SCN, CPN, File Segregation and Other Tricks to Hide Bad Credit Are Illegal

‘File Segregation’: New ID Is a Bad IDea

If you have filed for bankruptcy, you may be the target of a credit repair scheme called file segregation, SCN or Secondary Credit Number, or CPN or Credit Profile Number. In this scheme, you are promised a chance to hide unfavorable credit information by establishing a new credit identity. That may sound perfect, especially if you’re afraid that you won’t get any credit as long as bankruptcy appears on your credit record.

The problem: It is illegal. If you use it, you could face fines or even a prison sentence.

The Pitch: A New Credit Identity

If you have filed for bankruptcy, you may receive a letter from a credit repair company that warns you about your inability to get credit cards, personal loans, or any other types of credit for 10 years. For a fee, the company promises to help you hide your bankruptcy and establish a new credit identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet.

If you pay the fee and sign up for the service, you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs — which resemble Social Security numbers — are used by businesses to report financial information to the IRS and the Social Security Administration.

After you receive your EIN, the credit repair service will tell you to use it in place of your Social Security number when you apply for credit. They’ll also tell you to use a new mailing address and some credit references.

The Catch: False Claims

To convince you to establish a new credit identity, the credit repair service is likely to make a variety of false claims. Listen carefully; these false claims, along with the pitch for getting a new credit identity, should alert you to the possibility of fraud. You’ll probably hear:

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Claim 1: You will not be able to get credit for 10 years (the period of time bankruptcy information may stay on your credit record).

Each creditor has its own criteria for granting credit. While one may reject your application because of a bankruptcy, another may grant you credit shortly after you filed for bankruptcy or successfully completed a bankruptcy repayment plan. And, given a new reliable payment record, your chances of getting credit will probably increase as time passes.

Claim 2: The company or “file segregation” program is affiliated with the federal government.

The federal government does not support or work with companies that offer such programs.

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Claim 2: The “file segregation” or CPN program is legal

It is a federal crime to make any false statements on a loan or credit application. The credit repair company may advise you to do just that. It is a federal crime to misrepresent your Social Security number. It also is a federal crime to obtain an EIN from the IRS under false pretenses. Further, you could be charged with mail or wire fraud if you use the mail or the telephone to apply for credit and provide false information. Worse yet, file segregation likely would constitute civil fraud under many state laws.

Rights Under The Credit Repair Organizations Act

This law prohibits false claims about credit repair and makes it illegal for these operations to charge you until they have performed their services. It requires these companies to tell you about your legal rights. Credit repair companies must provide this in a written contract that also spells out just what services are to be performed, how long it will take to achieve results, the total cost, and any guarantees that are offered. Under the law, these contracts also must explain that consumers have three days to cancel at no charge.

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Under the law, you also have the right to sue in federal court. The law allows you to seek either your actual losses or the amount you paid the company — whichever is more. You also can seek “punitive” damages: sums of money to punish the company for violating the law. The law also allows class actions in federal court: cases where groups of consumers join together in one lawsuit. If you win, the other side has to pay your attorney’s fees.

Many states have laws regulating credit repair companies, and may be helpful if you’ve lost money to credit repair scams.

If you’ve had a problem with a credit repair company, report the company. Contact your local consumer affairs office or your state attorney general (AG). Many AGs have toll-free consumer hotlines. Check with your local directory assistance. – Source

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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.
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6 thoughts on “SCN, CPN, File Segregation and Other Tricks to Hide Bad Credit Are Illegal”

    “Account Numbers (SSANs). Currently, federal law allows individuals to
    legally use CPNs for financial reporting and protects those individuals
    who do not wish to disclose their SSAN. Individuals who acquire CPNs are
    completely responsible for any debt they incur using this number.”

  2. Steve, it doesn’t take much from a percent with 1/100th intellect that most normal human beings possess to notice what an armature writer you truly are. Perhaps you should educate yourself a little better before you start professing how federal statues established decades ago are “illegal”. While misrepensting one’s “social security” is illegal, federal law protects and encourages the protection of social security numbers through programs such as SCN. Perhaps you should quit wasting so much time sounding like an arrogant, clueless prick, and focus on educating yourself on what is truly “illegal” vs what is legal.

    • I think you failed to notice the source link at the end of the piece. I didn’t write the material you take a swipe at to discredit and call “clueless,” the Federal Trade Commission did.

      In fact the Federal Reserve Bank of St. Louis offers the same warnings. See https://www.stlouisfed.org/publications/br/articles/?id=2060 or how about the State of Indiana http://www.in.gov/dfi/2509.htm who even says, “Also, file segregation would likely constitute civil fraud under many state laws.” And let’s not forget the BBB http://www.bbb.org/us/article/ftc–‘file-segregation-new-id-is-a-bad-idea-4694

      I would welcome any link you can provide to FTC or CFPB documentation that states your assertions are in fact, legitimate.

      • I’m not sure if you are aware but NONE of the sources you listed above have ANY legislative authority whatsoever. You are confusing unethical behavior as being illegal. I do not proclaim myself to be an author, but I believe my technicality and precision trump your false accusations. It’s not hard to see why good writers are a dying breed.

        • Clearly you just want to level insults but let’s talk specifics. I asked for “any link you can provide to FTC or CFPB documentation that states your assertions are in fact, legitimate” which you did not provide.

          Additionally, while you feel compelled to attack me, rather than discuss, you seem to still miss the point that I did not write the piece and I gave you three authoritative resources that restated similar information.

          You may feel the warnings provided by those sources are wrong and carry no weight, but how do you explain all the actions the FTC took against operators who sold services geared towards providing alternative numbers to use in the application of credit. They have had some fairly substantial sweeps and even said, “The settlement bars future violations of the Credit Repair Organizations Act and the FTC Act; bars deceptive claims about file segregation — including claims that it is legal” See http://www.ftc.gov/search/site/%22file%20segregation%22

          Again, please provide links to government sources that say it is legal. I would welcome the research and resources to student in response to the statements made by the FTC, BBB, and others.


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