for services, including their total cost;
If you’ve had a problem with a credit repair company, don’t be embarrassed to report them. While you may fear that contacting the government will only make your problems worse, that’s not true. Laws are in place to protect you. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance. You can file a complaint with the FTC by contacting the Consumer
Response Center by phone: toll-free 1-877-FTC-HELP (382-4357);
TDD: 202-326-2502; by mail: Consumer Response Center, Federal
Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC 20580;
or through the Internet, using the online complaint form. Although
the Commission cannot resolve individual problems for consumers,
it can act against a company if it sees a pattern of possible
law violations. FEDERAL TRADE COMMISSION FOR THE CONSUMER Need Help? Don’t Despair If you can’t resolve your credit problems yourself or you need additional help, you may want to contact a credit counseling service. There are non-profit organizations in every state that counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These counseling services are offered at little or no cost to consumers. You can find the office nearest you by checking the white pages of your telephone directory. In addition, nonprofit counseling programs sometimes are operated by universities, military bases, credit unions, and housing authorities. They’re also likely to charge little or nothing for their services. Or, you can check with your local bank or consumer protection office to see if it has a list of reputable, low-cost financial counseling services. Do-It-Yourself Check-Up You’re entitled to one free report a year if you can prove that: you’re unemployed and plan to look for a job with 60
days; Credit bureaus usually are listed in the yellow pages of your telephone book under "credit reporting agencies." Three large national credit bureaus supply most credit reports: TRW, Equifax, and Trans Union. You may want to contact each of them for a copy of your report. Experian (formerly TRW) 'File Segregation': New ID Is a Bad IDea January 1999 If you have filed for bankruptcy, you may be the target of a credit repair scheme called "file segregation." In this scheme, you are promised a chance to hide unfavorable credit information by establishing a new credit identity. That may sound perfect, especially if you’re afraid that you won’t get any credit as long as bankruptcy appears on your credit record. The problem: "File segregation" is illegal. If you use it, you could face fines or even a prison sentence. The Pitch: A New Credit Identity If you have filed for bankruptcy, you may receive a letter from a credit repair company that warns you about your inability to get credit cards, personal loans, or any other types of credit for 10 years. For a fee, the company promises to help you hide your bankruptcy and establish a new credit identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet. If you pay the fee and sign up for the service, you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs — which resemble Social Security numbers — are used by businesses to report financial information to the IRS and the Social Security Administration. After you receive your EIN, the credit repair service will tell you to use it in place of your Social Security number when you apply for credit. They’ll also tell you to use a new mailing address and some credit references. The Catch: False Claims To convince you to establish a new credit identity, the credit repair service is likely to make a variety of false claims. Listen carefully; these false claims, along with the pitch for getting a new credit identity, should alert you to the possibility of fraud. You’ll probably hear: Claim 1: You will not be able to get credit for 10 years (the
period of time bankruptcy information may stay on your credit
record). Claim 2: The company or "file segregation" program
is affiliated with the federal government. Claim 3: The "file segregation" program is legal. Rights Under The Credit Repair Organizations Act This law prohibits false claims about credit repair and makes it illegal for these operations to charge you until they have performed their services. It requires these companies to tell you about your legal rights. Credit repair companies must provide this in a written contract that also spells out just what services are to be performed, how long it will take to achieve results, the total cost, and any guarantees that are offered. Under the law, these contracts also must explain that consumers have three days to cancel at no charge. Under the law, you also have the right to sue in federal court. The law allows you to seek either your actual losses or the amount you paid the company — whichever is more. You also can seek "punitive" damages: sums of money to punish the company for violating the law. The law also allows class actions in federal court: cases where groups of consumers join together in one lawsuit. If you win, the other side has to pay your attorney’s fees. Many states have laws regulating credit repair companies, and may be helpful if you’ve lost money to credit repair scams. If you’ve had a problem with a credit repair company, report the company. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance. You also may wish to contact the FTC. Although the Commission cannot resolve individual credit problems for consumers, it can act against a company if it sees a pattern of possible law violations. If you believe a company has engaged in credit fraud, you can file a complaint online, or send your complaint to: Consumer Response Center, Federal Trade Commission, Washington, D.C. 20580. For More Information You can file a complaint with the FTC by contacting the Consumer
Response Center by phone: toll-free 1-877-FTC-HELP (382-4357);
TDD: 202-326-2502; by mail: Consumer Response Center, Federal
Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC 20580;
or through the Internet, using the online complaint form. Although
the Commission cannot resolve individual problems for consumers,
it can act against a company if it sees a pattern of possible
law violations. FEDERAL TRADE COMMISSION FOR THE CONSUMER FTC Consumer Alert! Credit Repair: Help Yourself First March 1998 "Credit Problems? NO problem ..." "We can erase your bad credit—100% guaranteed." "We can remove bankruptcies, judgments, liens, "Create a new credit identity—legally." Do yourself a favor and save some money, too. Don’t believe these statements. Newspapers, radio, TV, and the Internet are filled with ads that offer—for a fee—to erase accurate negative information in your credit file so you can get a credit card, auto loan, home mortgage, or even a job. The scam artists who run these ads can’t deliver. Only time, a deliberate effort, and a personal debt repayment plan will improve your credit. The companies that advertise credit repair services appeal to consumers with poor credit histories. Not only can’t they provide you with a clean credit record, they may be encouraging you to violate federal law. If they ask you to make false statements on a loan or credit application, misrepresent your Social Security number, or advise you to get an Employer Identification Number from the Internal Revenue Service under false pretenses, you will be committing fraud. The truth is you can help yourself to re-build a better credit record. Start by contacting your creditors when you realize that you are unable to make payments. If you need help working out a payment plan and a budget, contact your local credit counseling service. There are non-profit groups in every state that offer credit guidance to consumers. These services are available at little or no cost. Also, check with your employer, credit union, or housing authority for no-cost credit counseling programs. In addition, you have specific rights under the Fair Credit Reporting Act: You are entitled to a free copy of your credit report if you’ve
been denied credit, insurance or employment and request the report
within 60 days of notice, or if you can prove that (1) you’re
unemployed and plan to look for a job within 60 days, (2) you’re
on welfare, or (3) your report is inaccurate because of fraud.
Bankruptcy information can be reported for 10 years. |