Legal Representation For Consumers

FOR LAWYERS: How “credit repair” may harm your clients.

In a prior article I discussed the difference between my Fair Credit Reporting Act practice and “credit repair”. Here I give you a simple example of why there are times when a credit repair organization (“CRO”) will actually harm your clients.

Say Mr. Jones has two negative entries in his credit report: (1) A $94 late medical account resulting from his forgetting to send a pathology lab his insurance co-payment and (2) a delinquency on his mortgage, resulting from the bank mistakenly reporting he was seriously late.

Obviously, the mortgage delinquency is a big stain which should not appear in his credit report because it was not his fault.

Mr. Jones wants to refinance his mortgage, but the misreported delinquency prevents him from doing so, at least at a reasonable interest rate. Being the helpful lawyer you are, you send Mr. Jones to a friendly CRO.

Mr. Jones goes to the CRO and pays it an up-front fee of several hundred dollars purportedly for “consulting” on his credit or for “opening a file” for him (note that CRO’s can’t lawfully charge money up front but they use these sorts of ruses).

The CRO sends letters to the credit bureaus “disputing” both accounts. The credit bureaus don’t correct the entries. The CRO sends another set of letters, perhaps varying the reason for the disputes. Note that the letters will come from Mr. Jones, not the CRO. This dispute cycle goes on for a while until the credit bureaus deem the disputes to be frivolous and stop responding to them—or until Mr. Jones gets tired of shelling out money every month for the worthless service. Ultimately, the CRO is unable to “fix” the problems.

Mr. Jones calls you back for help. You now suggest that he go see a consumer lawyer that handles Fair Credit Reporting Act (“FCRA”) cases; you suggest he see me. Sorry, I will likely not take Mr. Jones’ case. Why? Because the CRO tainted his legitimate mortgage misreporting claim.

Remember those letters the CRO sent purporting to come from Mr. Jones fraudulently disputing the $94 medical account? In my opinion (which is subject to disagreement by fellow practitioners) the letters destroyed his credibility as a plaintiff in what would otherwise be an excellent FCRA case about his mortgage.

If Mr. Jones files suit on the misreported mortgage debt, he will be shown to be, or at least appear to be, a liar: because he repeatedly disputed the undisputable, i.e., the correctly reported $94 debt. Other consumer lawyers may have a different criterion, but I don’t want to deal with a case in which my client coming in is looking like a liar.

Yes there is a way to remedy the situation, but it will take time. Mr. Brown needs to write to the credit bureaus and explain that he hired a CRO who sent the bogus letters lying about the $94 debt, but that the disputes about the mortgage were indeed valid. If he does come clean with the bureaus and the bureaus don’t correct the misreporting, I will reconsider taking his case.

For additional info, take a quick look at the FTC’s Credit Repair: How to Help Yourself. Better yet, send the link to Mr. Jones!