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BBB Study Finds Big Issues With Credit Repair and Debt Settlement Companies

The St. Louis BBB recently released a study titled, “Are They Creditable” in which they took a look to see if consumers were being taken advantage of by credit repair and debt settlement companies. They utilized their local St. Louis BBB and national BBB databases for complaints and other reporting sites.

Credit Repair Scam

A study of the credit repair complaints filed with the St. Louis BBB found consumers paid an average of $816 for services and 85 percent of complaints claimed no services had been received. These credit repair companies refused to give refunds in nearly all the complaints filed.

“The credit repair industry has boomed alarmingly in the past few years,” the study noted, pointing to the fact that complaints to BBBs nationally regarding credit repair have risen from 133 in 2006 to 711 in 2011.

“The BBB urges consumers who are having problems with their credit score not to make matters worse by paying scammers to do what they can do by themselves,” said Michelle L. Corey, president and CEO of the BBB in St. Louis.

“Authorities have been active in pursuing law violators,” the study concludes. “But they won’t keep up with the tide until consumers themselves are much more cautious in vetting companies with which they do business.”

The conclusion from the study was that many consumers were being charge in advance for credit repair services even though that practice is prohibited by the federal Credit Repair Organizations Act.

Debt Settlement Complaints

The same study found that on average consumers said they had lost $2,000 on average. And again the track record on refunds was less than stellar. Consumers said that in 68 percent of the complaints, debt settlement companies refused to provide a refund.

Of those in their area that did provide a refund, the average was $67.

The good news is that debt settlement companies are better than credit repair refund requests. Still, only 65 percent is not a great number and leaves room for significant improvement.

The BBB says “It has been noted that there are scammers who feed on consumer greed and those who feed on consumer need. In the case of unscrupulous credit repair and debt settlement companies, it is the latter. Beset by the fallout of a weakened economy, thousands of consumers have found themselves deeper in debt than their means can handle. Lured by attractive ads on the Internet and elsewhere, consumers have paid thousands of dollars for services that weren’t provided. It is a great irony that in the case of credit repair companies, consumers have paid these sums for actions that they themselves could have completed at little or no cost. The laws, some recently enacted or enhanced, are strict. And
authorities have been active in pursuing law violators. But they won’t keep up with the tide
until consumers themselves are much more cautious in vetting companies with which they do business.”

While it is true there are disreputable debt relief companies out there, there are good companies that try hard to deliver exceptional services and do offer prompt and courteous refunds when requested.

Bottom line is that as long as the debt relief industry allows bad acts to continue, the public perception and that of consumer advocates is going to be negative.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Bdlion

    Steve, I filed a complaint against a debt settlement company with the California Attorney General, and the company offered me a 50% refund on the money I paid upfront (about $1,500). I agreed, figuring 50% is better than nothing.

    I also contracted a credit repair company, and they have been performing wonderfuully. I did pay upfront, but I am happy with the job they are doing. I’ve been with them almost a year, and my wife’s credit is almost 100% repaired, while my credit is about 50% repaired.

    • http://GetOutOfDebt.org Steve Rhode

      Just remember that applying for future credit using a credit report that has had accurate but negative information removed from it is a criminal act.

      • Guest

        Steve, what about all the junk on some credit reports that are innaccurate (such as incorrect balances, incorrect date of last activities ect) and the CRAs just delete the items instead of correcting the inaccurate part of the negative items? Seems like the CRAs are lazy.

      • http://GetOutOfDebt.org Steve Rhode

        The credit reporting agencies are middlemen. Once contacted by the CRA the reporting entity either corrects, confirms, or admits the information is wrong. I’ve seen hundreds of cases where people have had negative information deleted only to have it correct and reported again in the future.

        There is no magic to credit repair. in fact a consolidated credit report generally provides consumers with advice on how to dispute inaccurate information.

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