Desperation can cause us to make bad decisions, making a believer out of even the biggest skeptic. And that’s just what credit repair scammers are banking on. Global News reports that the average Canadian owes nearly $10,000 in consumer debt, with average credit scores in the 600s—meaning many of us probably wouldn't qualify for car or home loans.
High debt and low credit scores make the Great White North the perfect hunting ground for unscrupulous scammers. These companies (we use that term loosely) have built businesses by milking people out of thousands—maybe even millions—of dollars. They know that individuals desperate to get out of debt or who want to clear their credit are prime targets. So what can be done to spot —and avoid—them? And what should you do if you’ve been scammed? We’re here to help you fight back!
Credit Repair Scams vs. Loan Schemes
Two corrupt peas in a pod—both prey upon vulnerable Canadians by offering quick debt relief and credit score fixes. And, while they do go hand-in-hand, their tactics are a bit different.
Credit repair companies say they'll repair your credit by simply removing negative information from your report, thus boosting your score—for a fee, of course.
Loan schemes also offer to repair your credit, while further tempting you by throwing in a loan to get you back on your feet. Payments made to the loan will reflect positively on your credit—so they claim—thus helping to boost your score. However, the loan never comes, money continues being deducted from your bank account, and your credit score remains unchanged. (For a real-world example, check out these articles from CTV News and the Toronto Star.)
Thankfully, the similarities between repair scams and loan schemes make them equally easy to spot, if you know what to look for!
Credit Repair Scam Red Flags
“Bad credit? No problem!” We’ve all heard that one before—it also happens to be a rallying cry for scammers. But here’s a more accurate one you’ve also heard before: If it sounds too good to be true, it probably is. It’s that little voice of reason in the back of your head—listen to it!
Any credit repair company offering a quick fix or instant solution should immediately cause you to raise an eyebrow. There’s no quick fix when it comes to your credit score. Repair takes time, effort, and prioritization; writing a $1000 check to someone can’t magically erase your woes; rather, it’ll just put you $1000 further away from debt relief.
Here are 8 instances where you should simply hang up the phone...and block the number for good measure!
- Use of high-pressure sales tactics. Think about it: Someone who truly has your best interests at heart is going to listen to your situation and offer help, not aggressively pursue you through telemarketing calls. So why do so many scammers take this approach? Again, they’re preying on your desperation, and they know that high-pressure “act now!”—type scenarios make it difficult to think clearly or act rationally.
- Requesting upfront payments. It is illegal for credit repair companies to request payment upfront; this is where many break the law. But many count on the lack of coordinated consumer protection to allow them to slide by, and they’ve also gotten cleverer over time, using loopholes to take your money, such as providing a guide or a tablet that they can then claim the fee went toward.
- Guaranteeing they can erase bad credit. They may claim they have a little-known secret, or know loopholes. This is a lie. No one can legally remove accurate negative information with a wave of their hand. It simply can’t be done!
- Warning you against contacting a credit bureau. Of course they don’t want you to—they’re likely to clue you in to that fact that you’re being scammed! The scammer will come up with any number of reasons why you shouldn’t contact them, but ultimately there is no valid reason not to.
- Advising you to dispute all information on your credit report. Only inaccurate or false information should be disputed; accurate negative information is there for a reason, and cannot be removed. Knowingly disputing accurate information is fraudulent.
- Not providing a transparent contract. If you are provided a contract, there are 5 things you want to be sure it includes:
- The amount you’re being charged or the details of the (bi-weekly/monthly) payment plan
- Details about the services being rendered
- The date when the service will be performed (or a time period in which it will occur)
- The name, business address, and phone number for the company
- A statement giving you 3 days to void the contract (a 3-day cooling period on contracts is standard for individuals to reassess their purchase decision)
- Not providing a contract at all. This should go without saying; never agree to anything or make a payment until you’ve seen a contract in writing.
- Suggest creating a new credit identity. The ultimate red flag—the company offers to help you get a new Social Insurance Number (SIN) or says you can apply for an Employer Identification Number (EIN) and use that instead of your SIN.
