Some debt relief companies require an upfront fee for their services, which is illegal under federal law.
FOR IMMEDIATE RELEASE / PRURGENT
Growth in Student Debt Increases Demand for a Quick Fix that May Worsen Financial Burdens and Cause Legal Problems
As student financial debt load increases, Connecticut Better Business is warning students and their families about companies that claim they can eliminate debt or promise a ?new credit identity.?
Some debt relief companies require an upfront fee for their services, which is illegal under federal law. Others promise a ?new credit identity,? according to the Federal Trade Commission (FTC), which in some cases, involves the illegal sale of stolen Social Security numbers. The FTC reports debt relief services may alternatively offer a 9-digit Employer Identification Number (EIN) and recommend their clients apply for credit using that number or their ?new? Social Security number.
Consumers who use these numbers to apply for credit face possible fines or prison sentences. It is illegal to lie on a credit or loan application, misrepresent your Social Security number or obtain an EIN from the Internal Revenue Service (IRS) under false pretenses.
There are a number of signs of debt relief fraud:
?Upfront fees are required before the company will begin work
?Advice not to contact credit reporting companies
?Recommendations to use false information on credit applications
?Absence of information about your legal rights or details of what services are provided and their limitations.
The Credit Repair Organization Act (CROA) makes it illegal for credit repair companies to misrepresent their services or require fees before they have performed their services. The CROA requires credit repair companies to draw up a contract which explains your legal rights, what services they will perform, any guarantees, how long their work will take and contains an option to cancel the contract within three days of signing.
Consumers with credit problems do not require a third party to dispute errors in their credit reports.
Credit reports may be obtained free of charge every 12 months from the government-sanctioned service, annualcreditreport.com/.
Options for people with a poor credit history include the use of prepaid credit cards and obtaining advice from the Consumer Credit Counseling Service (CCCS). CCCS services can be obtained free or for a small charge at www.nfcc.org, or by telephone, toll-free at 800-388-2227.
For more advice on money and credit management, visit Better Business Bureau?s Managing Credit ? Made Simpler program at http://www.bbb.org/credit-management.