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Financial Services Weekly Roundup: OCC Adds “Madden Fix” To Its Playbook | Goodwin

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REGULATORY DEVELOPMENTS

OCC Finalizes Madden Fix

On May 29, the OCC issued a final rule (Rule) affirming long-held understandings and market practices regarding the transferability of interest terms of loans that were valid when made, which were shaken by the Second Circuit’s 2015 decision in Madden v. Midland Funding, LLC. In Madden, the court held that a provision of the National Bank Act that permits national banks to charge interest at the rate permissible for the most favored lender in the state where the bank is located does not protect a nonbank assignee of a loan from state usury claims. If the interest rate on the loan exceeds the rate permitted by applicable state law, then a purchaser of a loan made to a borrower in a state where Madden is controlling may not be able to enforce its rights under the loan agreement or may even be required to disgorge amounts paid by the borrower. Under the Rule, which was adopted as proposed, federal regulations would provide that, when a national bank or savings association sells, assigns or otherwise transfers a loan, interest permissible before the transfer continues to be permissible after the transfer. The Rule does not purport to address which person is the “true lender” in such cases.

Multiple state attorneys general commented on the Rule, arguing that the Rule is inconsistent with the OCC’s authority under the National Bank Act. Therefore, the Rule may be subject to legal challenge, either through state governmental action or private litigation.

The Rule becomes effective 60 days after publication in the Federal Register.

SEC Staff Reverses Course on Control Share Acquisition Statutes

On May 27, the staff of the SEC’s Division of Investment Management (Staff) withdrew a Staff letter – more commonly known as the “Boulder Letter” – that took the position that opting into a state control share acquisition statute would be “inconsistent with the requirement in [section 18(i) of the Investment Company Act of 1940 (1940 Act)] that every share of stock issued by an investment company have ‘equal voting rights’ with every other outstanding voting stock.” The Staff also stated that it would not recommend enforcement action against a closed-end fund under section 18(i) of the 1940 Act for opting into and triggering a control share acquisition statute, if the decision to do so by the board of the fund “was taken with reasonable care on a basis consistent with other applicable duties and laws and the duty to the fund and its shareholders generally.”

A closed-end fund’s ability to opt into and trigger a control share acquisition statute may prove valuable in stifling activist campaigns, as such statutes generally provide closed-end funds the right to prevent or restrict certain changes in corporate control by altering or removing voting rights when a shareholder acquires, directly or indirectly, the ownership of, or the power to direct the vote of, shares of stock that are equal to or exceed specified percentages of the fund’s total voting power (i.e., control shares). Once holders of control shares lose their voting rights, such holders cannot vote their control shares unless the fund’s shareholders vote to approve the restoration of voting rights by an affirmative vote of a specific proportion (e.g., two-thirds of the votes entitled to be cast at a special meeting called for such purposes, excluding “all interested parties”).

House Passes Bill to Amend Paycheck Protection Program

On May 29, the U.S. House of Representatives, in a bipartisan vote of 417-1, passed H.R. 7010, or the Paycheck Protection Program Flexibility Act of 2020, which would amend the PPP in order to make PPP loans more accessible and usable to the small businesses that need it most. Specifically, H.R. 7010 would:

  • Extend the “covered period” to incur costs that measure the amount of indebtedness that qualifies for loan forgiveness from eight weeks to the earlier of 24 weeks or until the end of calendar year 2020;
  • Reduce the minimum portion of a PPP loan that is required to be spent on payroll costs for the loan to be eligible for forgiveness from 75% to 60%;
  • Extend the deferral period and the minimum period for repayment of PPP loans – the latter would increase to five years from two years;
  • Permit the loan forgiveness amount to be determined without regard to a proportional reduction in the number of full-time equivalent employees if such employer is able to document an inability to (a) re-hire an individual who was an employee prior to February 15, 2020 (b) to hire similarly qualified employees on or before December 31, 2020, or (c) return to the same level of business activity prior to February 15, 2020 due to compliance with requirements established or guidance issued by the Secretary of HHS, the Director of the CDC, or OSHA during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID–19; and
  • Eliminate the current requirement in Section 2302(a)(3) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that an employer is not eligible to claim the deferral of employment taxes if it has had a PPP loan forgiven.