How to Avoid Credit Repair Scams
You’ve spoken with a credit repair company, they seemed genuine, and none of the red flags were ever raised. Now what? There are a few more steps you can take to ensure that you’re dealing with a reputable company.
- Google Review is your friend. If you’re dealing with a scammer, chances are you’re not the first one they’ve scammed! A quick online search can turn up complaints from consumers across a number of sites that specialize in exposing scams.
- Consider the source. Where did you hear about this company? Was it a random cold call? Was it a late night (i.e. cheap) commercial promising to work miracles? Was it an ad disguised as an informative piece (another shady tactic)...Or was it through a reputable news source or referral?
- Look for features in publications. As mentioned above, if the company has been highlighted through reputable news sources, or has ever been used as an information source in a trusted publication, this demonstrates that they’re respected.
- When were they established? Most reputable companies have some history, and again the internet can be your friend (or foe) here. Scammers tend to come and go, and set up shop under different company names with relative frequency to avoid detection. The scammer referenced in the articles mentioned earlier operated under no less than 10 company names! Don’t be fooled. Do a Google search of the the address affiliated with the "business" to check if they have multiple business names.
- Check their Better Business Bureau (BBB) accreditation. The BBB rates organizations on a school grading system (A+ to F) based on complaints and reviews from the public, overall transparency, and more. But ratings can be deceiving; you’ll also want to see if they’ve met the BBB’s accreditation standards. If they have, it is clearly indicated at the top of the profile along with the BBB ACCREDITED BUSINESS seal.
I Think I’ve Been Scammed! What Do I Do Next?
Statistics on the number of Canadians who’ve been scammed don’t tell the true story; that’s because many feel embarrassed about having been taken advantage of and never report the incident. Don’t let them get away with it! That simply empowers the scammer and guarantees they’ll do it again to someone else.
If you’ve been scammed, or even suspect you have been, here are some steps you can take:
- Dig up all relevant documents. As with any financial transaction, you never want to throw anything away. Contracts, emails, receipts—even your bank statement showing payment—all this could help if you decide to pursue the matter.
- Ask for a refund. It doesn’t hurt to ask. A reputable company doesn’t require upfront fees before rendering services; if they did, they’ve already violated laws but could be working through a loophole. However, if you threaten to pursue the matter, they may decide it’s easier to return the money, cut ties, and pursue someone else rather than get into a battle with you.
- Report them to the Canadian Anti-Fraud Centre (CAFC). If you’ve already sent the funds, or just think you may be getting conned, report fraud or suspected fraud to the CAFC. Remember, if it happened to you, it can happen to anyone—our best defense is to look out for one another!
- File a claim with the Better Business Bureau (BBB). The more claims against a company, the lower their BBB rating falls. This is another avenue you can take to help prevent others from falling into the scammer’s snare.
File a complaint with your provincial Consumer Protection agency. If you want something to change, involving your provincial Consumer Protection agency will only help. For a full list of provincial and territorial consumer protection agencies across Canada, click here.
Where You Can Find Help
Everyone loves a quick fix, but the truth is there rarely is such a thing, especially when it comes to credit. And many people facing credit issues actually have serious debt problems, which will need to be resolved if they want to boost their credit rating and score.
A Credit Building Program from a non-profit credit counselling agency may be the best solution, which can also include debt consolidation as part of the credit rebuilding process. It starts with a free credit counselling session where a certified credit counsellor will pull your credit report and score (for free!) and review it with you. Depending on the information contained in your report, as well as your monthly income and expenses, they will provide you with all of your available options to get your credit where you need it to be, including the pros and cons of each option.
As much as we like to see the good in people, there’s always someone looking to take advantage of someone else’s bad situation. To ensure we don’t become victims, we must be vigilant! Refute and report credit repair scams and loan schemes to protect yourself and others. If you would like non-profit credit building help, give us a call at 1.800.267.2272. All of our counselling is 100% free, confidential, non-judgmental and there's no obligation.