Credit Repair Customer Typical Profile

Not all consumers are ready for the service that provides a Credit Repair Organization (CRO) and the sooner the owner of the company understands this critically important factor, the better. Why?


Compliance Conversation

The Credit Repair Industry is regulated by the Federal Trade Commission (FTC) via the Credit Repair Organizations Act (CROA) and the Telephone Sales Rule (TSR). Additionally, 24 states have passed additional laws that govern the industry for the protection of the most “ignorant” consumer that you might encounter. According to attorney Jean Noonan of the law firm Hudson Cook, based in Washington DC, “the credit repair industry is more highly regulated than the nuclear power industry.” Of course, she said this tongue-in-cheek, but you get the point. Noonan is a former head of the enforcement and prosecutorial of the Credit Repair division for the FTC and was instrumental, while at that agency, in the passing of CROA. We hope that by now you have a sense of the need for compliance when running a credit repair operation. But do not be disheartened. It is better to be in an industry in which laws are already in place than when they don’t. This creates a well-worn path to compliance. Bright lines of compliance, if you will. In this environment, a careful and continuous reading of the governing laws as well as past, current and future actions taken by both the State Attorney Generals and the FTC, provides clear and concise guidelines to establish the best practices of the industry as well as compliance documentation for your business. An additional potential regulator is the Consumer Financial Protection Bureau who, at the time, of writing this document has not indicated if they too will regulate directly the credit repair industry. Back to the fact that all consumers, even those with the ability to pay, should not be taken on as customers. Why? It’s simple. Even in the best-run organization, with clearly defined guidelines and constant and consistent training, every business will have a “bad compliance day”. Someone will violate the non-negotiable or a company policy that you have established. You hope that it doesn’t occur on the day a regulator comes shopping around you because of a complaint from a customer that did not meet the guidelines in the first place. An unhappy customer, one that does not feel that they received a fair shake from you, can start an investigation that will eventually involve the regulators, either federal or state, or both.


You should make it a policy to refund any unhappy customers’ funds immediately upon request even after the right of recession period has expired, or you have completed the service — even service that you performed over and above the customer’s expectations. You don’t want even one complaint to be filed with any regulator, Better Business Bureau or a chargeback against your merchant account or ACH provider, if possible. The money that you give back will pale in comparison to the wrong customer complaining to the wrong regulator or the loss of your merchant account.


Problem customers come in many forms, but the primary indicator of a customer that is not ready for your professional services is one you cannot get to accept the limitations of your service. If they think that you can remove any and all negative information from their report, you cannot take them on as a customer. The question, of course, is how did they come to that understanding? If it was the fact that your website or sales staff gave them that impression, obviously you need to bring your website and staff into compliance immediately. Unverifiable claims made by credit repair companies are pervasive and must be eliminated. Another source of problematic customers is enthusiastic referral sources. Regardless of the source, you must educate the potential customer of the actual service expectation without fail. One of our customers has a policy that if during the compliance call after the sale has been made, the consumer response to questions indicate that they have been “oversold”, they immediately cancel the agreement with the customer and refunds anything they might have earned to date. Why? It is impossible to “un-ring the bell” with some/all consumers. Don’t attempt to guess which customers can understand that the initial salesperson oversold the service and that the information on which they relied to make the decision is not valid, but they are relying on another “promise-guarantee-service level commitment.” This is too much to expect of a consumer. Cut your losses and use them as a training moment for your staff. If that doesn’t do it, fire the salesperson immediately.

Automatic Disqualifications

A consumer with the following elements on their credit report should not be accepted under any condition:

  • Late payments in the last 90 days
  • New collections in the last 90 days
  • Large past due amounts on open accounts

You will find that these consumers are under too much financial strain for a successful credit repair program. Not only is there a good chance that they will not be able to complete your program but also that they will not be able to pay after services are rendered.

