'Jamming' cleans your credit -- temporarily
By Kelly Dilworth
'Jamming' by credit repair firms provides no value in resolving consumers' inaccurate reports ...
of Credit Services Organizations
Consumer advocates say the long-running scam also harms consumers who hire the fraudulent clinics because they are lured into spending large sums of money on a service that ultimately doesn't work.
"Jamming" adds to the woes of the credit reporting system. It has become a crucial part Americans' financial lives, helping determine how they access credit and at what costs. In recent years, though, the system has been criticized as error-prone in its data colelction and "broken" for how it handles consumer complaints.
A review of credit repair clinics online shows prices vary widely. Some charge monthly fees as high $99 a month or more. Others charge several hundred dollars for an initial assessment, then charge extra -- sometimes as much as $100 or more -- for each negative mark that is deleted from a report.
The problem for consumers is that they don't get the result they were hoping for.
"For the most part, people are going to credit repair agencies because they have a lot of problems and they want to be creditworthy again," says Steven Baker, director of the Federal Trade Commission's Midwest Region. However, if the debt is yours, "There's really not much you can do to get it changed," he says.
Following the law
Not all credit repair companies spam credit reporting agencies with excessive and fraudulent disputes. The credit repair industry's leading trade group, the National Association of Credit Services Organization (NACSO), for example, has a "no jamming" policy, according to the group's website, and urges both member and non-member companies to refrain from sending an excessive number of legitimate disputes.
"'Jamming' by credit repair firms provides no value in resolving consumers' inaccurate reports and does not further NACSO members' goals of lawfully achieving accurate client consumer credit reports," wrote the organization in an August 2013 news alert.
Many credit repair firms instead prefer to take a more strategic approach to fixing customers' credit histories and focus on information that's truly inaccurate, says John Ulzheimer, a credit expert who used to work in the credit reporting industry. "They almost act as a communications agent for the consumer."
According to Ulzheimer, the Credit Repair Organization Act -- a 1996 federal law inspired in part by the credit repair jamming scam -- helped reshape the credit repair industry and weeded out some of the bad apples trying to take advantage of consumers desperate to fix their credit.
The long-standing scheme is to send multiple letters disputing exactly the same thing on a person's credit report, even though they know the information is accurate.
Director of public education, Experian
The act "has changed how these companies have to do business in order to remain compliant with federal law," says Ulzheimer. Before it was enacted, "It was really the Wild West," he says. "Because of that, you had kind of an industry come out of the ground without a whole lot of regulation."
The law gave additional power to the Federal Trade Commission to regulate the credit repair industry. For example, "a credit repair company can't tell you to just dispute everything on your credit report," says Ulzheimer. "That's illegal."
Credit repair companies are also barred from asking for payment before providing you with a service. In addition, they must provide you with a detailed contract that explains your consumer rights and outlines what the company will do for you, how much the service will cost and how long it will take.
Experts say there are still plenty of crooks working within the credit repair industry. However, there also are legitimate operations that don't rely on deceptive tactics to ply their trade, says Ulzheimer. "In my mind, there are two categories of credit repair companies. You have companies that follow all the rules and then you have companies that are flying in the face of the law."
Some consumer advocates remain skeptical of credit repair companies' claims. "I personally haven't seen a credit repair company that says, 'We fix mistakes,'" says the FTC's Steven Baker.
Instead, the FTC sees more advertisements for companies promising to clean up reports riddled with bad debts, says Baker.
|HOW THE JAMMING SCAM WORKS|
With the jamming scam, your credit report appears to be cleansed of problems, but the relief is temporary. Enlarge image.
Chris Thetford of the Better Business Bureau says that many of the complaints it receives are indeed for clinics that promise more than they can deliver. According to a 2012 report by the Better Business Bureau's St. Louis chapter, the number of credit repair-related complaints the bureau receives has shot up in recent years.
"It's a question of expectations," says Thetford. "Consumers might think, based upon the marketing or the advertising that they've seen or received, that credit repair companies are able to do more than perhaps credit repair companies could do," he says.
Deatra Riley, vice president of community outreach at Credability, says credit repair companies do nothing consumers can't do themselves. "You can do it on your own," says Riley.
The credit reporting industry has already taken steps to deal internally with the large volume of disputes, says the CDIA's Magnuson. So even though the jamming scam may gum up the process, the credit bureaus are still able to respond to the disputes they receive within 30 days -- and sometimes even faster. "They're doing pretty well," he says, estimating that 70 percent of all disputes are resolved within 14 days.
Nevertheless, the Federal Trade Commission continues to crack down on fraudulent clinics -- when it can catch them. "We're spread too thin," says Baker. "We're a small agency and we deal with a massive problem of consumer protection." The FTC has fined or shut down a number of clinics. "But we can't get at them all," he says.