The industry that charges low-income Americans to fix credit errors they can fix themselves for free

By the time she made it to the American Bill Pay Web site, with its testimonials and its guarantee to solve credit woes, Kimberly Cox couldnt afford another problem.

She was squeaking by on $720 per month in disability checks. Her credit score was a measly 530. She lived with her son, Logan, who moonlighted on weekends as a bullrider at amateur rodeos in western Arkansas. Neither had health insurance, and one rodeo night, a 2,000-pound bull bucked hard, knocking Logan to the ground.

There was a knee surgery, a long hospital stay, a $40,000 medical debt. And then a seeming helping hand. REGISTER NOW, the American Bill Pay site said, and it offered an enticing possibility: that Cox, for a fee, could ease her debts and improve her credit score with just a few easy steps. Cox borrowed $900 from her mother-in-law to pay for the service.

We were in desperation mode, Cox said.

Cox had found a fast-growing and controversial industry that charges Americans to assist them with relatively basic financial repair work. The Federal Trade Commission warns that the industry is vulnerable to rampant abuse, noting that among the thousands of credit repair companies, many make highly questionable claims about the results they can achieve. Other players are above-board and legal, trying to help Americans improve their financial standing even if consumers could do by themselves most of what the companies charge hundreds of dollars to do on their behalf.

The industry has capitalized on the aftermath of a financial crash that has left many lower working-class people struggling to pay bills despite the broader economic recovery. Lenders have tightened standards since the Great Recession, increasing the importance of ones credit score, a three-digit number that reflects a history of paying back bills on time over seven years. The problem? The past seven years have seen the highest level of late debt payments in generations.

Industry insiders say the number of credit repair firms now stands between 5,000 to 7,000, at least double the number before the financial crisis. Many of the new companies are small, started by former mortgage brokers or auto dealers who had familiarity with the power of credit scores and whose own industries had suffered major downturns.

The FTC has pursued more than 160 cases against credit repair companies over the past decade only a small fraction of the 2,000 annual complaints the agency receives.

There was a husband-and-wife team in Texas that allegedly charged retainer fees of up to $2,000 and sent more than a million letters to credit bureaus, disputing some items they knew to be accurate. A California-based company, Successful Credit Service Corporation, allegedly claimed to have special connections with creditors and collection companies. A Florida-based company, RCA Credit Services, advertised, according to the FTC, that it could boost a credit score into the 700s in as little as 30 days. It required advanced payments and in some cases provided no services of any kind.

Many of the companies targeted, including those three, have agreed to pay financial penalties or faced court-imposed damages. In the case of Successful Credit Service Corporation, an $8.3 million judgment was suspended because of the defendants inability to pay.

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The industry that charges low-income Americans to fix credit errors they can fix themselves for free