The Federal Trade Commission, the Department of Justice and 47 other federal, state and local law enforcement and consumer protection agencies have surfed the Web looking for illegal scams that promise consumers that they can restore their creditworthiness for a fee. Over 180 Web sites are being put on notice that their credit repair claims may violate state and federal laws. Ten state Attorneys General's offices, 29 Better Business Bureaus, the National Foundation for Credit Counseling and six of their Neighborhood Financial Care Centers, participated in the Internet surf day looking for credit repair ads that appeared to be making deceptive advertising claims or promoting illegal schemes.
According to the FTC, many credit repair operations "guarantee" that they can remove negative information from consumers' credit reports, even if the negative information is accurate and timely. They can't. Over 60 credit repair operations identified sell instructions about how consumers can substitute a false Social Security number for their current number and "start fresh" with a new credit identity. They claim the scheme is perfectly legal. It isn't. And any credit repair operation that claims it can improve a consumer's credit report and charges for that service in advance is violating the Credit Repair Organizations Act (CROA), a new federal law designed to help consumers combat fraudulent credit repair scams.
"I'd like consumers to remember three things about credit repair," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "First, accurate and timely negative information cannot be removed from a credit report in an effort to repair it. Second, it's not only a bad idea to try to create a new credit identity using a false Social Security Number, it's also illegal. And third, when it comes to credit repair, only time and a personal debt repayment plan will improve your credit report."
E-mail warnings and letters are being sent to web site operators that may be violating the law. The warning says, "This electronic mail is intended to notify you that credit repair advertisements may violate Section 5 of the Federal Trade Commission Act . . . which prohibits deceptive advertising. Credit repair advertisements, products, and services may also violate the Credit Repair Organizations Act . . . the federal Telemarketing Sales Rule . . . and applicable federal criminal and state statutes. In the past several years, the FTC has taken legal action against numerous companies that deceptively advertised credit repair products and services on the Internet.
We have not determined whether your online advertisement(s) violate any of the laws we enforce. However, we have copied and preserved your online advertisement(s) for future reference. If your company engages in any deceptive or fraudulent credit repair activities, we strongly urge you to stop; otherwise, you may be subject to legal action."
The e-mail warnings urge the credit repair operators to familiarize themselves with the laws by providing hyperlinks to the FTC Web site where statutes and consumer credit information is located. The letter also says that the FTC has established an e-mail box at email@example.com where credit repair organizations can send questions or comments.
The FTC has developed four brochures for consumers that address credit repair schemes:
Copies of the consumer brochures about credit issues are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll free at 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Claudia Bourne Farrell
Office of Public Affairs
C. Steven Baker
Midwest Regional Office