January 27-February 2, 2006
Who’s credible in
the credit industry?
Credit counselors and debt managment firms
try to raise their credit score with the public
By Jennifer Nycz-Conner, Staff Writer
Glance through your bulk e-mail folder
or spend some time watching late night TV,
and it’s almost guaranteed that someone will
promise to help you get out of debt. Fast!
There are definitely some bad apples hang-
ing on the credit-advising tree. That tree took
a shaking this month when Andris Pukke,
founder of the now-defunct Germantown-
based credit counseling firm AmeriDebt,
PHOTO: JOANNE S. LAWTON
agreed to pay up to $35 million to settle two Hendricks spends a full chapter explor- helped guide people through the minefields,
lawsuits accusing him of misleading debt-lad- ing the wild world of credit repair and credit “I think it would be a tremendous business,”
en consumers. counselors. He says there’s a tremendous need he says.
There are plenty of legitimate counselors for solid consumer education and credit coun- It’s important to understand the distinction
out there who are on the up-and-up and need between the credit counseling agencies and
to rise above the dust kicked up by the indus- the credit repair firms.
try’s less-than-stellar types to connect with CREDIBLE SOURCE: Credit counseling focuses primarily on
consumers who truly need their help. Here’s Evan Hendricks scans and slams the scams debt consolidation and reduction for over-
how they can do it. of the credit industry in his book extended consumers. The counseling firms
are often nonprofit organizations that place a
“Credit Scores & Credit Reports:
PUTTING THE “ED” IN CREDIT heavy emphasis on consumer education when
How the System Really Works,
Evan Hendricks knows the credit industry it comes to things like budgeting, saving and
What You Can Do.”
and has a 2-inch thick book to prove it. learning to using credit wisely. Credit
Hendricks, who lives in Cabin John, is the repair firms are service businesses that help
author of “Credit Scores & Credit Reports: seling right now, yet people find themselves people clean up their credit reports and opti-
How the System Really Works, What You wondering whom they can trust. mize their credit scores. Credit repair also is
Can Do.” It’s an in-depth look at the entire “There’s a serious number of people go- becoming a service that people are seeking
credit industry, ranging from reports to scores ing for credit repair, but there’s kind of a low out, especially as one or two points on a score
to scams to legislation. The book, which sold satisfaction level,” Hendricks says. can mean the difference in hundreds or thou-
out its first edition with no marketing, is now If more agencies followed the old adage sands of dollars worth of interest. Both kinds
in its second edition. of “If you did good, you’d do well” and truly of credit operations have taken a lot of shots
In Focus: Banking & Finance
An in-depth look at the news trends shaping one of the region’s most significant industries
in the media in recent years. And both are now bad actors ... we welcome it.” vices, stick with the company an average of
actively striving to separate themselves from All of the NFCC’s accredited member or- seven to eight months, Ayer says. Most people
the bad apples. ganizations are registered 501(c)(3) nonprofit show up with a mission in mind, such as ob-
organizations, which means they have to taining a mortgage.
CREDIT COUNSELING prove that they are providing an educational “They usually stay with us until that mis-
Last spring, Congress passed the Bank- or charitable service. They also must be will- sion is successful,” he says.
ruptcy Abuse Prevention and Consumer ing to work with a client regardless of the Businesses are warming up to credit repair
Protection Act (BAPCPA). The legislation person’s ability to pay. services. Small business owners and real es-
requires that all individual debtors who file “You don’t see that in a for-profit model,” tate investors are always having their credit
bankruptcy on or after Oct. 17, 2005, must Jacobs says. pulled or seeking some kind of financing.
undergo credit counseling within six months NFCC has rigorous membership require- Two decades ago, credit scores weren’t
before they file bankruptcy. They must then ments, and all members must be accredited by nearly as vital to the bottom line as now.
undergo a financial management instruction the Independent Council on Accreditation. “Your credit report is becoming one of your
course after filing. most important assets,” Ayer says. “It’s only
In other words, anyone who goes through CREDIT REPAIR natural that you’d want to protect that.”
the bankruptcy process is required to get Credit repair agencies specialize in help- To help repair their own rep, Veracity and
help. ing consumers clean up their credit reports about 15 other repair firms are creating The
“Your credit report is becoming one of your most important assets. It’s only natural
that you’d want to protect that,” says Madison Ayer of Veracity Credit Consultants
To make sure that people facing bank- and navigate the murky waters of the “big Organization of Responsible Credit Advo-
ruptcy are meeting up with the good guys, the three” credit agencies. Unlike their counsel- cates to monitor the industry, keep the scam
U.S. Trustee Program, the Justice Department ing brethren, credit repair groups are often artists at bay and generate positive recogni-
division that oversees the bankruptcy system, for-profit ventures. tion for legitimate repair providers.
is compiling a list of approved budget and The industry is moving away from its The most effective way to win consumers’
credit counseling agencies and financial man- mottled past into an important service sector, trust is to promise only what you can deliver,
agement instructors. Bankruptcy filers must says Madison Ayer, the founding partner of says Alice Hrdy, an assistant director with the
select a counselor from that list to satisfy their Veracity Credit Consultants, a Denver-based Federal Trade Commission.
requirements. credit repair agency with offices in D.C. That means not promising that they can
While the U.S. trustees oversee bankrupt- Critics of the repair industry point out that get all of those legitimate dings removed from
cy proceedings, the Federal Trade Commis- you can do all these things yourself for free. reports.
sion regulates the credit counseling and credit But that riles Ayer, who says such talk reflects “Negative information has a place on your
repair agencies. pre-Industrial Revolution thinking. credit report, as long as it’s accurate and with-
One thing the FTC recommends consum- “You can also repair your car yourself,” he in the time period,” Hrdy says. “Time heals
ers seek in a credit counselor is third-party says, but it’s often more efficient to take it to a all wounds, including negative information
accreditation. The National Foundation for mechanic. on your credit report.”
Credit Counseling in Silver Spring is eager to Do-it-yourselfers would be taking on the That message also applies to the credit
talk about the industry’s efforts to clean up its credit-repair task without the tools and exper- counseling and repair firms as they to restore
act. tise of a credit service as they work their way some credit to their profession.
“We welcome the scrutiny,” says Nick Ja- through the main credit reporting agencies:
cobs, an NFCC spokesman. “We fully recog- Experian, Trans Union and Equifax. PHONE: 703/816-0339
nize that there are bad actors in the industry. Most of Veracity’s clients, who pay $39
Anything that can be done to weed out the a month* for their monitoring and repair ser- * Monthly fee has since increased to $45