credit repair scam warning sign #2
Because this was such a problem with credit repair scams, the federal Credit Repair Organization Act which regulates the practices of credit repair companies was written to include the following:
"No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed."
There is some debate as to how this is interpreted with some believing that it means a credit repair company cannot accept any payment until they have completed working to repair our credit, but in practice, in means that credit repair companies do not charge for a step in the credit repair process until after that step is complete. So if a credit repair company's contract states that they charge a set-up fee, they must complete all of the work that contract defines as being included in the set up process (create case file, import credit reports, client evaluation, compose first round of dispute letters, etc.) before charging the set-up fee. If they charge per month or per deletion fees, then these fees cannot be collected until after the month's worth of services or credit deletions have been performed.
The prohibition on accepting payment before services have been rendered is made a little more complicated again by some local laws. For example, the Texas Finance Code states:
"a credit services organization or a representative of the organization may charge or receive from a consumer valuable consideration before completely performing all the services the organization has agreed to perform for the consumer only if the organization has obtained a surety bond for each of its locations."
Because of the gray area, it is helpful to remember the intent of the no payment before services rule. It is to protect you from becoming a victim of a credit repair scam. So instead of tracking down and interpreting all the legislation applicable to a particular credit repair company in a particular location, it's better to look at the intent over the letter of the law. Basically, if a credit repair company requires that you pay a few hundred dollars or more before they will do anything to help you; you're probably better off looking elsewhere.
1) Offer to Create a New Credit Report
2) Require Large Upfront Payments
3) Don't Have a Contract
4) Only Accept Cash, Checks, or Money Orders
5) Use a Third Party Payment System
Require Large Upfront Payments
A common trait of many credit repair scams is to take all the money up front which makes good business sense for them. By the time you realize you've been had, your money is already gone.Because this was such a problem with credit repair scams, the federal Credit Repair Organization Act which regulates the practices of credit repair companies was written to include the following:
"No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed."
There is some debate as to how this is interpreted with some believing that it means a credit repair company cannot accept any payment until they have completed working to repair our credit, but in practice, in means that credit repair companies do not charge for a step in the credit repair process until after that step is complete. So if a credit repair company's contract states that they charge a set-up fee, they must complete all of the work that contract defines as being included in the set up process (create case file, import credit reports, client evaluation, compose first round of dispute letters, etc.) before charging the set-up fee. If they charge per month or per deletion fees, then these fees cannot be collected until after the month's worth of services or credit deletions have been performed.
The prohibition on accepting payment before services have been rendered is made a little more complicated again by some local laws. For example, the Texas Finance Code states:
"a credit services organization or a representative of the organization may charge or receive from a consumer valuable consideration before completely performing all the services the organization has agreed to perform for the consumer only if the organization has obtained a surety bond for each of its locations."
Because of the gray area, it is helpful to remember the intent of the no payment before services rule. It is to protect you from becoming a victim of a credit repair scam. So instead of tracking down and interpreting all the legislation applicable to a particular credit repair company in a particular location, it's better to look at the intent over the letter of the law. Basically, if a credit repair company requires that you pay a few hundred dollars or more before they will do anything to help you; you're probably better off looking elsewhere.
Warning Signs of a Credit Repair Scam
1) Offer to Create a New Credit Report
2) Require Large Upfront Payments
3) Don't Have a Contract
4) Only Accept Cash, Checks, or Money Orders
5) Use a Third Party Payment System
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I signed up with Lexington Law about 1 1/2 years ago at the suggestion of a man I did not know as I was waiting in line at the bank. He heard me talking about my bad credit, and how my life had literally been ruined and I couldn't even get an apartment. He told me about Lexington Law on the internet and told me he had signed up and that it was the best thing he had ever done. He explained that it would take more than a year, maybe longer but that it would be well worth the investment and that slowly, over time, it would become apparent that my credit history really was improving. I have made bad choices in my past that directly affected my credit. However, I have matured and knew I needed to do something legally but was afraid I could never afford an attorney to clean up my credit. ... moreCarol
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