Finance experts ask from time to time whether paying a credit repair company to fix a credit file is necessary. There is a somewhat persistent view that consumers can sort out their own credit file issues with credit providers – and if that does not work they can take their case to one of the ombudsman services for free so they can sort it out. So, they ask, why pay for credit repair services?
It’s a great question and one that is made more relevant by media releases from ASIC, the various ombudsman services and other complaints services that say it is unnecessary to pay “high fees” to credit repair companies when consumers can do the work themselves “for free” with the help of the ombudsman.
Just Google ‘credit repair’ and you will see the plethora of negative – and I believe somewhat unjustified – press.
I say ‘somewhat’ because it is partially correct to state that some credit repair companies have done an unsatisfactory job looking after clients in terms of results, fee structures and client care. Complaints have been made about contracts containing unfair terms – such as excessive termination fees – and the withdrawal of funds from consumers’ bank accounts without authorisation or where the consumer had already indicated their intention to cancel a contract. These are very poor practices indeed.
But does this mean that you throw the baby out with the bathwater, or is it possible to find a reputable credit repair company to recommend to your clients?
I believe there are credit repair companies that are reputable. These companies will provide figures that show solid results over many years, will charge reasonable fees, and will be upfront about their success rates and average timeframes to do the repair work. This is important because the last thing you need is a client complaining to you about the poor service of the credit repair company you recommended.
So what is the best way to find the reputable companies? Ask around and see who other finance professionals recommend because it is important not to tar every credit repair company with the same brush when this service is incredibly valuable to your credit impaired clients. (Remember, in eight out of 10 cases I work on the adverse listing was placed in error.)
In the absence of a regulated credit repair industry, it is a good idea to find a credit repair company that can be trusted to treat your clients fairly and remove any incorrectly placed adverse listings because this will save your client thousands, and help you get the client a good interest rate loan.
Now, back to the main question posed by this article – can your client fix their own credit file? I will answer that with a question: What client do you know who has a handle on the consumer laws that relate to credit reporting and their rights in relation to these laws? In my experience, not many.
On the other hand, credit repair companies have made it their business to understand the consumer laws and your client’s rights in relation to these laws. Credit repair companies base their cases on these laws and insist that credit providers verify that they have placed adverse listings in accordance with these laws. If the credit provider cannot prove they have followed the rules then they must erase the adverse listings from the credit file.
But what about the free ombudsman services? Can’t a consumer just use them? In my experience of removing 2,000 adverse listings from credit files, the ombudsman services are an excellent help to credit repair companies if a credit provider at first resists removing an adverse listing. However, it is important to remember that the ombudsman services specialise in arbitrating complaints between consumers and credit providers – they do not specialise in preparing complaints on behalf of consumers. The ombudsman services do not conduct the deep research that credit repair companies do in order to make a complaint about an adverse listing on a credit file.
Therefore, your client is less likely to be able to remove an adverse listing by themselves or via making a case to the ombudsman when compared to having a credit repair company prepare a complaint on your client’s behalf.
Dr Merrilyn Mansfield, lead adjudicator and researcher, Princeville Credit Advocates
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