A Spotlight on Exorbitant Credit Repair Companies
It did not make headlines when the CFBP took to court two of the major credit repair firms in the US —CreditRepair.com and Lexington Law. However, the impact it caused is a sign other companies should get their matters in order.
The bureau claimed these service providers unlawfully made consumers pay upfront for credit fixing services among other claims of misleading promotion to entice clients.
This lawsuit raised red flags across the industry, and more policymakers may soon push for regulatory changes.
California, being home to hundreds of credit repairers must now prepare for these coming storms. Most of the service providers who enter this market rip off consumers who desperately want to fix their credit status.
These cases continue even though consumer activists have insisted in the past that these so-called credit score fixers are scammers. Some even claim that customers can do on their own whatever most of these firms claim to offer.
Most of them guarantee more than they can offer and make customers pay upfront fees and trick customers into monthly payments worth more than $100.
What Consumer Activists Say
All bodies that watch over consumer rights say it takes time and effort to boost credit. They recommend certain practices, but narrow down to two fundamentals; clear all bills in good time and work on reducing your debt.
Paying to the tune of $100 on such services is a misuse of finances, especially for someone who is already sinking in debt.
Consumer complaints about firms that claim to fix credit have increased significantly. Yet the CFPB has failed to crack down on Californian credit repair firms. Lawmakers have been unable to utilize their power under the California Credit Services Act. However, they have been reluctant to update this act since it was proposed in 1984.
The bill needs any credit service firm to acquire a registration certificate from the Justice Department. Regrettably, none of this information is readily available, and there is no public listing for credit repair organizations.
Some phony credit repair firms are setting up bases in California to target innocent consumers. Citizens cannot differentiate perfectly legit credit repair merchant account holders from scammers from a basic Google search.
Tim Grayson, a Democrat, has proposed an Assembly Bill 699 to revise and update the Credit Services Act.
If this law passes, customers will get better disclosure of the charges of the service and protection from phony players. It will also ensure service providers list clearly what services they offer.
It is ironic how such a risky industry has only a few regulations to protect consumers. Most of the players in this sector take advantage of the unclear rules to defraud customers.
Customers who must use these services should be aware of these dangers and scrutinize a service provider before they sign up.
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