On May 7, 2013 the Manhattan U.S. District Attorney’s office unsealed criminal charges based on a first ever referral from the Consumer Financial Protection Bureau (CFPB). In an indictment for Mail and Wire fraud, the Feds are accusing the Debt Repair firm, Mission Settlement Agency of defrauding at least 1,200 people nationwide.
According to authorities the firm never paid a single penny to creditors from the $2.2 Million paid to the firm for that purpose by the 1,200 customers. The complaint alleges that money was used instead for a nightclub, owned by the firm’s manager and other personal expenses. The debt repair firm is also accused of doing little or no work and not making payments to creditors on behalf of the firms “financially destitute clients”. In addition to the criminal charges the CFPB has also filed a civil lawsuit in an attempt to recover money for the victims.
The U.S. prosecutors said the firm “systematically exploited and defrauded” people nationwide by charging exorbitant fees and failing to reduce debt. The indictment also says that the debt repair firm collected about $14 Million from 2,200 other customers since 2009, but only paid $4.4 Million to its customer’s creditors.
Charges were filed against the firms Manager, Michael Levitis who authorities say controlled and operated the company. Other defendants include Denis Kurlyand, Mission’s vice president of sales; Boris Shulman, a sales representative; and Manuel Cruz, an employee who assisted with customer solicitation. Two other former employee’s were also charged and pled guilty. Company Manager, Michael Levitis was previously suspended from practicing law and placed on probation in 2011. The conviction came as a result of a corruption case for bribery against Carl Krueger, a former democratic politician in New York, who is now serving a prison sentence.
Consumers Beware!
If you are considering hiring a debt repair firm there are some things you should know, first and foremost the services being touted as special are really things that consumers can do themselves. There is no magical formula for erasing bad credit; this matter is governed by law. Credit bureaus are information gatherer’s and the information collected comes from many sources such as banks or other creditors, court filings (bankruptcy, lawsuits, etc.). To determine what information is in an individual’s credit report is the first step and that can be obtained by the consumer easily by contacting the three main credit bureaus.
If the information in one or all of the three credit reports is not correct, the next step is to ask the credit bureau or bureau’s whose report(s) contain the information you feel is in error to investigate, they have 30 days to do so. The credit bureau(s) will send a request to the creditor reporting the negative information asking them to validate their claim. If the creditor does not respond in time the information may be removed but most often, only temporarily. Some creditors because of size, workload, lost files or whatever reasons are delayed in responding to the credit bureau’s request.
Debt Repair companies may use this knowledge to make it appear as a special ability worth paying for, a testimonial so to speak. Using that technique the claim is they successfully had negative info removed from a credit report. Consumers should know that legitimate lenders with legally enforceable debt will eventually respond and the negative info will reappear when they do.
When it reappears, consumers could be disappointed. Depending on the fine print in the contract with the debt repair company there may be little recourse. Disclaimers on websites have language similar to, individual results will vary or this program does not assume or pay any consumer debts.
The fact of the matter is unless information in a credit report is erroneous, the only real way to repair damages to a credit history and score is paying the debt and letting time take its course.
Consumers can also deal directly with the creditor in question to correct an error themselves. If it can be proved that the debt has been paid or they are not the owner of the debt (as in cases of identity theft) the creditor should correct the mistake.
Time will be a factor because information that is negative does fall off a report, generally it takes 7 years. There are exceptions, i.e., unpaid tax liens can remain for 15 years while paid tax liens remain for 7 years from the payment date. An exception for this in the opposite direction is a Tax Lien Withdrawal (TLW). On May 9, 2013 the IRS announced the Fresh Start Program and because of this change the TLW is now the only accurately reported negative that can be removed from a credit report early. Consumers with the withdrawal paperwork properly completed can contact the credit bureaus to request removal. Time is also a factor because as debt ages the impact of bad credit lessens.
With effort and time consumers can do the same things that a debt repair company can do. Other options for people suffering from bad credit include non-profit credit counseling services especially if one is already financially destitute. The FTC has tips that are helpful on their website that also warn consumers about checking the background, should they consider using a debt repair company.
While people will undoubtedly cheer a conviction if the charged are found guilty as well they should, being informed about credit matters could go a long way in avoiding victimization. Even better would be knowing the do’s and don’ts beforehand and avoiding bad credit altogether. Be a knowledgeable consumer. If you are on the verge of having bad credit, or you don’t want to end up there, educate yourself about credit utilization, credit scores, credit monitoring, it will pay off in the long run.
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