Referring credit-challenged clients to credit repair companies is a lot more serious and consequential than you might think. Consult this post as a warning about and an opportunity for safe credit-related services.
The problem upfront.
Your deal dies. Why? Bad credit. Here are the two most common responses: 1) Refer that client to credit or debt help, likely losing that deal forever. 2) Move on to the next client, definitely losing that deal forever. Both situations are potentially bad business and definitely solvable.
The solution upfront.
Send all credit-deficient clients to Credzu because it is designed for legal compliance and is the only product on the market that protects consumer funds in escrow to ensure consumers pay only for services they receive (rendering scams and ripoffs impossible).
It’s not just that Credzu is a good place to send consumers who need credit improvement. There is practical and legal liability, otherwise. Here are a few examples the market presents without Credzu’s involvement.
In fact, if you have worked with or know of a good credit repair company, you should encourage them to use Credzu for the same reasons.
Practical Liabilities of Referring Clients to Credit Repair Companies.
Client Disappointment.
You cannot control the outcome of a third party.
If you’re sending credit-challenged consumers to unreliable places, their bad experience may be a reflection of you and your company.Consumers intent on negative reviews lash out at everyone, regardless if it’s appropriate.
You want to send consumers to a place that handles expectations, protects consumer funds and returns consumers to you credit-ready.
Unknowingly, unwittingly bad companies.
How could a company not know if they’re good or bad? Well, because in the case of regulators, the companies do not get to decide.
Even the best-intentioned company in the world may not know they’re violating consumer protection laws.
It is a well-settled legal maxim that ignorance of the law is not a defense to a violation of it. In the case of credit repair organizations, there are many laws and rules that are violated regularly.
Practical Liabilities of Referring Clients to Credit Repair Companies.
You should consult an attorney that advises you on legal matters. This may not apply to your situation and it’s not legal advice. But, you should consider these topics with your trusted legal expert.
RESPA
The Real Estate Settlement Procedures Act (RESPA) prohibits kickbacks for those involved in the closing of transactions subject to RESPA.
If you’re involved in a transaction as a settlement service provider under the RESPA, you cannot be compensated for referrals to credit repair companies.
a real estate agent [or settlement service provider, like a lender] cannot receive a referral fee for real estate service from a credit repair service, because the real estate agent is a settlement service provider. It does not matter whether the credit repair service is considered a settlement service provider or not.
The Savvy Inspector
FTC Act
The Federal Trade Commission Act targets a variety of improper commercial behavior.
In the case of credit issues, the truthfulness of representations (by you or a credit repair company) may trigger the FTC’s interest. Working with honest companies is imperative.
The Commission will find an act or practice deceptive if there is a misrepresentation, omission, or other practice, that misleads the consumer acting reasonably in the circ*mstances, to the consumer’s detriment.
The Federal Trade Commission
CROA
The Credit Repair Organizations Act imposes transparency standards on credit repair companies, which are extremely easy to violate.
Examples include:
- Requiring written contracts with certain provisions.
- Requiring disclosures.
- Requiring cancellation procedures.
- Prohibiting up front fees.
- Prohibiting dishonest advice.
Clearly, this only applies to credit repair organizations, but the language may include others if they are not careful with their words.
The term “credit repair organization”— (A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of (i) improving any consumer’s credit record, credit history, or credit rating; or (ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i); and
The Credit Repair Organizations Act
A standard referral is likely outside the reach of the CROA. However, if a referrer is providing advice or assistance, that may cross the line.
Also, if there is too much cooperation between the referrer and the credit repair organization, the FTC could use the principle of “common enterprise” to impose CROA liability on both.
Fraud
Many credit repair companies engage directly or indirectly in fraud.
Credit repair is literally and accurately described as correcting mistakes in credit reports.
When the legal tools, like the FCRA of FDCPA, do not achieve the desired credit-improvement outcome, some companies may seek illegal tools.
For example:
- Credit sweeps. Using fake police reports to challenge accurate negative information.
- Primary tradelines. Creating fake accounts to boost credit scores (not the same as authorized user tradelines).
- CPNs. Creating “new” social security numbers to leave bad credit behind (this is synthetic identity fraud, by the way).
TSR
Don’t, under any circ*mstances, send leads to a telemarket that sells credit repair as this may constitute substantial assistance.
The CFPB and the FTC view violators and those who substantially assist violators of the TSR as the same thing.
Why is this relevant? Because virtually every single credit repair company in the Country is likely violating the credit repair provisions of the TSR.
There is a severe rule that prevents credit repair companies from charging consumers until 6 months after they perform service.
Conclusion.
Credit repair companies are extremely regulated.
Referrals to credit repair companies shares in that regulatory risk.
Referring clients to Credzu does three things:
- Significantly reduce your regulator risk (we force compliance)
- Ensure your consumers are protected (money secured in escrow).
- Ensures your clients return to you (you’re constantly informed of progress).
If interested, you can contact us about or sign up for our partner program.
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