Once a year I try to touch on the evils of credit repair as every year I see more and more the damage it can cause a borrower. But it’s not just the borrower that is negatively affected by credit repair. It can also be damaging to the mortgage broker or lender if they are referring their clients to use a credit repair agency.
Why is this? There are several reasons:
We all see ads every day on the internet, TV, etc. for credit repair agencies. Yet very few, if any of these are truly in compliance with the Credit Repair Organizations Act. One of the prohibited practices of the act is in Section 404 (4) (b) “Payment in Advance – No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair organization has greed to perform for any consumer before such service is full performed”. Yet most credit repair companies charge $200-$400 up front before any “repair” is performed. How do they get away with this? Most will claim it is a sign up fee or service agreement fee but does not relate to services performed. By the text of the rule as stated by the FTC and the CFPB this is in direct violation of the Act. If a mortgage broker is referring a client to a credit repair agency they are inadvertently supporting a company that is violating the Credit Repair Organizations Act.
When a borrower signs up with a credit repair agency they are required to provide a copy of their credit report. Credit repair agencies do not have permissible purpose with the repositories (Experian, Trans Union, Equifax) to pull credit. If a mortgage broker provides the borrower with a copy of the credit report that they pulled for the borrower to provide to the credit repair agency they are in direct violation of their permissible purposes for pulling a credit report in the first place.
Throughout the years we have seen audits conducted by the repositories that result in the termination of that broker or lender’s access to credit reports. These audits are triggered by borrowers, who at the recommendation of a credit repair agency have disputed items on their credit report that was provided to them by a mortgage broker. The repositories monitor patterns on the disputes they receive and match them to recent inquiries on the consumer’s credit report. If the repositories find evidence of disputes coming from credit repair agencies or frivolous disputes by a borrower and discover inquiries from mortgage brokers, it is grounds for them to terminate that company’s access to credit reports.
If there are truly inaccuracies on a borrower’s credit report there is nothing the borrower can’t do for themselves that a credit repair agency can claim to do. And they can do it without the cost they would incur with a credit repair agency and without the negative ramifications that can come from using a credit repair agency.
When it comes to credit repair agencies, truly the answer is to just say no. There are many avenues for the borrower to help themselves in repairing any inaccuracies on their credit report. And for the mortgage brokers who want to help advise the borrowers on what they need to do to improve their credit they can they can start with sending the to the Consumer Credit Help section on our website www.advcredit.com. There they can find answers to almost any question they would have concerning their credit report. Mortgage brokers can also contact any of our credit consultants in the rescore department for answers on how they can help their borrowers.
TMC - Chief Operating Officer
President/CEO - Pulte Financial Services