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FTC Investigates Credit Repair Scheme
By Lily Garza
August 7, 2008
Consumers in Dallas got a wake-up call July 17 when the Federal Trade Commission announced that it would halt the business activities of Payneless Credit Repair, LLC while the company and its owner, Lesley L. Payne are investigated for false claims and violations of the Credit Repair Organizations Act (CROA), a law designed to regulate and protect consumers from deceptive business practices of credit repair organizations.
The company, based in Richardson, Texas, a suburb of Dallas, advertised on its website that it could provide "Fast, Legal, Effective CREDIT REPORT REPAIR…We will fight to remove negative items from your credit reports, so you can improve your credit scores". The defendants also published these claims in classified ads appearing in the Dallas Morning News and Yellow Page listings. The company even offered a money-back guarantee for improving consumers’ credit scores. Payne is also accused of misrepresenting that her company was licensed and bonded.
The FTC claims that the company is in violation of the CROA for falsely representing that they can improve any credit score. The CROA states that information that is accurate and not obsolete cannot be removed from any person’s credit report. The FTC is also charging that Payne violated the act by requiring advance payment for services and not clearly stating in contracts that clients may cancel services without a fee before the third business day after the contract is signed. An FTC press release also stated that an investigation revealed that the company was not even registered as a "credit services organization" with the Texas Secretary of State, which Texas law requires. If found guilty of these charges, the defendants must pay restitution to consumers and forfeit any other profit made by the company.
The FTC was alerted to the Payneless Credit Repair scheme after clients complained that little or no results were achieved and the defendants were difficult to reach once they received payment. The defendants reportedly met with clients in temporary office suites, at clients’ workplaces, restaurants, and even parking lots to conduct business. After the initial contracts were signed the defendants stopped answering e-mails, voice mails and did not leave forwarding addresses after vacating their temporary offices.
According to the Federal Trade Commission website, many companies that promise credit repair for a fee are fraudulent specifically because negative information on a credit report cannot be removed if it is accurate. All these companies can legally do is to provide help in disputing the accuracy of the information. However, consumers can do that for free themselves by contacting the credit reporting companies directly.
The FTC suggests that consumers should always be careful in dealing with these companies and not trust any credit repair company that offers a "hundred percent guarantee" because some bad credit can only be improved with time and diligence.
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