July 20, 2009

By Mike Wayman

One of the most devious credit repair schemes is referred to as file segregation. In this scam a credit repair company not only promises perfect credit, they promise an entirely new credit identity. Instead of using your social security number they argue that it is legal to use something called a PCN or CPN. These acronyms stand for a personal credit number.

If you want me to explain what a PCN or CPN number is I can do it relatively simply: It’s fraud! Imaging that you own a car dealership and a client comes in. They want financing from you and you ask them for the typical laundry list of requirements: name, address, date of birth, social security number, name of employer, etc. Well instead of giving you their social which is the primary means of tracking credit the give you some made up number. The credit report you pull indicates the buyer has perfect credit. Well, if you were to use their social security number you’d find they had terrible credit and as such you wouldn’t want to extend them credit.

Stay away from anyone offering file segregation! It could land you in a federal jail!

By Mike Wayman

The New Jersey Attorney General recently indicted 11 different companies for mortgage and credit related fraud. One specific company under indictment was run by a two men, one a practicing attorney, that used a non-profit organization as a front in their efforts to drain their victims of cash. Allegedly the non-profit company charged fees up front for loan modifications, debt settlement and credit repair and failed to provide tangible results although they offered a 100% money back guarantee. The non-profit group set up a credit repair service that allegedly violated FTC rules and bilked over 40 people out of their savings.

Non profit organizations are designed to help people, not take their money. It’s doubly insulting that someone would set up a non profit for the purpose of victimizing people that are in the greatest need. WHile no one is guilty until proven so, it’s hard to read news like this and not wish for the alleged perpetrators to get very long jail sentences.

From Real Estate Rama New jersey:

In one of the two lawsuits, the defendants also are accused of violating federal law governing credit repair activity, and with founding a non-profit “financial advocacy council” solely to legitimize their fraudulent enterprises. The state has identified 42 homeowners victimized by the latest schemes.

By Mike Wayman

One of the reasons that so many homes are in foreclosure is that some real estate agents and loan officers, without any sense of morals or respect for the law, understand far too well how to maniuplate the credit and lending systems. Taks Diane Atari, real estate agent and fraudster. Mrs. Atari has allegedly earned in excess of a million dollars in commissions by taking advantage of people that have poor credit and limited income. Here’s how she did it: First she would fix a clients credit by any means possible, deleting accurate instances of negative credit. Thereafter, and when the buyers credit was repaired to the point that a home loan could be obtained, Mrs. Atari would falsify income documentation on behalf of the client making it appear as though the buyers could afford more home than they were able to pay for.

This scheme was perpetrated on at least 100 buyers. Most of the homes went in to foreclosure because the buyers couldn’t afford to make payments. Now, with foreclosures on their records, these buyers will have credit problems for a very long time. I hope Mrs. Atari gets the book thrown at her at sentencing. While many people blame the government or banks or the Federal Reserve for the present economic problems, the story of Mrs. Atari goes to show you that individuals, not just large government or corporate entities can have a large effect on the economy as well.

From the Loudoun Independent:

Real estate agent Diane Atari, an Ashburn native, has been indicted by the Grand Jury of Loudoun County for ten counts of False Statement to Obtain Credit, one count of Racketeering and one count of Money Laundering. Atari, 42, is accused of fraudulently fixing clients’ credit and inflating their income on financial records – enabling them to be approved for higher credit so these clients could buy homes they could not otherwise afford. Many of the clients were unable to satisfy the high monthly payments and were later forced into foreclosure.

June 30, 2009

By Mike Wayman

Credit repair scammers beware! The Federal Trade Commission announced today that they will be holding a press conference tomorrow announcing a widespread attack on companies that are taking advantage of consumers due to the economic downturn. The FTC is calling the new attack on fraud “Operation Short Change.” Operation Short Change will be conducted in conjunction with local, state and federal law enforcement agencies in their efforts to reduce the amount of fraud targeted at consumers who have been affected by the economic turndown.

I am happy about the announcement and I think that the new efforts will rid the credit repair industry of the common “dispute letter mills” and other forms of credit repair fraud. People that have been affected negatively are the most at risk group in America for financial fraud. Many people that have lost their jobs or homes are desperate to recover both financially and emotionally and scammers use their negative circumstances against them.

The most common form of fraud is over-promising and under-delivering. Remember, no one can fix your credit or your finances overnight. Their is no magic bullet or pill that will cure your financial circumstances. However, there are truthful and honest credit repair firms available that can help you. They won’t promise you perfect credit in 30 days or less; they won’t guarantee a specific FICO score and they won’t guarantee that you will be approved for finance through their company.

My hope is that the newest wave of enforcement about to hit the streets will clean up the industry and consumers will be less likely to be taken advantage of.

June 29, 2009

By Mike Wayman

Disputing items on your credit report with Experian is actually rather simple. Moreover, it’s also free, that is, free if you have recently purchased a credit report from the Experian website in the last 90 days. There are three options consumers have to improve their credit on Experian’s website. The first is to login from their dispute page as a client that recently obtained credit report with a credit report number from Experian. The second means of disputing a tradeline is if you purchased a report online from Experian without an Experian credit number. Finally, you can purchase a credit report and dispute directly from the new report.

All of the disputes essentially work the same way. Once you are logged in to Experian and your identification has been verified then you can select from any of your creditors and request a dispute. When you select a creditor you will be asked to supply a specific reason as to why you think the account is inaccurate. Experian will thereafter send the dispute to your creditor and wait for a response from your creditor regarding your claim.

Experian typically allows creditors 30 days to respond to credit dispute requests. If your creditor fails to respond then typically your request is accepted by default and your credit profile will be updated accordingly. Should the creditor respond in time and validate that your dispute is inaccurate the tradeline will remain the same.

