FTC cracks down on 'credit repair' scammers
Action hits firms that falsely claimed to boost consumers' credit scores
The Federal Trade Commission today announced the forced closure of a number of businesses that targeted consumers with false claims of boosting their credit scores.
"Operation Clean Sweep" involved a joint crackdown by the FTC and 24 state agencies on 33 operations that assert they can assist in removing damaging items from consumers' credit reports. "This is not a new initiative," director of the FTC's Bureau of Consumer Protection Lydia Parnes said in a Washington, D.C., press conference announcing the actions. Instead, she said, it's part of a long-running battle by the FTC against such firms whose claims are "founded on a false pretense compounded by a false promise."
According to an FTC press release, these firms "deceptively claim they can remove negative information from consumers' credit reports, even if that information is accurate and timely." In reality, federal law dictates that negative but accurate information can remain on a credit report for up to seven years, with bankruptcies appearing for up to 10 years.
"In the seven FTC actions announced today, the commission seeks to halt the defendants' allegedly unlawful business practices, prohibit further violations and make them pay consumer redress and give up their ill-gotten gains," the release says. "In addition, the FTC announced three related credit repair cases earlier this year."
One defendant, multiple names
The defendants listed offered their services under a variety of names, making it difficult for even educated consumers to know exactly with whom they were dealing. For example, the scammers that victimized Texas resident Daniel Duke operated under a number of aliases and business names. According to a Sept. 10, 2008, press release from the FTC, "The defendants are Rudolph Joseph Strobel, aka Lee Harrison, and Leanna Ruth Harrison, both doing business as Lee Harrison Credit Restoration, Credit Restoration, and Lee Harrison Associates Credit Restoration (LHCR), all located in Naples, Texas."
Duke has an easy label for Harrison -- regardless of what he calls himself. Harrison is "probably the biggest scoundrel in Texas," a cowboy hat-wearing Duke told the FTC-organized press conference.
Don't mess with Texas
Duke fell victim to promises surrounding the paid removal of derogatory items from his credit report. While doing some online Chase banking, Duke realized he'd need to bump up his credit score in order to buy a new home. Using a link on the bank website, Duke reached out to Lee Harrison Associates, and the company promised to fix incorrect derogatory items on Duke's credit report in exchange for $1,200.
After sending $900 and waiting six months, nothing had changed. If anything, his score had "actually gotten worse" due to the lender inquiries that kept piling up, Duke says. When he called to ask for his money back, the agency threatened Duke, claiming they'd make his credit worse if Duke didn't pony up the additional $300.
That's when Duke got mad, vowing to fight the company's bullying with his self-described "big mouth." "I wrote everyone" to spread the word about the agency, Duke says, even his preacher. "People don't know, and that's the bottom line." Although he was initially promised a credit-score increase of 100 points in just two months, "The problem is, it's garbage and it's not true," Duke says.
Relying on advice from his mortgage broker and his own efforts, Duke was able to get his credit score fixed -- for free. For example, to prove he had never lived in California, where some of the debts originated, he directly contacted the lenders that erroneously appeared on his report. "I told them to call the governor," Duke joked.
The experience left him with some advice to share. "Giving up your power of attorney -- that's the stupidest thing you can do," Duke says. "They take your money upfront, and then what recourse do you have?" When it comes to accurate information on a credit report, "They're not going to remove it if it's right," he says.
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