False statements to credit bureaus: Nothing to CROA 'bout

It’s called CROA – the Credit Repair Organizations Act – and it was put in place to protect people battling their way back from financial adversity.  Given the long history of questionable practices in this sector, CROA makes it illegal to charge people upfront before services are rendered.  It also bans misleading statements to credit bureaus about consumers’ credit records.  There’s been lots of talk about the harm posed by false negative information in credit reports.  But in an interesting twist, the FTC’s settlement with RMCN Credit Services – one of the largest credit repair outfits in the country – alleges that the company charged illegal fees to deceptively challenge truthful negative information in those reports.

Texas-based RMCN advertised online and in radio and billboard ads across the country.  RMCN representatives typically told consumers that the company would dispute all “derogatory information” on their credit reports, including the accurate stuff.  RMCN assured customers its tactics were on the up-and-up and that federal law required credit bureaus to “prove it or remove it.”

Before the company provided any services, consumers had to pay a “retainer” of between $900 and $2000 and an additional monthly fee of $100 or so for a six-month program.  RMCN then sent more than a million dispute letters to creditors and credit bureaus, challenging the accuracy of pretty much all negative information on clients’ credit reports, regardless of whether there was any factual basis for questioning the accuracy.  In many cases, when challenging the information, RMCN offered a laundry list of fictitious reasons unrelated to the facts of the particular case.

What’s more, the company made it look like the letters were coming directly from the consumer.  RMCN signed the person’s name and used their return address on all correspondence.  Consumers didn’t know what was going on because RMCN didn’t give them copies of the letters.  And RMCN didn’t let up.  Even after getting detailed paperwork verifying the accuracy of the negative information, the company kept at it until the credit bureau deleted it or the consumer stopped paying RMCN.

The FTC sued the RMCN and its owners in 2011.  The complaint alleged that the defendants violated CROA by charging upfront fees and making a raft of false statements to credit bureaus.

To settle the lawsuit, the defendants have agreed to stop charging advance fees for credit repair services.  Those untruthful or misleading statements to credit bureaus?  They’re banned under the order.  RMCN also has agreed it won’t send letters to credit bureaus or creditors without having consumers review them first.  In addition, the company will send letters to all current customers telling them about the lawsuit and giving them the right to cancel their contracts and owe nothing to RMCN.  The order contains broad protections for future consumers by prohibiting any misrepresentation about the sale of any product or service.

The order imposes a $2.35 million civil penalty, which will be partially suspended based on the defendants’ inability to pay the full amount.  But first, they’ll have to turn over a total of $400,000.

The message for marketers?  First, CROA offers important protections for consumers and lays out clear dos and don’ts for the industry.  If you market credit repair services, now is the time for a compliance tune-up.  Second, as the FTC’s long-standing commitment to enforcing CROA and the Fair Credit Reporting Act makes clear, the touchstone of the system is accuracy.  Whether it’s creditors reporting erroneous or incomplete data, credit bureaus slacking off on their obligation to investigate, or groundless challenges to accurate information, the FTC works toward maximizing the truth.



Do we really need additional government involvement in our lives? Fair dealings by all parties should be the rule of the land NOT further government messing.
Yes, we do because there are so many unethical individuals out there taking advantage of the less fortunate ones while charging them an exhorbitant amount of money. I have no problem with a government dog watch to ensure that everyone is playing by the same rule.
Finally@ Thank you for posting this information.
To keep America strong upholding rights and interests of the common people is important
Thanks for informing us as consumers that these credit repairs company is a fraudulent and seeking monies for their own greedy desires. I had an instinct that they were scamming people out of monies. The person can personal clean up their own credit report and the bureaus has instructions how to carry out the process with their help and guidance's.
Calmdove1 is right that there are steps consumers can take on their own to help improve their credit. <a href="https://www.consumer.ftc.gov/articles/0058-credit-repair-how-help-yourself">Credit Repair: How to Help Yourself</a> offers some advice.
There are many legitimate, moral, and legal credit companies out there. Yes, there are scammers just like in any industry that is easy for start-up businesses (doesn't require a lot of capital). A consumer can certainly repair their own credit. But I look at it this way. If my car breaks down, I can research, read, and perform trial and error for days (maybe weeks) to try and fix it or I can take it to a professional mechanic - where they are trained, skilled and have experience. They'll have me on the road in a day or two.
The government shouldn't decide how consumers spend their money. Allow the consumer to vote with their dollar. If a business isn't truly serving the people justly, I'm sure a negative reputation would arise fairly quickly; especially in this day and age of social media.
As a loan manager I see these letters all the time. Even though the credit bureaus will not admit it, every time a dispute is received it "re-awakens" the credit (the good, bad and the ugly). Be careful - BK's fall off after 10 years, Charge-offs and collections after 7 years. Example: Charge-off if 2010 - would fall off in 2017, dispute in 2016, now would fall off in 2023. I laugh at these, because someone with junk credit just keeps junking their credt more. As mentioned by Calmdove, you can resolve your credit issues yourself.

Add new comment

Comment Policy

Please enter a username. Don't use your email address.

Privacy Act Statement

It is your choice whether to submit a comment. If you do, you must create a user name, or we will not post your comment. The Federal Trade Commission Act authorizes this information collection for purposes of managing online comments. Comments and user names are part of the Federal Trade Commission’s (FTC) public records system (PDF), and user names also are part of the FTC’s computer user records system (PDF). We may routinely use these records as described in the FTC’s Privacy Act system notices. For more information on how the FTC handles information that we collect, please read our privacy policy.