June 25, 2009

By Mike Wayman

Dispute letters are rarely affective in getting legitimate, negative tradelines removed from a consumer credit report. The funny thing about dispute letters is that consumers can send them to the bureaus themselves as a hard copy and as an electronic dispute through the bureaus as well.

It doesn’t surprise me, then, that the FTC would come after people that guarantee simple dispute letters will remove completely accurate tradelines that report a negative credit history. While the FTC recently imposed a 21 million dollar fine against a Florida based credit repair company, American Credit Experts, the FTC was nice enough to reduce the fines against the principals of the company down to $5,000.00 each. This is extraordinarily generous. However, there are strict requirements for the principals: if they breach their agreement with the FTC to cease deceptive practices the fine remains at 21 million; if it is discovered that they lied about their financial distress the fine maintains.

Personally, I think these guys got off easy. However, they’d be pretty stupid to not comply with the FTC guidelines. If I was them, I’d find another industry!

The moral of the story here is that dispute letters really don’t solve every credit related problem. If a company claims that dispute letters alone will result in guaranteed success then the credit repair company is either ignorant of what they are able to really do with dispute letters or the firm is simply operating fraudulently.

Perhaps this FTC fine will serve as a warning to all of the credit repair firms that try and perpetrate the “Dispute letters solve all credit problems” scheme.

June 24, 2009

By Mike Wayman

This week at Cornell University, the theft of a laptop computer resulted in the loss of 45,000 records of former and current employees as well as students. These records contained social security numbers as well as other personal records. While Cornell is not disclosing where the laptop was stolen from this story underscores the importance of corporate security in the modern age.

There is no doubt in my mind that the intent of the thief is nothing less than nefarious. It is quite simple to take personal information of this nature and use it for identity theft. Accessing this much information at once makes it easy for identity thieves to perpetrate fraud on a massive scale.

Should we expect each of the 45,000 former and past employees as well as students to immediately call all of their creditors and cancel all of their accounts? Does Cornell have the manpower to quickly respond to each and every person whose identity was stolen? The answer is: most likely not.

While I am not blaming Cornell University for being responsible for the lack of security I am trying to underscore just how important corporate security really is. When you go to work or go to school you provide a great deal of information to your employer or school and it can be very difficult to keep everything under lock and key. My hope is that the University finds the source of the security breach quickly and also learn how the data may have been distributed as soon as possible for the sake of the past employees, current employees and students.

June 23, 2009

By Mike Wayman

Identity theft is much easier than it used to be with the advent of web 2.0. Almost everyone nowadays has a myspace, facebook or twitter account. On each of these accounts people like to post as much as they can about themselves, their friends and their families.

The biggest problem with social networking sites is that a great deal of information that may not seem financially personal can be used against you to gain more personal information. For example, you may indicate that a hardship in your life is occurring on one of these sites. The personal information about this hardship can be used by a “friend” within the social network to begin a phishing expedition designed to ultimately get to what they need from you: your data needed to apply for credit.

The best way to avoid this problem is simply to make all of your information private on these sites, diligently review your friend requests and treat everyone like a potential threat to your security if they ask you questions of a personal nature that may borderline on asking for information about your credit, your credit history or your financial profile.

There are far more complex schemes regarding phishing for credit data on the internet and many of them are easily avoidable. Always log out of your service. Never stay logged in. Don’t keep your passwords on a file on your computer. write them down and keep them somewhere safe. Web 2.0 is excellent but it does present dangers to your financial identity.

June 22, 2009

By Mike Wayman,

One of the most common forms of credit repair practice around is for a credit repair company to send off dispute letters to each of the tradelines on your consumer credit report that appears negative. This is a very temporary solution. Moreover, it’s a solution that won’t necessarily work in the short term.

Here’s the strategy in a nutshell: You go to a credit repair company. The credit repair company reviews your credit report and finds 12 derogatory accounts. Their strategy is to send 36 dispute letters off to Transunion, Experian and Equifax simultaneously.

Not every creditor will respond in time. Nor will every creditor respond back to all three bureaus. The real goal is to simply get a few of the items removed and make the customer happy in the short term. Long term this isn’t a strategy that works and major news outlets are catching on.

From ABC2 News:

When it comes to making those improvements, the BBB warns some scam companies may try one tactic to make it look like they’ve helped. They’ll do a blanket dispute for every blemish on your credit report, so those items will come off. But the solution is only temporary according to Barnett, “It’s lifted for 30 days. But on day 31, it’s back on there if it is a valid blemish on your credit report.”

June 19, 2009

By Mike Wayman

When you begin work with a credit repair company you place a great deal of trust in their hands. These companies have access to your social security number, date of birth and sometimes your driver’s license number. This makes it rather easy to steal your identity.

Sometimes these scammers start out as legitimate companies. They make good money in the beginning and when business starts to fail they may forget their guiding morals and values. When people in the credit repair industry lose their morals and values the first thing they ask themselves is how they can monetize the data they have collected from all of their clients.

Some of these companies will get lines of credit using the identity of others or just get credit cards in their client’s names. One Florida based company lately ran a more inventive scheme. This company defrauded hundreds of people in Illinois by placing unauthorized charges on their client’s phone bills. What they were buying or getting in return for these illegal charges is unknown.

Be careful about the credit repair company you choose. Definitely ask how business is going because it’s easy for some people to sacrifice their ethics when business goes bad.

From The Chicago Sun Times:

A Florida-based credit repair company that placed unauthorized charges on the phone bills of thousands of Illinois consumers has been shut down, and victims may now apply for refunds, Illinois Attorney General Lisa Madigan announced Thursday. US Credit Find and its owner, Aaron Stanz, agreed to cease participating in the alleged deceptive practice, called “phone cramming.”