Consumers Do Not Want Credit Repair

This is the right time to understand that very few consumers want credit repair. Most credit repair customers want to purchase something because of their past credit history they are not able to qualify. This, if you provide a service, even a great service, and are unable to cause the Credit Report Agencies to remove many and even all of the incorrect and unverifiable items because the accounts are not verified by the credit bureaus or data furnishers, the presence of even one recent 30-day late could disqualify most applicants from many loan types. If you have violated the principles of this document and have taken on the wrong customer, you will find in too many cases that this denial will result in the customer blaming you for not delivering the “service”, even though you can demonstrate deletions or corrections. People with bad credit seem to want to blame someone, and in this case, it will be you. The next step, of course, is a complaint to a regulator or the BBB. Remember the cost of responding to a regulator will far outweigh the income from ANY customer. A regulator’s job is to find fault with your business. Since even the best-run organization has a flaw in some days, it is best to diminish the chance that it will be the day that the regulator shops you. The moral of the story is to tell a customer under the current financial strain that now is not the time to repair their credit. Keep this consumer on a drip campaign and approach in six months.

People With Bad Credit Don’t Mind Owing You

Another key factor in running a successful credit repair company is to determine the ability and the willingness of each of your customers to pay for your services on time. Unlike most businesses, credit repair companies are prohibited by federal and many individual state laws to charge in advance for service. Paraphrasing the law, you are prohibited from charging until the service is completely performed. The most conservative reading of that aspect of the law would be that the service is not completely performed until the consumer’s credit and credit score have improved and after they can purchase the item for which their loan was declined. According to a lawyer’s counsel, it is critical that your contract very carefully describes your service so that it is measurable and not open to clarification by others. You should seek legal counsel from a qualified lawyer. Keep in mind that “all” of your customers have bad credit. Thus your accounts receivable would never be considered an asset by a financial institution. It’s very important for the survival of your business that you make very good decisions when establishing your non-negotiable in this area. For example, one of our Monthly Recurring Revenue model customers business will not accept a customer that wants to pay cash. From his experience, that customer will be difficult to collect subsequent payments from. Without a valid and acceptable form of payment, debit/credit card or ACH, his salespeople must just say no

The Evolution of the Credit Repair Business

While it is illegal to accept payment in advance of the service before the “service that you contract for” is completely performed, it is acceptable, according to legal counsel, to “require” customers to establish a Special Purpose Account (SPA) with a qualified company. We recommend for these accounts. What is Trans2pay and how does it work? The customer sets up a new bank account to set aside funds to pay for services after they have been performed; nothing more and nothing less. The best part is that the accounts are not connected to a debit card nor they have bank checks. Not to be overstated, the consumer has access to the funds in the SPA but only after giving a seven-day notice and only after you receive notice that the consumer has requested to close or withdraw money from the account. This gives the customer a cooling off period and provides you with an opportunity to re-sell the customer. Whether you are on a monthly model or pay for delete, “requiring” your prospective customer establish this account as a non-negotiable will virtually eliminate the collection problems that exist in this industry. Research indicates that as much as 25% of all revenue remains uncollected. And this is after a considerable and consistent collection effort. That one fact alone causes most credit repair companies to fail or substantially reduces the necessary cash flow and profits to be truly successful. According to debt settlement companies that have been using the SPA model since 2003, “up to 95% of consumers that make their first payment into the SPA complete the program.” Making the SPA a requirement in your enterprise is without a doubt a necessary move. Not only does it “virtually” eliminate the collection issues but it also serves as a great indicator of the consumer’s willingness to pay you after the service has been fully performed. We can all attest to the fact that individuals with bad credit “don’t mind owing you.” The best time to get money from a consumer with bad credit is before you do the work. But since this is impossible, the next best thing is to gauge their fortitude to keep their end of the bargain/contract by agreeing to set aside up to as much as 100% of the cost outlined in the contract. Whether Pay For Delete of Monthly Recurring Revenue Model, the ability to know that the consumer’s funds are good before the work, and not having to chase down the customer for payment after “they have gotten what they want” is a revolutionary development in the credit repair industry. Yes, the consumer has an additional monthly fee of $10 per month, but the savings for you far outweighs any objection to price. Let’s put it this way: if you will only collect 75% of the fees that you earn after considerable effort, in most cases, the credit repair company would be better paying the $10 per month fee simply to “virtually” eliminate cash management and collection issues. The best part about the SPA is that the consumer provides you with “pre-authorization” to submit a request for payment to Trans2pay after you have submitted an invoice for payment. Of course, the moment you take advantage of this program by collecting funds from the consumer’s account before satisfactory work has been done will be the day your privileges are revoked. We presume that some customers will not choose to do business with you because of this requirement. They may be the same 25% of your customers that do not intend to pay you anyway. Perhaps the requirement of the SPA will eliminate all of these customers.

