Thursday, March 17, 2022
Credit Repair Companies Deceitfully Charge Consumers
Contact: Amy Eisenstein, firstname.lastname@example.org, 630-878-9701
SPRINGFIELD – The “credit repair” industry in Illinois siphons savings from people, often without improving their credit scores at all, according to testimony before the Illinois House of Representatives Financial Institutions Committee on Thursday.
Advocates, service providers, and directly-impacted Illinoisans testified on how credit repair companies prey on consumers with low credit scores. These companies typically charge Illinoisans monthly fees up to $100, promising to boost their credit scores. Many of their customers have paid $1,000 to $3,000 before giving up hope and exiting their contracts.
“Credit repair companies are just out to get peoples’ money,” says Mary Joyce Nunn, a Chicago resident who used credit repair products. “They don’t care about people who are struggling. They removed things from my credit report that belonged to my mom, but then they promised to get a bankruptcy off my report, and that’s how they really got me. They said to just to be patient. And then months rolled by, and they keep telling me the same story. You don’t realize what’s happening until it’s too late. I didn’t know how to read a credit report, and it cost me dearly.”
Credit repair companies promise to “fix your credit” by disputing negative items on their customers’ credit report, whether the items are accurate or not. Credit repair companies make false promises that their results are lasting. However, only real inaccuracies can be removed permanently, and consumers can dispute negative items on their own for free.
Credit repair companies often dispute accurate items and because of a loophole in the Fair Credit Reporting Act of 1970, they may come off temporarily. But when accurate items are inevitably returned to a consumer’s report (when creditors re-verify the information with the credit bureaus), the consumer’s credit score will again plummet.
“When a consumer notices that an item they thought was removed is still on, they call the credit repair company to complain, and that’s when these companies engage in the most deceptive practice, as they tell consumers to “keep paying, ” so they can “get the item off for good”, says Ricki Lowitz, Founder and Co-CEO of the non-profit organization Working Credit. “Many of our clients have worked with companies over the years, and many have spent thousands of dollars on this service.”
Consumers who use credit repair services can file complaints against companies at the Office of the Illinois Attorney General and the Consumer Financial Protection Bureau. Many of the companies operating in Illinois are violating the Telemarketing Sales Rule, which requires that credit repair companies produce documentation that the disputed items have been removed from a consumer’s report for six months. No consumers should pay up-front or monthly fees before this six-month timeline.
“The Federal Trade Commission’s Telemarketing Sales Rule protects consumers from credit repair organizations that ask for money they’re not entitled to receive,” said Andrew Pizor, staff attorney at the National Consumer Law Center. “But too many providers ignore the law. We urge the Illinois Attorney General to devote more resources to enforcing the rule.”
Financial Inclusion for All Illinois leads this advocacy effort, with membership from organizations including Illinois PIRG, Working Credit NFP, Jane Addams Resource Corporation, and more. Learn more about our work to educate consumers about credit repair here.