The U.S. Senate is expected to consider the bill this week.

SBA Issues Rules on PPP Loan Forgiveness Process and Lender and Borrower Responsibilities

On May 22, the SBA issued long-awaited interim final rules describing the PPP loan forgiveness process and lenders’ and borrowers’ responsibilities under the PPP. Under the interim final rule on lender responsibilities, in order for a PPP loan to be forgiven, the lender must (1) confirm that it received the borrower certifications in the loan forgiveness application form and the borrower documentation required by the form and (2) confirm the borrower’s calculations on the forgiveness application. According to the SBA, “Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for loan forgiveness.” Minimal review of calculations based on a payroll processor’s report would be sufficient to meet this standard. Lenders must report their decisions on forgiveness applications to SBA within 60 days of receiving a complete application and must provide supporting documentation for their decisions. The interim final rule on the loan forgiveness process includes details on several technical questions related to employee status, payroll calculations and forgiveness-eligible non-payroll expenses. The interim final rules became effective upon publication in the Federal Register on May 28, 2020.

U.S. Federal Reserve Announces Changes to, Provides Guidance on, and Posts Additional Documents with Respect to the Main Street Lending Program

On May 27, the Federal Reserve announced additional changes to the Main Street Lending Program (MSLP), while also providing additional guidance through an updated FAQ and posting documents for MSLP to the Federal Reserve Bank of Boston’s website, available here. Read the client alert to access our chart, created by Goodwin lawyers, that highlights these updates as well as describes the effects of any such changes (and non-changes) and guidance on borrowers. For a summary of the changes to MSLP that were made on April 30, please see Goodwin’s May 2 client alert here.

Federal Reserve Issues Updated FAQs for CPFF, PMCCF, SMCCF and TALF 2020

On May 26, the New York Fed released updated frequently asked questions for the Commercial Paper Funding Facility, the Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility and TALF 2020. On the same date, the New York Fed also published an updated Form of Issuer and Sponsor Certification for TALF 2020.

SEC Staff Issues No-Action Letter Relief from ’40 Act Provisions to Participate in TALF 2020

On May 21, the SEC staff issued a no-action letter reaffirming its relief from certain 1940 Act provisions to allow investment companies to participate in TALF 2020. The SEC staff noted that on March 23, 2020, the Federal Reserve, with the approval of the Secretary of the U.S. Department of the Treasury (Treasury), established TALF 2020 in response to the impact of the COVID-19 pandemic on global financial markets. To the extent that investment companies registered under the 1940 Act are considering participating in TALF 2020, the SEC staff highlighted two no-action letters that it issued in 2009, one to Franklin Templeton Investments and one to T. Rowe Price Associates, Inc. (the 2009 Letters), relating to TALF established by the Treasury and the Federal Reserve in response to the financial crisis of 2008 (TALF 2008). In the SEC staff’s view, the terms and conditions of TALF 2020 are substantially similar to those of TALF 2008 for purposes of the staff no-action positions taken in the 2009 Letters. Accordingly, the SEC staff reaffirmed its no-action positions in the 2009 Letters as they may relate to registered investment companies’ participation in TALF 2020. The SEC staff further extended its relief in its T. Rowe Price Letter in two ways. First, the no-action position in the T. Rowe Price Letter is now available to third parties. Second, the SEC staff stated that its no-action position with respect to section 57(a) of the 1940 Act extends to business development companies.

U.S. Department of Labor Announces Rule to Better Deliver Retirement Plan Information Options

On May 21, the Department of Labor (DOL) announced publication of a final rule that provides a new optional safe harbor method for compliance with ERISA’s general standard for delivery of disclosures to retirement plan participants. The final rule allows retirement plan sponsors to satisfy applicable disclosure requirement by either posting disclosures on a website with appropriate participant notification (i.e., the “notice-and-access” method), or emailing disclosures directly to participants. Note, however, that plan participants retain the right to elect to receive paper copies of the disclosures. The final rule only applies to retirement plans, and it does not cover health and welfare plan disclosures. The final rule seeks to make plan disclosures easier to understand and more useful for participants, while reducing plan administrative costs and burdens associated with the distribution of disclosures. The DOL anticipates that the final rule will save plans approximately $3.2 billion over the next decade. The final rule is effective on July 27, 2020.

