Credit Card Relief Scams

January 19, 2023

QUESTION

We allow our loan applicants to pay for certain services by credit card. One service that we do not offer is credit relief. But our loan officers send applicants with poor credit to a credit relief company. The credit relief company repairs their credit, which makes it possible for us to get them a mortgage on improved terms. Most of the time, their credit problems involve credit card debt.

Recently, an attorney for one of our loan applicants contacted us about the applicant being scammed by the credit relief company. He's threatening to contact law enforcement, the state banking department, the FTC, and the CFPB. For what it's worth, I had told the CEO not to use credit relief companies, but he ignored me.

I know you have written about all kinds of scams over the years. I want to show the CEO your feedback. Maybe he will change his mind about using a credit relief company.

What are some dangers of using a credit relief company?

ANSWER

Yes, indeed, I have written extensively about credit relief companies. They pose a threat to the banks and nonbanks in many ways. Your scenario, unfortunately, happens all the time. The Federal Trade Commission (FTC) is very aggressive in going after these companies.

If your CEO calls me, I will tell him to knock it off! He's playing with fire. Whatever his reasons (which I assume are based on profit incentives), the risk is much too high to justify such a tactic to originate mortgage loans.

There is a constant stream of administrative and litigious actions against credit card relief scams. I'll pick just one bad actor out of the barrel of thousands of bad actors that have been caught in the FTC's net. But other federal and state agencies are continually monitoring and prosecuting these scammers. If your company is referring clients to them, you could come in for rather unpleasant special treatment by these agencies.