AG Urges Consumers to Shop Carefully for Credit Counseling Services

HARRISBURG — Attorney General Tom Corbett urged Pennsylvania consumers to shop carefully and understand their rights when considering the use of a credit counseling service, especially when seeking help to reduce holiday bills or pay-off other debts.

“For many consumers, the end of the holiday season can mark the beginning of a credit nightmare – as bills and other winter expenses pile up,” Corbett said. “Many organizations and businesses offer services to help manage and reduce debt, but consumers need to be watchful for scams and careful to select a service that fits their needs.”

Corbett explained that many types of businesses – some non-profit and others for-profit — offer different forms of credit counseling or debt reduction services. In addition, information on debt management and smart spending is often available for free from consumer organizations, from resources at your local library or via Internet sites.

“There are no ‘magical’ or instant solutions to credit problems,” Corbett said. “Consumers need to evaluate services thoroughly to determine if a credit counseling service is the best way to address their particular situation.”

Corbett said that Pennsylvania’s Credit Services Act requires credit services organizations to register with the state and post a bond to cover any consumer losses caused by their actions. This requirement applies to most businesses that charge a fee to help consumers “repair” credit, get new credit or manage existing debts – but it does not apply to certain nonprofit organizations, financial institutions and some licensed individuals, such as real estate brokers.

Additionally, Corbett said the law prohibits credit service organizations from making untrue claims about the services they provide, using any advertisement that guarantees a consumer will obtain credit, or charging consumers for referrals to credit offers that are the same as those available to the general public.

Corbett said that all credit service organizations are required to provide detailed information to consumers entering into any agreement, including:
– A dated and signed contract.
– A full de scri ption of the services to be performed.
– An estimated date those services will be performed, as well as the length of time it will take to complete those services.
– The total of all payments the consumer must make.
– Information about a consumer’s rights, if they should suffer damages because of the actions of the credit service organization.

Corbett said the Credit Services Act also gives consumers the right to cancel contracts, without penalty, within five days from the date the contract was signed. Contracts are required to include clear and conspicuous notice about the right to cancel, as well as a cancellation notice that can be returned to the credit service organization.

Corbett added that consumers should be wary of services that make extravagant claims about being able to quickly eliminate debt or “fix” bad credit by helping you create a new credit identity.

Corbett explained that accurate information about your financial accounts and debts cannot legally be removed from your credit report. Information about debts remains on your credit report for seven years and information about bankruptcy filings remains for 10-years.

Corbett said that every Pennsylvania consumer is entitled to one free credit report per year from each of the three major credit bureaus. He encouraged consumers to take advantage of that free service and carefully review all of the information included in their credit history – noting that consumers can dispute any outdated or incorrect information and have that removed free-of-charge.

“There are no ‘magic solutions’ to a bad credit history, as long as that information is correct, but consumers can take steps to address any problems and manage their accounts,” Corbett said. “The passage of time, along with a regular history of paying your bills on-time, is the only guaranteed way to improve your credit rating.”

Corbett added that consumers should be cautious about which website they use to obtain their free credit report, explaining that some private businesses attempt to subscribe consumers to expensive monthly “credit monitoring” or “credit protection services.”

The official national Web site created by the major credit bureaus to provide free credit reports to consumers is:  

Corbett noted that the Attorney General’s Bureau of Consumer Protection receives approximately 7,500 complaints per year related to credit issues, adding that credit issues are typically one of the top five categories for consumer complaints. Consumer complaint topics include disputes over credit repair, credit cards, loans, debt collection & recovery, loans, credit ratings and other related services.

Corbett said information and tips concerning common credit problems are available in the “Consumers” section of the Attorney General’s website:

Consumers with questions or problems can call the Attorney General’s toll-free Consumer Protection Hotline at 1-800-441-2555, or visit the Attorney General’s Web site to file an online complaint. (Highlight the “Complaints” menu on the front page of the website and select “Consumer Complaints” from the menu that appears.)

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