Federal Agencies Share Principles for Offering Responsible Small-Dollar Loans

On May 20, the Federal Reserve, OCC, Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration issued guidance (Guidance) encouraging banks and credit unions to offer responsible small-dollar loans. Small-dollar loans can provide liquidity lifelines to those facing cash-flow imbalances; unexpected expenses, emergencies, or disasters; or disruptions in work or income, such as those arising from the COVID-19 pandemic. The Guidance continues the shift in recent years away from prior policies aimed at curtailing access to predatory small-dollar loans, and it follows on the heels of similar encouragements issued by federal banking agencies during recent months. For information on how fintech companies can assist banks in offering small-dollar loans, please read the client alert issued by Goodwin’s Fintech practice.

CFPB Issues No-Action Letter Templates and Applications to Promote Innovation and Aid Struggling Consumers

The CFPB had previously issued a revised Policy on No-Action Letters, pursuant to which companies that provide consumer financial products and services can secure a template that can serve as the foundation for “No-Action Letter” (NAL) applications. A NAL is a statement that the CFPB will not take supervisory or enforcement action against a company for providing a product or service under certain facts and circumstances, which can promote the development of innovative products and services with the potential to benefit consumers.

Recognizing the potential to improve the loss mitigation application process through digitalization, the CFPB, on May 22, approved the first NAL template to enable mortgage servicers to apply for their own NAL and to implement loss-mitigation efforts for their borrowers through the use of an online version of the Fannie Mae Form 710. Additionally, to promote robust competition in the small-dollar lending space that facilitates access to credit – especially in light of the COVID-19 pandemic, which is causing an increase in temporary cash-flow imbalances, unexpected expenses and income disruptions – the CFPB approved a NAL template for insured depository institutions to apply for a NAL covering their small-dollar credit products.

CFPB Releases Compliance Aid Providing COVID-19 Pandemic Related Guidance Related to the Remittance Transfer Rule

On June 2, the CFPB released a compliance aid providing COVID-19 pandemic related guidance related to the Remittance Transfer Rule. The compliance aid includes three FAQs that discuss the responsibilities of a remittance transfer provider when the remittance fails to arrive by the disclosed date due to a government mandated shutdown of commercial activity in the relevant intermediary or recipient countries in response to COVID-19. In the compliance aid, the CFPB indicated that the remittance provider’s failure to deliver funds by the disclosed date would not be considered an error under the Remittance Transfer Rule if the remittance provider could not have reasonably anticipated the closure, and provided several examples of the application of this guidance.

Federal Housing Finance Agency Announces Proposal On Capital Rule For Fannie Mae and Freddie Mac

On May 20, the Federal Housing Finance Agency (FHFA) released a notice of proposed rulemaking (the 2020 Proposal), which would establish a new regulatory capital framework for Fannie Mae and Freddie Mac (Enterprises). The 2020 Proposal is a re-proposal of the FHFA’s notice of proposed rulemaking published in July 2018 (2018 Proposal). The Enterprises’ statutory capital classifications and regulatory capital requirements were suspended when the Enterprises were placed in conservatorship. The 2018 Proposal sought comments on a new capital framework for the Enterprises based on the conservatorship capital framework that had been developed by the FHFA in 2017. The 2020 Proposal would establish a post-conservatorship regulatory capital framework to ensure that each Enterprise operates in a safe and sound manner and is positioned to fulfill its statutory obligations to provide stability and assistance to the secondary mortgage market. The 2020 Proposal maintains the mortgage-risk sensitive capital framework of the 2018 Proposal with “enhancements” related to the quality of capital, quantity of capital, pro-cyclicality of the aggregate capital requirements and other advanced approaches regarding the Enterprises’ ability to assess their own credit, market and operation risks. In addition, each Enterprise would be required to satisfy certain leverage ratios based on its core capital and Tier 1 capital. The FHFA also provided a fact sheet with additional information on the 2020 Proposal. Comments are due 60 days after publication in the Federal Register.

