The Consumer Financial Protection Bureau wants everyone to know about the many pitfalls of using a credit repair company. The New York Times reports that earlier this month the CFPB filed a lawsuit against two of these companies, alleging that they illegally charged consumers before services were rendered.
The lawsuit claims that Lexington Law and CreditRepair.com, two of the biggest credit repair companies, violated the Telemarketing Sales Rule. The law bans credit repair companies — who sell services over the phone — from charging consumers before providing documentation that the results they promised were delivered. The lawsuit also alleges that these companies used “deceptive” marketing to attract consumers. In one example cited in the suit, one credit repair company promised home loans to consumers with bad credit. Consumers who had bad credit then signed up for the company’s repair service, in the hopes of eventually landing the home loan. Little did they know the credit repair company never had any loans to offer.
If you’re considering using a credit repair company, we suggest you think twice. As the CFPB states on its site, anything one of these companies says it can do, you can do by yourself, completely free of charge. Remember that credit repair companies cannot remove any correct, negative information on your credit report, despite what they promise. Also, you can do all the negotiating with lenders that a credit repair company says it will do for you. Don’t feel intimidated. These lenders want their money, and they’re likely to work out a deal with you. You could also try using a CFPB-approved credit counselor. Head to the National Foundation for Credit Counseling to find one near you.