Credit-repair schemes prey on those in debt

Scammers charge for help that never comes

CHARLOTTE -- Charlotte's top potential scams this year are aimed at those who can least afford it.

The Charlotte-area Better Business Bureau predicts that more consumers will gripe about credit-record repair, foreclosure rescue, and loans and credit cards with upfront fees.

Businesses in these categories have mushroomed around Charlotte over the past year, to 27 from seven, the BBB said.

The services are legal if firms don't charge large upfront fees or defraud customers. Yet they do attract scammers who lure people when they are most financially vulnerable, consumer advocates said.

Examples include consumers with poor credit who pay $300 for a card or $1,000 for a loan that never arrives. People behind on mortgage or card payments hire firms for $500 to negotiate with banks or remove credit blemishes, but find problems aren't fixed.

There's fertile ground for these businesses. Since 2000, N.C. foreclosures doubled, while the percentage of late credit-card bills nationwide grew 42 percent.

"These companies can come in and for little cost, just an office front, start taking cash," said Al Ripley, consumer specialist at the N.C. Justice Center. "There's no regulation preventing this."

South Carolina requires credit repair and foreclosure firms get state licensing; North Carolina does not. N.C. bankers said they are working with lawmakers to toughen credit-help standards that would especially protect lower-income consumers.

"These are people who feel like they can't get help any other way," BBB boss Tom Bartholomy said. "Usually they can help themselves."

BBB's Top Scams of '07

Foreclosure Rescue

Offer to work with banks to rework payments but nothing happens while debt accumulates.

Credit Repair

Promise to wipe blemishes off credit records but do nothing more than file dispute letters that are free to file.

Credit Cards/loans

Charge large upfront fees to consumers with bad credit. Loans and cards never arrive.