FHFA Announces New Fannie Mae and Freddie Mac LIBOR Transition Resources

On May 28, the FHFA announced the launch of LIBOR transition websites by each of Fannie Mae and Freddie Mac that provide key resources for lenders and investors as the Enterprises transition away from the London Interbank Offered Rate (LIBOR). These websites contain information about resources and products, including the Enterprises’ jointly published LIBOR Transition Playbook and Frequently Asked Questions (FAQs). The LIBOR Transition Playbook describes key transition milestones and recommended actions for stakeholders to consider as they manage the upcoming transition away from LIBOR. According to the FHFA, the LIBOR Transition Playbook and the accompanying FAQs are designed to help participants plan and adapt business policies, procedures, and processes to support products linked to alternative reference rates, discontinue most LIBOR-indexed products by the end of 2020, and prepare for discontinuing the use of LIBOR as an index.

OCC Permits Telephonic and Electronic Participation At Board, Shareholder and Member Meetings

On May 16, the OCC issued an interim final rule that amends 12 CFR Sections 5 and 7 to clarify that national banks and federal savings associations (FSAs) (collectively, banks) may permit telephonic and electronic participation at all board of directors, shareholder and, as applicable, member meetings. The interim final rule:

  • permits banks to provide for telephonic or electronic participation of members and shareholders, as applicable, at both annual and special meetings;
  • requires banks that permit telephonic and electronic participation at member or shareholder meetings to have procedures for this remote participation and provides banks with a choice of procedures to follow based on elected state corporate governance procedures, the Delaware General Corporation Law, or the Model Business Corporation Act;
  • codifies an OCC interpretation that permits national banks to provide for telephonic or electronic participation at board of directors meetings; and
  • updates OCC rules to clarify that all FSAs may provide for telephonic or electronic participation at board of directors meetings.

Concurrent with the issuance of the interim final rule, the OCC published optional model bylaw provisions for FSAs that permit telephonic and electronic participation as provided in the interim final rule. The interim final rule became effective on May 28, 2020. Comments on the interim final rule must be received no later than July 13, 2020.

FDIC Extends Comment Period on Proposal to Ensure Safety and Soundness of Industrial Banks

On May 27, the FDIC extended the public comment period for its proposed rule regarding industrial banks and industrial loan companies (industrial banks) by 30 days to July 1, 2020. On March 17, 2020, the FDIC Board of Directors approved for publication a proposed rule regarding the organization or acquisition of an industrial bank by companies not supervised by the Board of Governors of the Federal Reserve System. The proposed rule would formalize a supervisory framework that will ensure the safe and sound operation of the industrial bank. An extension of the comment period will allow interested parties additional time to analyze the issues and to prepare comments to address the questions posed by the FDIC. For additional information regarding the proposed rule, please read the client alert issued by Goodwin’s Banking practice.

Fair Lending Considerations in a COVID-19 World: Fair Servicing and Consumer Relief in the U.S.

In response to the sudden financial impact of the COVID-19 pandemic on consumers, the CARES Act, mortgage-related guidance from Government Sponsored Entities (GSEs) and emergency regulations issued by the federal government and by state governments have provided temporary or permanent relief for borrowers who are unable to continue making loan payments. While many lenders and servicers have implemented mandated options and created programs for borrower relief, the volume of consumer demand may give rise to concerns about fair lending compliance and whether the monitoring necessary for such compliance can be implemented in a timely and effective manner. Read the client alert to learn more about the fair lending issues that may arise in connection with consumer loan and asset servicing during the pandemic, as well as advice on things to consider in mitigating those risks in real time. This is the second article in a series of client alerts highlighting fair lending issues that may arise in this rapidly changing business and compliance environment.

