1st Line Credit & Financial Services

Companies who offer to improve or repair credit cannot request fees in advance of performing those services. By law, information stays on your credit report for seven to 10 years. Accurate negative information can only be removed by with cooperation of your creditors, and this usually involves paying all or some of the debt. If you believe your credit report contains erroneous information, you may dispute the entry by calling or writing the credit reporting agency. While in dispute, the negative item may be removed temporarily from your report, however it will be added on again if determined to be valid.

Our experience with credit repair offers is that they advertise various credit services which they claim are designed to provide assistance to consumers with poor credit histories to improve their rating by removing negative items or creating a new credit file. However, clients of these types of offers generally complain that their credit histories do not improve, that they are unable to contact the company making the offer, and ultimately that refunds for failing to provide the promised services are not provided.

Our experience with debt negotiating companies, is that they attract heavily indebted clients by claiming to be able to settle the clients’ debts for far less than the amount owed and to stop creditors’ calls. They often claim, also, that their services are more effective than those provided by credit counseling services.

These companies usually instruct their clients to stop paying their creditors. Some companies direct them to make their payments to the debt negotiation company instead and promise, when the company has accumulated enough to offer a cash settlement to one or more creditors (which can take as long as two or three years), to pay off the debt. The debtor must pay fees to the service during the time the payments are accumulating.

Other companies simply collect the fees and advise debtors to save their money to pay their creditors themselves. California law limits the amount of fees debt negotiators can charge you, but by not collecting the money and distributing it to your creditors for you, companies can remove themselves from the limiting statutes and charge whatever they wish. What they are supposed to do for you while you’re saving up your money is to contact your creditors and inform them that they’re working with you, negotiate the amount to settle your debt, and ask them stop contacting you.

However the company operates, though, complainants allege that creditors continue to harass them, fees and interest continue to accumulate, the companies do not contact the creditors, creditors increase their collection efforts and sometimes sue for payment, the debtor’s credit is ruined, and they end up worse than before they contacted the service.
Debtors may not realize that if their creditors do accept a negotiated settlement, the amount forgiven constitutes taxable income.

Credit counselors perform services that include education and counseling and debt management, whereby they collect money from you and make monthly payments to your creditors. Credit counseling organizations are nonprofit organizations and are subject to limitations on what they can charge you. For example, if they make payments to your creditors of $300 in a month and may charge only the lesser of 8 percent or $35, their charge could be no more than $24.