Echo Press Editorial: Beware of quick fixes for credit card debt
Everyone wants better credit or to repair a poor credit rating. But don’t fall for some of the quick solutions that are bombarding the radio or TV. They could get you into even deeper trouble.
As part of National Consumer Protection Week, March 2-8, the Minnesota Department of Commerce and Better Business Bureau of Minnesota and North Dakota (BBB) are partnering to offer consumers advice on companies offering credit repair services.
In Minnesota, the Department of Commerce regulates two types of firms offering credit repair services: credit service organizations and debt management companies. These firms must offer you a contract describing their fees and services and they must register with the Department of Commerce. Before signing a contract with any firm, always check to see that they’re licensed by visiting mn.gov/commerce/banking-and-finance/consumers/license-lookup/.
Credit Service organizations offer education and personalized advice to consumers for a fee. They advertise that they can improve your credit rating or history, help you obtain credit, and offer credit advice or assistance. Debt management companies also charge a fee for helping over-extended consumers by developing a budget and receiving money from the consumer to re-pay creditors under a specific debt reduction plan.
“There are certainly many reputable firms and organizations that can help you to get out of debt, but there are companies that seek to victimize the debt-ridden consumer,” said Commerce Commissioner Mike Rothman. “Be wary of any company that promises a quick and painless way out of debt – all with a cost of high upfront fees.”
The Credit Repair Organizations Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you, and to charge you before they’ve performed their services. CROA is enforced by the Federal Trade Commission (FTC) and requires credit repair companies to explain:
• Your legal rights in a written contract that also details the services they’ll perform.
• Your three day right to cancel without any charge.
• How long it will take to get results.
• The total cost you will pay, and any guarantees.
If a credit repair company you hired doesn’t live up to its promises, you can:
• Sue them in federal court for your actual losses or for what you paid them, whichever is more.
• Seek punitive damages – money to punish the company for violating the law.
• Join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney’s fees.
Though some credit repair companies may be able to assist certain customers, BBB and the Minnesota Department of Commerce echo the views of the FTC: “The fact is, there’s no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.”