Know your consumer rights
Debtors should be aware of their consumer rights granted under the Consumer Protection laws. Many consumers are not aware that they may request their credit reports free of charge one time annually. In fact, the Federal Trade Commission (FTC) worked with the three major credit bureaus to allow consumers this right. Do not fall for advertisements that offer free credit reports with the subscription of other services.
Know the statutes of limitations
Collection agencies call consumers on debt that they have often forgotten about. Some of these agencies use “strong-arm” tactics to get debtors to pay something on old debts. The primary reason for this is that the collection agent is only paid if the consumer makes payments, the secondary reason is that a payment restarts the statute of limitations on the debt. Make sure you know the debt statute of limitations in your state.
Understand your rights to dispute
Consumers have the right to dispute any information that they believe is erroneous on their credit reports. This does not have to be done by an attorney or a “credit repair company”, it may be done by the consumer at no charge. Credit reporting agencies are required by law to respond to all disputes.
Know the signs of a scam
The following are some hints that you may be facing a credit repair scam:
- Upfront payments - the company is asking the consumer to pay an upfront fee before they do any work. The FTC states that these agencies are to be reported as there are prohibitions on fees.
- Misinformation - the company does not advise you of your rights to remove certain items on your own or tells you to not contact the credit reporting agency. Consumers are always able to contact credit agencies for information regarding their own credit reports.
- Suggests fraud - any company that suggests the debtor dispute valid debt or apply for a new social security number is likely not legitimate. Any agency that suggests that a consumer dispute legitimate debts should be reported to the Better Business Bureau or to the Federal Trade Commission (FTC).
According to the Federal Trade Commission, consumers have a right to receive a contract that clearly spells out what the credit repair company intends to do on their behalf. It is important to note that under specific laws, credit repair companies cannot request payment prior to performing the services promised to consumers. These laws provide that credit repair agencies specify in the contract exactly what they intend to do and the fee for each service.