Credit's Costs, Part II

Right up front, I’m going to admit that this week’s edition is going to be HEAVILY borrowed – nay, copied word for word – from an article recently written by Ken Harney, a gentleman who covers housing issues on Capitol Hill for The Washington Post Writers Group. He does a great job of citing rules and sources – it would be sort of dumb for me to try and rewrite it and try to pass it off for my own product. Read on:

You’ve almost certainly seen or heard pitches for “credit-repair” services promising to clean up your credit problems, reduce your debt or even raise your credit score by 100 points.

But experts warn that these services can do far more harm than good to mortgage seekers — even get them rejected on the spot.

In fact, the Consumer Financial Protection Bureau has won two new legal settlements worth more than $2 million in penalties against credit-repair companies.

The CFPB alleged that Prime Credit, IMC Capital, Commercial Credit Consultants and Park View Law charged clients illegal advance fees and misled customers about what could be done for them. The defendants neither admitted nor denied the allegations, but they agreed to the settlements.

Under federal law, credit-repair companies may seek payment only when they can document improvements made for a client. Up until then, consumers shouldn’t have to pay a cent. But the companies in the settlements required an initial “consultation” charge typically of $59.95, hundreds of dollars for a “set-up fee” and monthly fees of $89.99.

For typical clients — and there were thousands of them — the companies sent letters to the national credit bureaus challenging “much of the negative information” in credit reports, “even if that information was accurate,” according to the CFPB. The companies then didn’t follow up or determine whether they had raised clients’ scores.

“We run into the damage they do every week,” said Joe Petrowsky, president of Right Trac Financial Group in Connecticut. But “you can’t get a mortgage with outstanding disputes” on your credit files.

Thomas Conwell III, CEO of Michigan-based Credit Technologies, which provides credit reports to lenders, says, “There is nothing any credit-repair company can do that consumers can’t do for themselves faster and at no cost.”

I realize I wrote about this not too long ago, but I believe these recent developments concerning the CFPB’s actions warrant bringing this back for a second look. Keying off of Mr. Conwell’s comments above, potential home buyers can do this for themselves – and we can help direct their efforts. They should save that money and buy themselves a nice house-warming gift! With anything left over, we wouldn’t say no to a box of doughnuts or a pizza.