Since its conception, the credit repair industry has been marred by controversy, most of which has stemmed from the numerous cases of fraud and illegal activity. Although some genuine “credit fixers” do exist, their reputation is tainted by the majority whose policies are misrepresentations or even lies, as to what can or cannot be done. With thousands of people falling victim to credit-related scams every year, it has become increasingly difficult for legitimate credit repair merchants to operate.
The latest case of credit repair fraud
Credit-fixing scams may not be news for many, but occasionally, a case involving a sizeable amount of money will get people talking.
Last month, three major credit repair agencies and a law firm hit the airwaves after they reportedly agreed to pay $2 million in penalties for charging their clients millions in illegal advance fees.
According to the Consumer Financial Protection Bureau, Commercial Credit Consultants, IMC Capital an Prime Credit agreed to pay $1.5 million for falsely claiming they could fix credit reports and charging illegal fees.
The law firm in question, Park View Law, also consented to pay $500, 000 to the Treasury Department. Prime Credit sold its credit repair services using Park View Law’s name.
The CFPB alleged that the credit repair companies charged clients an initial consultation fee to facilitate a credit review, setup fees totaling hundreds of dollars, and exorbitant monthly fees. The companies apparently offered a money-back guarantee for some services but did not disclose that customers had to pay for at least six months in advance to sign up.
Some executives from the three firms received a five-year ban from working in the credit business, but the companies themselves are seemingly still in operation.
Repairing the credit-repair industry
Despite the negative perception of the business, credit fixing is still a much-needed service. Many customers have reported having their credit scores turned around, thanks to knowledgeable and honest merchants.
If you’re thinking of starting a credit repair business, the tips below will help you become part of the solution, rather than the problem.
- Offer affordable plans
The last thing that people with bad credit want is to put even more pressure on their finances. When formulating your policies, consider setting different price points for your clients, based on factors like income levels or the cost of similar services that are already available. This way, your customers will see the value in your service, and not think you’re only taking advantage of their misfortunes.
- Focus on providing exceptional service
Credit repair, like any high-risk service, relies heavily on referrals. The happier your customers are, the more likely they are to refer friends, family, and colleagues to you. One of the best practices for exceptional service is to communicate openly with your clients and involve them in the process.
- Use the right payment software
Your credit repair business will likely involve monthly payments from your customers. Automating the collection process is therefore essential so that you can offer recurring billing without the hassle of chasing down clients at the end of every month.
A company like eMerchantBroker can set you up with ACH and credit card billing solutions so that you can concentrate more on how best to serve your clients and less in managing payments.