Court halts credit-repair network accused of taking nearly $200 million

What the court action does

On August 10, the Federal Trade Commission announced that a federal court had temporarily halted a network of 17 related credit-repair companies and five principals. The FTC alleges the operation collected nearly $200 million in unlawful advance and recurring charges from consumers since at least 2016.

The court order is temporary, and the FTC's complaint contains allegations rather than a final finding that the defendants violated the law. The case was filed in the U.S. District Court for the District of Arizona.

How the FTC says consumers were targeted

According to the complaint, the companies used paid search ads to reach people looking for creditors or debt collectors and, in some cases, targeted military servicemembers. The FTC alleges telemarketers impersonated creditors, promised substantial credit-score improvements, disputed legitimate debts, and sometimes filed false identity-theft reports without consumers' knowledge.

The FTC also alleges the operation used an initial one-dollar charge and other fees before providing services, then enrolled consumers in recurring charges without clear consent and frequently denied refund requests.

Why this matters before shopping for an auto loan

A credit report can affect vehicle-loan approval and pricing, which can make promises of a fast score increase especially tempting before a car purchase. The FTC says a credit-repair company cannot legally remove negative information that is accurate and current, and anything a company can lawfully do to investigate an error is something a consumer can do directly for little or no cost.

This enforcement action does not change auto-loan rates, erase any consumer's debt, or establish that a particular borrower will qualify for financing. It is a warning to verify credit information through official channels before paying someone who promises a specific result.

Steps shoppers can take

• Review credit reports before applying and dispute genuine errors with both the credit-reporting company and the business that supplied the information.
• Do not pay a company that demands money before helping, promises to remove accurate information, or tells you to file a false identity-theft report.
• Keep credit repair separate from vehicle shopping, and compare written auto-loan offers by APR, term, amount financed, and total of payments.
• Report suspected credit-repair scams to the FTC and use the CFPB complaint process for unresolved credit-reporting problems.