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Your Money Matters by Thomas Sottile, Esq.
Supreme Court Case Is Cautionary Tale
For Credit Consumers
The United States Supreme Court’s decision last month in the case of CompuCredit Holding Company and Synovus Financial Corp. v. Greenwood has an impact on purchasers of certain credit cards, and tells a cautionary tale to those of us considering various options to improve our credit.
CompuCredit marketed a subprime credit card under the brand name Aspire Visa to consumers with low or weak credit by means of an enormous direct-mail and internet advertising campaign. The cards themselves were issued by Columbus Bank and Trust, now a division of Synovus Bank. Customers purchased the credit cards through the mail, and via telephone and the internet.
Wanda Greenwood and other consumers alleged that CompuCredit advertised that the card could be used to “rebuild poor credit,” and “improve your credit rating”; and that no deposit was required in order to get the card. Consumers claimed that they were promised an immediate $300 dollars in available credit once the card was received. Instead, they reportedly were hit with a $29 finance charge, a monthly $6.50 account maintenance fee, and a $150 annual fee; all assessed against the $300 limit before the consumers obtained their card. In aggregate, the card had $257 in fees the first year.
Although the promotional material mentioned the fees, it did so in small print amidst other information in the advertising and not in proximity to its representation that no deposit was necessary. CompuCredit also required that a consumer sign its Terms of Offer contract which included the statement that the signatory agrees to binding arbitration should a dispute arise with the company; and that he or she would give up the right to litigate the case in court if the matter could not be resolved. Consumers brought a civil law suit in federal court against CompuCredit and Columbus Bank based in part on violations of the Credit Repair Organizations Act (CROA). This is a federal law, enacted in Sept. 1996, with the express purpose of guaranteeing that buyers of credit repair services are given the information necessary to make an informed decision; and to protect the public from unfair advertising and business practices related to credit repair organizations.
The credit providers sought to have the consumers’ case dismissed and compel arbitration because the binding arbitration clause, which all of the plaintiffs had agreed to in their contract, precluded such court action. Even so, the U.S. District Court and Appeals Court in California found that the consumers’ case should be heard because CROA’s language states that a consumer has a “right to sue a credit repair organization that violates” the Act. It also contains a non-waiver provision which says that: “Any waiver by any consumer of any protection...” shall be treated as void and unenforceable. The credit providers immediately appealed this adverse ruling. In an 8-1 decision, the U.S. Supreme Court reversed the lower court and found that CROA did not prohibit a binding arbitration agreement between the consumers and the credit providers; and that another federal law, the Federal Arbitration Act, required it to be enforced according to its terms.
The Federal Trade Commission (www.ftc.gov) warns consumers that some companies target individuals with poor credit histories daily, with offers to clean up their credit reports so that they can get a car loan, a home mortgage, insurance, or even a job - after paying a fee for the service. The truth is that no one can remove accurate negative information from a credit report because it is illegal to do so. There’s no easy fix for bad credit. Improving credit takes time and a conscious effort to pay off debts.
Here are some red flags which may let a consumer know whether the credit repair company that he or she is dealing with may not be on the up and up.
The first is that the company wants you to pay up-front for the service before they provide it. According to the FTC, companies must render the promised service before the person is required to pay, and it violates federal law for them to do otherwise.
Another problem is when companies do not tell customers what they can do for themselves for free. The law allows for consumers to ask for an investigation of information in their credit file that is disputed as inaccurate or incomplete, and this does not cost any money. Under the Fair Credit Reporting Act (FCRA), the consumer reporting company and the information provider (the person, company, or organization that provides information about you to the consumer reporting company) must correct inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the consumer reporting company and the information provider in writing. If a credit repair company recommends that you not contact any of the three major national consumer reporting companies (Equifax, Experian, and TransUnion) directly, then that is an additional warning sign.
Consumers also should be wary if the credit repair company suggests that you apply for an Employer Identification Number (EIN) to use instead of your Social Security number so you can invent a “new” credit identity - and then, a new credit report. The FTC points out that it is illegal knowingly to put false information on a credit application or to get an EIN from the Internal Revenue Service under false pretenses.
It seems clear from the Supreme Court’s decision in the above case, and the FTC’s information about credit repair offers, that the onus of responsibility rests squarely on the shoulders of the consumer to read every word of any document that we sign, and enter into transactions with eyes wide open.
Of course there is no doubt that a down economy has many good people suddenly experiencing credit problems for the first time. An initial reaction might be to grasp for an offer which promises a ready solution. Nevertheless, a more studied approach in taking the time to gather all available information, and seeking guidance from trusted advisors, might yield a better result.
*
Thomas Sottile is an attorney in Media, PA. He retired from the U.S. Postal Inspection Service after 23 years as an investigator and attorney.
