Wanna' run your own credit repair site? Be careful.

Do it wrong, and you may well be violating the Credit Repair Organizations Act (CROA). Like...having affiliates may well be a bad idea:

Anyone who deals with credit repair needs to be careful and make it clear that there are no conflicts of interest and/or hidden affiliations with any entity or person who does credit repair and accepts or can be reasonably assumed to perform such activities for a fee. By having such undisclosed arrangements, it could well lead to trouble under the CROA (Credit Repair Organizations Act). Even if one does not accept fees for their own credit repair works, if one were to affiliate with an entity that does, they may well end up covered by the Act [See §403].

Per Sec. 404, "Prohibited Practices":

(4) engage, directly or indirectly, in any act, practice, or course of business that constitutes or results in the commission of, or an attempt to commit, a fraud or deception on any person in connection with the offer or sale of the services of the credit repair organization.

Seems to be a "stretch"? Maybe, or maybe not: If the "not for fee" (note that I did NOT say "not for profit" since not for profit organizations can and do charge fees) affiliate--if they are shown to be an affiliate--could be considered fraudulent or deceptive if what the affiliate does is, in essence, provide "cover" for the CRO.

3.) This FTC opinion which deals with affiliate advertising and deception for non-disclosure. The FTC Opinion states in pertinent part:

[A]n act or practice is deceptive under Section 5 of the FTC Act if: 1) there is a representation or omission of information that is likely to mislead consumers acting reasonably under the circumstances; and 2) that representation or omission is material to consumers. ... A representation or omission is material if it is "likely to affect [consumers'] choice of, or conduct regarding a product." ...The Commission presumes certain categories of claims to be material, including express claims and claims the seller intends to make. ...

The main question the petition presents is whether it is deceptive in violation of Section 5 of the FTC Act to fail to disclose that a marketer is paying' a sponsored consumer to make claims to other consumers about the marketer's product.'
In addressing similar concerns, the Commission's Endorsement Guides state that "[w]hen there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement . . . , such connection under Section 5, even if the paid relationship is clearly disclosed....

The Endorsement Guides look to whether the connection between the seller and the endorser is likely to have a material effect on the weight or credibility of the endorsement, that is, if the "connection [between them] is not reasonably expected by the audience."

In other words, even though YOU might not charge for services yourself, the mere fact you take money from someone who is associated with your site who does can leave YOU liable for CROA violations. Whether you hide it or are in the open. It's a credibility issue. After all, people do not expect "splogs" (blogs which are really advertising) and discussion boards which are really disguised ads; to give the wrong impression not only impacts such credibility but may well violate the CROA.

And, when it comes to violating the CROA? You don't want to go there.

"Maxed Out" movie maker tells the truth about credit and collections.

This video is a recording of a question-and-answer segment by James Spurlock at a Google seminar. He is the film maker who made "Maxed Out" and explains here the background behind the movie and answers questions about credit, debt, and collections (No he did NOT go into debt to make the movie, despite some rumors floating around on the Internet.):



Here are some points he makes during the session:

The most surprising thing?

1.) Income has nothing to do with the credit issuer's decision whether to issue credit or not. It's ALL in the FICO score for the lending decision. All the income information is used for? For collections purposes if one defaults (read: deciding whether the creditor should sue or sell the debt). In other words, the days of the friendly banker/credit issuer who would lend one money, as the old saw goes, if one could prove one dies not need it, is over.

[A note from DT: Even when "manual" processing is involved, it's the credit score that is the #1 item the credit issuer looks at. The advantage of manual processing is that it gives the consumer a chance to explain why the situation is as it is and might help convince a credit grantor to issue a credit line/credit anyway.]

2.) Assigning blame for the debt mess? More than enough for both sides, but the fact is that consumers make decisions thinking the creditor will not rip them off...not so. In fact , creditors love people who may well not be able to pay: "Front-loading" (Definition here also here) and punitive fees pay the loan back early and the rest is "gravy" they are loathe to lose. Even if there is a default, and they are not yet paid back?
Tax law and debt sales make up for the majority of the loss.

3.) The fear that the drying up of "easy credit" will result in economic "meltdown"? Not that simple; it's a political thing that is more fear-mongering than a real possibility.

4.) Best advice to reliably stay out of hopeless debt?

a.) Don't...have children, get ill, etc.

b.) Do not count on being able to pay it back because life can...go from "Awesome!" to "Aw s*it!" very quickly and there may be no way to control that or to be able to put enough away to clear out the mess if things do "go south". The "be frugal and you can pay them back" mantra is...a bunch of sh*t for most people.

Why do you think we hear about the "frugal" ones who paid it back once they got into credit trouble for whatever reason? It's the (relatively) rare situation that is "newsworthy", not the usual for the rest of the "maxed-out" population.

New source for case law: PreCYdent .

We have been informed about a new (and free!)case law database. It's named " PreCYdent":

The link above will take you to the home page. You can search without joining the site as a member. Is it worth it to join? Yes; becoming a PreCYdent member will give you access to a greater choice of services and is highly recommended; you can even upload case law to the site as a member if you wish.

To make it even easier to use PreCYdent, we have added a widget from PreCYdent in the sidebar.

NOTE: We do not own nor have a financial interest in PreCYdent. We are just satisfied users. :)