THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, April 12, 1996 TAG: 9604120557
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: By DARLENE SUPERVILLE, ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium: 93 lines
Firms that promise to fix bad credit and ask to be paid up front are misleading consumers, breaking the law and pocketing millions of dollars in the process, officials warned Thursday.
``Nothing but time can clean up negative but accurate information from consumers' credit records,'' said Jodie Bernstein, director of consumer protection at the Federal Trade Commission.
Bernstein announced that her agency and 10 state attorneys general - including North Carolina - have brought federal cases against 15 ``credit repair'' firms on charges of violating a provision of the FTC's new telemarketing rule.
Virginia is not among those states. But the National Fraud Information Center has received 10 complaints from Virginians so far this year, said John F. Barker, the center's director.
Virginia does not appear to have major problems with credit-repair companies, Barker said. But if more people complain, the FTC may take action, he said.
The FTC's investigation was based largely on complaints registered with his center, Barker said.
Aimed at putting credit repair firms out of business, the FTC's telemarketing rule prohibits them from seeking payment until six months after they deliver the promised service. The theory is that since they can't ever deliver, the firms won't ever be able to collect any money.
Credit-repair scams are an old but growing problem, Bernstein said. An estimated 1,100 such firms operate nationwide, raking in millions of dollars from the unsuspecting and the uninformed, she said.
``The fact is, credit repair firms cannot deliver on their promises to remove accurate, up-to-date information from consumers' credit records,'' Bernstein said. ``And if they can't deliver, they can't collect, and that means they're out of business.''
But Catherine Rose didn't know the services are phony. Working two jobs after the breakup of her 20-year marriage, medical problems and personal bankruptcy, the Charlotte, N.C., woman was intrigued by a credit repair ad.
``I thought, being desperate, that this was the solution, and it wasn't,'' said Rose, explaining that she lost $695 because she believed the firm's promise to remove the bankruptcy from her record.
Federal law allows credit bureaus to report all truthful information about a person's credit background - even if it's negative. Such information can stay on the record for seven years. Bankruptcies stay on the record for 10 years.
``All it did was put me in deeper financial problems,'' Rose said.
The FTC rule also allows state attorneys general to win injunctions in federal court that apply nationwide, instead of just in their state.
``This is a highly skilled group of scam artists,'' said Charles Burson, the Tennessee attorney general. ``Once they get you on the telephone, chances are you're going to lose some money.''
To help educate consumers, the Newspaper Association of America, which represents 1,500 papers in the United States and Canada, said members have agreed to run warning ads about credit repair firms in the classifieds.
Bernstein also said consumers who have been victimized should contact the National Fraud Information Center or the FTC.
Four of the 15 cases announced Thursday were brought by the FTC.
The remaining cases were filed by attorneys general from Illinois, Indiana, Massachusetts, Missouri, North Carolina, Ohio, Tennessee, Washington state, Wisconsin and the District of Columbia. MEMO: Key provisions of the Virginia Credit Services Business Act, passed
in 1989 to regulate credit repair companies.
Credit service businesses operating in the state must register and
file a surety bond or a letter of credit with the Virginia Division of
Consumer Affairs.
Before you sign a contract, the credit services business is required
to provide you with a written information statement.
The credit services business may not charge you or receive any money
from you until it has performed all the services to which it has
agreed.
All credit services business contracts must be in writing, and you
must be given a copy of the agreement after you sign it.
' Credit services business contracts must contain a three-day
cancellation clause.
A credit services business must not misrepresent its services, or
engage in fraudulent or deceptive practices when offering or selling
their services. by CNB