BBB Logo

Better Business Bureau ®
Start With Trust®
In Minnesota and North Dakota
BBB offers advice on Credit Repair
March 17, 2014

Burnsville, Minnesota – March 5, 2014 – As part of National Consumer Protection Week, which took place March 2 – 8, Better Business Bureau of Minnesota and North Dakota (BBB) offered North Dakota consumers advice on companies offering credit repair services.

Under FTC rules, firms offering credit repair services must offer you a contract describing their fees and services. BBB advises people seeking to repair their credit to be wary of any company that promises a quick and painless way to get out of debt – and then asks for upfront fees.

“Running into credit issues usually doesn’t happen overnight, and the same goes for repairing your credit – despite what some firms might tell you,” said Dana Badgerow, president and CEO of BBB of Minnesota and North Dakota.

Credit service organizations offer education and personalized advice to consumers for a fee. They advertise that they can improve your credit rating or history, help you obtain credit, and offer credit advice or assistance. While there are reputable firms and non-profit organizations that can help you get out of debt, there are also companies that seek to victimize debt-ridden consumers.

The Credit Repair Organizations Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you, and to charge you before they've performed their services. CROA is enforced by the Federal Trade Commission and requires credit repair companies to explain:

  • your legal rights in a written contract that also details the services they'll perform
  • your three day right to cancel without any charge
  • how long it will take to get results
  • the total cost you will pay, and any guarantees.

If a credit repair company you hired doesn't live up to its promises, you can:

  • sue them in federal court for your actual losses or for what you paid them, whichever is more
  • seek punitive damages — money to punish the company for violating the law
  • join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney's fees

Here are some things to consider before choosing a credit repair firm:

  • Avoid offers of a quick debt reduction or a debt settlement plan with high upfront fees (in the hundreds or thousands of dollars) – this should be a red flag that you are not working with a legitimate firm.
  • Some fraudulent agencies will get away with using a non-profit status just to collect your money. Legitimate agencies should be willing to sit down with you and discuss your spending habits and help you come up with a budget.
  • Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short time span or promises to reverse a bad credit score. If it sounds too good to be true, it probably is.
  • Check to see if the company has a debt settlement license with the North Dakota Department of Financial Institutions: www.nd.gov/dfi.
  • Research the company at bbb.org. Check to see if the firm is a member of a major association, such as the National Foundation for Credit Counseling (www.nfcc.org) or the Association of Independent Credit Counseling Agencies (www.aiccca.org), where the members are nonprofit agencies using certified financial counselors that meet certain quality and ethical standards using certified financial counselors.

Though some credit repair companies may be able to assist certain customers, BBB echoes the view of the FTC: “The fact is there’s no quick fix for creditworthiness. You can improve your credit report legitimately, but it takes time, a conscious effort, and sticking to a personal debt repayment plan.”

Sign up for our monthly consumer newsletter!