Proactive Versus Reactive Credit Repair

If you don’t require consumers to obtain credit monitoring, how will you obtain a credit report legally? The answer is that you can’t. The consumer might bring you the tri-merge report from the mortgage lender, or you may even have an unwilling mortgage lender send the report to you directly, but in this case, everyone is operating outside of federal law. Federal law prohibits access to credit reports except for the permissible purpose that the report was pulled. For example, a car dealer can use the report to approve car loans; a mortgage lender for a mortgage loan, and so forth. Additionally, every mortgage lender’s Terms and Conditions of their membership with the bureaus prohibits the use of the report for purposes of credit repair. It is not a matter of if but of when the bureau will determine that a lender is providing reports for credit repair purposes. It is important to not only follow the federal law but also to be careful not to place an ignorant loan originator in a position to ruin his employer’s business. Protect your affiliate from themselves; don’t use Tri-merge credit reports. Instead, require the consumer to obtain an account with a credit-monitoring provider. While the Terms of Service between the consumer and the monitoring company prohibits the use of the report for credit repair, this agreement does not place anyone in harm’s way by violating permissible purpose laws. The consumer is obtaining a consumer report and can do with it as he or she pleases. Moreover, using the same credit monitoring service during the life of the customer streamlines the comparison of updated subsequent reports to the previous report. The reason is that each credit monitoring company and the tri-merge provider has unique nomenclatures that they use in their reports, therefore making it difficult to correlate entries and this make mistakes during the review and update. Credit monitoring also allows you to provide a pro-active versus reactive service. Reactive credit repair relies upon the consumer to send in the results received from the bureaus. (Credit Reporting Agencies and creditors are required to respond in writing directly to the consumer in response to a request for an investigation of an item on the consumer report. However, all industry participants agree that less than 30% of consumers will consistently deliver these results to the CRO on a monthly or timely basis. Without the results or monitoring, the credit repair process is slowed and becomes re-active at best. Part of the success of any credit repair company is the number of times an investigation is requested by the consumer (the number of rounds of letters). By using credit monitoring, rounds of letters can be produced every 30 to 35 days. Simply stated, the increase in the number of rounds produced during the lifetime of the credit repair customer will improve results.


Credit repair company executives and owners face a myriad of challenges in the derogatory credit industry. It is obvious how important it is to the future economic health of our country to help educate consumers about debt and to assist them where possible in demanding that the Credit Reporting Agencies and Data Furnishes follow federal law. The job of the credit repair professional is to help the consumer have a completely accurate credit report and for the lender to use that credit report to determine the credit-worthiness of the consumer. In short, Credit Repair Organizations are both ambassadors of credit education as well as being custodians of their consumer’s credit report. We must get the Regulators and the Better Business Bureau to concentrate on the fact that consumers have a right to have every trade line on their credit report to report accurately. The PIRG reports that 70% of all credit reports contain errors and that 25% of those files contain errors that will or have caused a consumer to be turned down for a loan. It is time for the regulators and the Better Business Bureau to concentrate on the enforcement of all consumer credit laws and not just the Credit Repair Organizations Act. In some cases, if all of the consumers’ accounts are reporting accurately and in accordance with federal law, the consumer still cannot obtain a loan because one or more of negative items have been verified. In that case, the system has worked, and the consumer will have to wait until the derogatory item has aged sufficiently so that it does not count against them according to the FICO algorithm of the lender’s guidelines. That is why it is imperative that the CRO establish appropriate expectations before, during and after the sale and that only the candidates that meet or exceed your guidelines be accepted as a customer. A win must be that the credit report is accurate.

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