The Federal
Trade Commission today announced a number of new important tools to
combat fraudulent credit repair organizations.
Beginning, April 1st, a
new federal law outlawing deceptive claims made by credit repair
organizations and giving consumers important new legal rights goes into
effect. The FTC also introduced a new consumer education campaign that
includes a handbook for consumers and a new Web page on credit repair.
The book was produced cooperatively by the FTC, the Better Business
Bureau of Northern Illinois and the Consumer Counseling Service of
Chicago. In addition, the result of the agency's "surfing the Web" for
credit repair advertisements was announced.
"Every year people fall
prey to credit repair scams," said Jodie Bernstein, Director of the
FTC Bureau of Consumer Protection. "The schemes often target
consumers who are unemployed, divorced, or have medical bills -- people
who are vulnerable and susceptible to scams. These con artists charge
hundreds of dollars and claim they can fix credit reports so that
accurate timely information about the consumer's credit history will no
longer appear. These claims are false. The new tools announced today
will provide consumers with better protection against these pernicious
schemes."
The new statute is the
first federal law targeting credit repair scams.
The most important new consumers rights under the statute:
It prohibits all credit repair organization from taking money from consumers before services are fully performed.
It requires credit repair
organizations to give consumers a written disclosure explaining their
legal rights about their credit history, before any contract is signed.
It requires credit repair
organizations to give consumers a written contract with all the terms
and conditions of payment, a detailed description of the services to be
provided, including any guarantees of performance and an estimate of
how long it will take to perform the contract.
It gives consumers a three
day cooling off period, or right to cancel, any agreement they sign
with a credit repair organization.
It states that any contract made between a consumer and a credit repair organization that doesn't comply with the law is void.
The FTC staff has been surfing the Internet in a search for credit
repair advertisements. Forty-seven credit repair companies were found
on the World Wide Web and the Usenet. E-mail messages were sent to
these advertisers to provide them with information about the federal
credit laws and to direct them to the FTC Website for more
information. Follow-up searches will be conducted in May. The FTC staff
also sent similar letters to over a thousand credit repair operations.
The consumer education
campaigns new book, titled "Getting Back in the Black," outlines legal
alternatives to help consumers get solvent; explains consumers legal
rights; warns of scams they may be especially vulnerable to and lists
place to go for help.