ENFORCEMENT & LITIGATION

CFPB Settles with Lender and Student Loan Debt Relief Companies Over Alleged Misuse of Credit Reports

On May 14, the CFPB announced that it had entered into a proposed stipulated judgment and final order with a California-based mortgage lender and several affiliated individuals and companies (collectively, the lender) resolving allegations that the lender had obtained consumer credit reports for an improper purpose. Under the proposed stipulated judgement, based off the allegation that the lender’s president and its co-founder jointly created a scheme to use the mortgage lender’s account to obtain consumer reports for their associated student loan debt relief companies, the mortgage lender would pay $18 million in consumer redress, as well as ban the mortgage lender, its president and co-founder from the debt-relief industry, and would impose $450,001 in civil money penalties. Read the Consumer Finance Enforcement Watch blog to learn more about the CFPB’s complaint.

FTC Reaches $40 Million Settlement with Payment Processor Over Laundering Allegations

On May 19, the Federal Trade Commission announced that it had reached a $40.2 million settlement with a payment processing company and one of its executives after the company allegedly failed to monitor and heed warnings that the executive was processing payments and laundering for fraudulent companies. Read the Consumer Finance Enforcement Watch blog to learn more about how the settlement was reached.

Multistate Investigation Results in $550 Million Settlement with Auto Financing Company

On May 19, a coalition of 34 state attorneys general announced a settlement of over $550 million with an auto financing company. The settlement is the result of a five year, multi-state investigation into the company’s subprime lending practices from the allegation that the company used a sophisticated credit scoring model to identify populations of consumers that were predicted to have a high likelihood of default and then placing them into risky auto loans. Read the Consumer Finance Enforcement Watch blog for more information about the settlement.

CFPB and Massachusetts AG File Lawsuit Against Credit Repair Company

On May 22, the CFPB and Massachusetts Attorney General’s Office (Mass AG) announced that they had filed a complaint against a credit repair company and the owner of the company in the U.S. District Court for the District of Massachusetts, alleging that they had engaged in deceptive acts or practices under the Consumer Financial Protection Act and the Massachusetts unfair and deceptive acts and practices statute, as well as abusive telemarketing acts and practices under the Telemarketing Sales Rule. Read the Consumer Finance Enforcement Watch blog for more information about the complaint.

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Credit Repair Companies

ADR Financial Group makes its name as one of The Best Credit Repair Companies in the USA

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Your credit score plays a vital role when it comes to buying a car, purchasing a home or obtaining a loan for any other purpose like starting a business. In cases where you have a lower credit score, these purchases may become unrealistic and impossible to achieve. It may result in having to pay higher interest rates or putting down a large down payment. Having negative marks on your credit report will hamper your creditworthiness which is why it is important to stay on top of your finances. 

Within a short period of time, ADR Financial Group quickly raised to the top as one of the best credit repair companies in the United States. Founded by Alexis (“Lex”) DeWitt and Ratiq (“Rocky”) DeWitt, ADR Financial Group is based in Charlotte, North Carolina. ADR Financial  Group is dedicatedly assisting their  its clients with the removal of inaccurate, erroneous, and unverifiable accounts on their credit report. With a mission to deliver a clean credit profile to its their clients, ADR Financial Group also educates their clients on how to achieve the highest credit scores during restoration. 

ADR Financial  Group is not your typically credit repair company.  What separates ADR apart from all, is the fact that their program is personalized to fit their client needs,  rather than providing a generic procedure for all. Although credit is an important aspect of life it is not taught in schools or institutions. This is the sole reason behind the establishment of ADR Financial Group. Over the years, ADR helped many of their clients reach their financial goals . Till date, ADR has helped more than 700 families purchase their dream home, removed more than $17 million of debt from credit reports and deleted over 72,000 negative accounts.

Some of the services offered by the company are Full-Service Credit repair, DIY Credit Repair, Tradelines, Credit Education, Business Credit and Credit Monitoring. Moreover, ADR also teaches other entrepreneurs how to start their own credit repair company to help change lives. Check out their website www.badcreditcostmore.com if you’re interested in their services. 

In the next 5 years, the company plans to be a pioneer for all those who find difficulty in purchasing their homes. ADRs target is to help 5000 families in building a home of their dreams. Besides this, ADR plans to make financial literacy a topic of discussion in many schools and households. ADR is making a significant impact in urban 

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Credit Repair Review Methodology

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When it comes to managing your finances, thoroughly researching any company you work with is of the utmost importance. This couldn’t be truer than with credit repair companies.

