FTC Credit Repair Announcement
You’ll never believe what the FTC has just done to the credit repair industry . . .
Net Impression / CROA Compliance / Deceptive Advertising / (TSR omitted)
Synopsis of 3 topics above
All Questions are only with respect to CROA and NOT TSR:
- Can you clarify/confirm that the FTC is the “enforcer” of CROA and that both FTC and CFPB have enforcement authority for TSR?
- Only with respect to CROA: Recently I saw a company that was advertising a $777 for an hour consultation fee and then a $69 monthly fee for the credit repair. What are your thoughts on this structure?
- Only with respect to CROA: Many companies charge a “First Work fee” to do a credit “analysis” or a credit “audit”. Because the audit or analysis as it may be called contains information about the improvement of credit and credit scores, often as it relates to the individuals credit, would we be correct in assuming that this work would be considered credit repair and therefore covered under CROA; that the consumer should first sign a CROA disclosure and credit repair contract and the work should be completed before they are charged?
- Only with respect to CROA: As a subset of the above question, some companies will generate the client audit but not deliver it to the consumer until the consumer signs the contract, disclosure, and renders payment. In this instance, because the credit repair company completes the service of making the audit, is it ok to collect the fee from the consumer after the disclosure and contract and signed and money is delivered, but before the work product is delivered to the consumer?
- It has been documented by the courts that Credit Monitoring services are NOT considered credit repair. In that vein, a credit repair company who is a reseller of credit monitoring services – can they collect 6 months of credit repair services in advance at the start of the credit repair process? It should be noted that some consumers subscribe to the monitoring service who never do credit repair and some consumers discontinue the credit repair and continue the monitoring service – so the two services are not tied to each other.
- AGAIN with respect to CROA ONLY (Not TSR) Earlier this year, you were involved in the “Boost My Score” case. That has generated a lot of confusion within our space as to whether the purchase of authorized user accounts is legal. Let’s discuss that please. First let me give an example of what one company says is a valid and legal purchase of an authorized user account. Because the authorized user accounts are marketed to improve credit and scores– they are deemed credit repair and as such, the company should be licensed and bonded as appropriate in the consumers state, have the consumer sign a CROA disclosure and contract, and also have the consumer sign a statement that they understand they will not be getting an actual credit card that they can charge on. Finally, the company claims that they must collect fees after the service has been performed – in this case the issuing card company has agreed to issue a card, and then because the service has been performed, they charge the consumer for the service. In this hypothetical scenario – is the company selling tradeline operating legally or do you see a problem with their model?
- What do you see as the difference if any between a parent adding a child as an authorized user to their credit card and someone buying an authorized user account form a website or through company acting as a broker?
- Follow up to the above 2 questions, what do you see as the difference, if any, between someone adding a friend or family member as an authorized user to their credit card and someone buying an authorized user account from a website or through a company acting as a broker? Also, assume the friend or family member was specifically trying to help their friend’s credit and the intent was not to use the credit card.
- Could the purchase of an authorized user account be a violation of the Identity and Theft Assumption and Deterrence Act of 1998 under section 7 – “knowingly transfer . . . without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, or in connection with, any unlawful activity that constitutes a violation of Federal law . . .”
- Do tradelines companies fall under CROA if they do not do any traditional credit repair and only sell tradelines? If a tradeline company does not advertise or promise any credit benefits, would they still fall under the laws of CROA?
- Another follow up question to the above tradeline situations. What if I as the Credit Repair Company Owner, want to add a consumer to my own credit card account as an authorized user, would I be allowed to charge a fee for that service? Commercial service / no deception.
- It is well documented that the tradeline industry has existed for over a decade. Recently, we have seen two tradeline companies, Top Tradelines and Boostmyscore.net, get shut down in the last year. Have there been any changes recently that have you more aggressively pursuing the tradeline industry specifically?
- From the boostmyscore case, it is very clear that the FTC does not want to see tradeline companies promising any specific credit repair boosts or end result. What other types of advertising messages would tradeline companies be prohibited from saying?
- This strategy (piggybacking) appears to be a credit loophole with the credit bureaus. Do you intend on making changes to close this loophole? If so, what challenges do you see in attempting to close this loophole?
- It is widely accepted that friends and family can have legal access to authorized user benefits. Some argue that it is unfair that all people do not have access to that same benefit and claim this is an equality issue. What is your stance in regards to some people being able to access to this benefit while others are not?
- Assuming a credit repair company makes a claim like “In XXX days, our clients see an average improvement of XXX in their credit score”. Is it true that claim would trigger a net impression that the credit repair company’s service is to improve the client’s credit report by those XXX points BEFORE they are charged any fees? What documentation would you expect a credit repair company to maintain in order to make such a claim on their website or advertisements?