Supreme Court Case Is Cautionary Tale
For Credit Consumers
The United States Supreme Court’s decision last month in the case of CompuCredit Holding Company and Synovus Financial Corp. v. Greenwood has an impact on purchasers of certain credit cards, and tells a cautionary tale to those of us considering various options to improve our credit.
CompuCredit marketed a subprime credit card under the brand name Aspire Visa to consumers with low or weak credit by means of an enormous direct-mail and internet advertising campaign. The cards themselves were issued by Columbus Bank and Trust, now a division of Synovus Bank. Customers purchased the credit cards through the mail, and via telephone and the internet.
Wanda Greenwood and other consumers alleged that CompuCredit advertised that the card could be used to “rebuild poor credit,” and “improve your credit rating”; and that no deposit was required in order to get the card. Consumers claimed that they were promised an immediate $300 dollars in available credit once the card was received. Instead, they reportedly were hit with a $29 finance charge, a monthly $6.50 account maintenance fee, and a $150 annual fee; all assessed against the $300 limit before the consumers obtained their card. In aggregate, the card had $257 in fees the first year.
Although the promotional material mentioned the fees, it did so in small print amidst other information in the advertising and not in proximity to its representation that no deposit was necessary. CompuCredit also required that a consumer sign its Terms of Offer contract which included the statement that the signatory agrees to binding arbitration should a dispute arise with the company; and that he or she would give up the right to litigate the case in court if the matter could not be resolved. Consumers brought a civil law suit in federal court against CompuCredit and Columbus Bank based in part on violations of the Credit Repair Organizations Act (CROA). This is a federal law, enacted in Sept. 1996, with the express purpose of guaranteeing that buyers of credit repair services are given the information necessary to make an informed decision; and to protect the public from unfair advertising and business practices related to credit repair organizations.
The credit providers sought to have the consumers’ case dismissed and compel arbitration because the binding arbitration clause, which all of the plaintiffs had agreed to in their contract, precluded such court action. Even so, the U.S. District Court and Appeals Court in California found that the consumers’ case should be heard because CROA’s language states that a consumer has a “right to sue a credit repair organization that violates” the Act. It also contains a non-waiver provision which says that: “Any waiver by any consumer of any protection...” shall be treated as void and unenforceable. The credit providers immediately appealed this adverse ruling. In an 8-1 decision, the U.S. Supreme Court reversed the lower court and found that CROA did not prohibit a binding arbitration agreement between the consumers and the credit providers; and that another federal law, the Federal Arbitration Act, required it to be enforced according to its terms.
The Federal Trade Commission (www.ftc.gov) warns consumers that some companies target individuals with poor credit histories daily, with offers to clean up their credit reports so that they can get a car loan, a home mortgage, insurance, or even a job - after paying a fee for the service. The truth is that no one can remove accurate negative information from a credit report because it is illegal to do so. There’s no easy fix for bad credit. Improving credit takes time and a conscious effort to pay off debts.
Here are some red flags which may let a consumer know whether the credit repair company that he or she is dealing with may not be on the up and up.
The first is that the company wants you to pay up-front for the service before they provide it. According to the FTC, companies must render the promised service before the person is required to pay, and it violates federal law for them to do otherwise.
Another problem is when companies do not tell customers what they can do for themselves for free. The law allows for consumers to ask for an investigation of information in their credit file that is disputed as inaccurate or incomplete, and this does not cost any money. Under the Fair Credit Reporting Act (FCRA), the consumer reporting company and the information provider (the person, company, or organization that provides information about you to the consumer reporting company) must correct inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the consumer reporting company and the information provider in writing. If a credit repair company recommends that you not contact any of the three major national consumer reporting companies (Equifax, Experian, and TransUnion) directly, then that is an additional warning sign.
Consumers also should be wary if the credit repair company suggests that you apply for an Employer Identification Number (EIN) to use instead of your Social Security number so you can invent a “new” credit identity - and then, a new credit report. The FTC points out that it is illegal knowingly to put false information on a credit application or to get an EIN from the Internal Revenue Service under false pretenses.
It seems clear from the Supreme Court’s decision in the above case, and the FTC’s information about credit repair offers, that the onus of responsibility rests squarely on the shoulders of the consumer to read every word of any document that we sign, and enter into transactions with eyes wide open.
Of course there is no doubt that a down economy has many good people suddenly experiencing credit problems for the first time. An initial reaction might be to grasp for an offer which promises a ready solution. Nevertheless, a more studied approach in taking the time to gather all available information, and seeking guidance from trusted advisors, might yield a better result.
*
Thomas Sottile is an attorney in Media, PA. He retired from the U.S. Postal Inspection Service after 23 years as an investigator and attorney.