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Lawsuit says credit repair was sham

By Michael Kinsman

April 3, 2002

To people like Bradley Lang of Bonita, the lure of a clean credit slate was too much to resist.

Lang and several other San Diego County residents each paid $409 last year to ICR Services in the hopes that the Canton, Mich., company would be able to repair their credit histories.

Now Lang and six others have filed suit in San Diego Superior Court, alleging that ICR's credit repair business was a sham and did nothing to help their credit standing.

Consumer advocates and government officials say they are not surprised. Credit repair is a booming business, yet the services do little to help the financially overburdened, they say.

"Credit repair the very name is a farce," said Paul S. Richard, executive director of the San Diego-based Institute of Consumer Financial Education. "No one can repair your credit history. No one has that power. You are the only one who has any control over that."

Still, Richard's nonprofit organization gets several complaint calls each day from consumers who say they have paid something to erase their credit problems.

"It's the same complaint," he said. "They were told their credit could be repaired and then they are unhappy because they got nothing for their money."

The state Attorney General's Office also hears from dissatisfied consumers.

"They complain because they were made promises that can't be kept," said Hallye Jordan, a spokeswoman for the Attorney General's Office. "We see companies repeatedly misrepresent their ability to fix someone's credit record."

The state does not release the number of credit repair complaints it receives from consumers, saying such figures would be useless since only a small percentage of schemes ever get reported.

"People only come to us when they have no other hope," Jordan said. "By that point, the company is gone and it's too late to do anything."

Consumer advocates say reputable credit repair companies offer credit report review services only, evaluating individuals' credit reports and making suggestions for curing debt woes. Such companies stop short of making promises, they say.

Credit-repair services are marketed on TV, over the radio and in a number of low-cost ways, including newspaper classified ads, fliers and the Internet.

"These companies have a habit of disappearing overnight, so they may be here one minute and you can't find them the next," Richard said.

He said some companies issue new credit histories for their clients, simply erasing credit obligations without reason and issuing clean, but bogus, credit reports.

"The individual will take this and think everything is fine," he said. "Then when they apply for, say, a car loan, they find the credit still is no good."

Another common tactic is to create a new credit identity for an individual. Some people are encouraged by credit repair firms to apply for an Employer Identification Number to replace their Social Security Number.

"If you're being asked to get a get a new tax ID number to get more credit, you've got to realize that is wrong," said Gerry Wilson, president of the San Diego Better Business Bureau. "Anyone who asks you that is not legitimate. And, you are placing yourself in a very dangerous situation by breaking the law."

Charles LeBeau, the San Diego attorney representing Lang and six others, declined to discuss the details of the case.

According to court records, ICR Services is accused of violating a federal law that prohibits individuals and companies from collecting fees upfront for credit repair.

The suit says ICR and its subsidiary, National Credit Repair, created a marketing ruse to avoid state and federal laws that restrict upfront fees for credit repair.

Lang and other plaintiffs purchased credit-repair courses called "Consumer Advantage" from ICR. As part of the course, the individuals received information pamphlets and "free" credit repair by National Credit.

The suit says the credit repair course was "worthless" and had been created solely to collect upfront fees.

ICR Services and National Credit Repair did not respond to requests for interviews about the lawsuit. ICR Services has been sued in several states over similar credit repair operations.

"This kind of thing is very, very common," Richard said. "There must be 25 or 30 individuals and companies marketing various kind of credit-repair scams at any time."

The Federal Trade Commission notes that most kinds of accurate negative information can be included on individual's credit reports for seven years, and only time can remove that information.

Still, there are steps consumers can take to improve their credit situation, such as notifying creditors right away if they are having difficulty paying bills on time, and setting up debt repayment plans in some cases with low-cost or no-cost help from a nonprofit credit counseling agency.

Richard preaches self-discipline as a method of correcting blemished credit.

"You have control over your credit situation, but you have to have the patience to work through your problems," he said. "These aren't problems you can just wipe away in a day. You've got to work on solving them, and that takes time."

He also blames the credit woes on consumers who have an insatiable desire to spend.

"People who want to use these services do so because they are desperate to continue spending," he said. "It's not people who really want to do the right thing to get out of debt. It's people who want to figure out a way . . . to spend money again."

Michael Kinsman: (619) 293-1370;

Copyright 2003 Union-Tribune Publishing Co.

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