According to the U.S. Federal Trade Commission (FTC), credit repair scams are incredibly common. There have been several recorded cases of criminals setting up false credit repair schemes designed to steal Social Security numbers, and some completely legitimate companies have been accused of violating consumer rights by charging illegal fees and making false promises to customers.  Even those with a clean record often face high volumes of consumer complaints for a variety of reasons, such as overpriced services and failure to deliver results.

The FTC makes it clear that no credit repair company is authorized to perform any action you can’t do on your own for free. Under the Fair Credit Reporting Act, you’re legally entitled to access your credit report for free once per year or if you’ve been the victim of identity theft. Additionally, the law dictates that you can dispute inaccuracies on your report and have negative information removed after a certain number of years. The FTC offers a clear, step-by-step guide on how to do this without paying a credit repair company.

At the end of the day, many people still choose to work with a credit repair company because they feel overwhelmed by the dispute process and are willing to pay for expert help. There are a number of ways in which credit repair companies can provide value, such as spotting errors on your report that you might otherwise miss. The FTC advises that reputable companies will also help you achieve long-term financial success that goes beyond your credit report by providing budgeting help and free educational materials.

So how do you tell a legitimate credit repair company from a scam? That’s the question we set out to answer in our series of credit repair reviews. We looked at some of the most popular companies and closely examined their services, pricing structures, and reputations to determine whether or not they offer value. In this guide, we’ll walk you through the methodology we used to evaluate each company and explain why each factor that we examined is important when dealing with credit repair.

Credit Repair Methodology

Credit repair is a complex service that involves many moving parts. What’s more, no two credit repair companies offer the exact same approach. To get a fair evaluation of each company we reviewed, we broke our scoring sheet down into five categories as listed below.

Within each category, we ranked each company on specific aspects of their service on a scale of 1 (lowest) to 5 (highest). We then took the weighted average of all scores according to the importance of each in deciding whether or not to work with a credit repair company. The percentages used to weigh each category are outlined in the following table.

Stability 2%
Reputation and Customer Satisfaction 11%
Customer Experience 7%
Services 30%
Costs and Fees 50%

In the end, each company received an overall rating from 1.0 to 5.0, with 5.0 being the best possible score and 1.0 being the worst.

The following sections will give a more detailed breakdown of the specific data points we used to evaluate credit repair companies in each category.

Evaluating Stability

Unlike other financial industries such as insurance, there is no authoritative body that rates the stability of credit repair companies. With this information unavailable, we used the next best measure of evaluating stability: number of years in business.

The number of years a credit repair organization has been in business is important because it demonstrates that the company has achieved long-term stability. Not only does this mean the company isn’t likely to go out of business before completing the services you paid for, it also means they’ve gained years (or even decades) of experience helping others in your situation. A credit repair company that has been around for a long time is likely to have earned enough respect from customers to continue attracting business.

Based on industry averages, we scored each company’s number of years in business using the following scale:

Excellent (5) More than 25 years in business
Great (4) Sixteen to 25 years in business
Good (3) Eleven to 15 years in business
Fair (2) Six to 10 years in business
Poor (1) Five or fewer years in business

Company Reputation and Customer Satisfaction

In credit repair, a company’s reputation says a lot about the type of experience it provides to customers. There are many channels for regulating authorities and consumers to file complaints about a credit repair company, both official and unofficial. We looked at complaint data from three of the most recognized third-party sources:

  • Consumer Financial Protection Bureau complaints and actions
  • Better Business Bureau reviews
  • Google reviews

Consumer Financial Protection Bureau Complaints and Actions

The Consumer Financial Protection Bureau (CFPB) is a government agency that acts as a consumer advocate in financial markets related to banks, loans, and credit. One of the CFPB’s core functions is to field complaints that result from unfair practices. Complaints are published in a database on the CFPB website that anyone can access.

While the CFPB doesn’t verify the specific facts in complaints, the bureau does refrain from publishing those that don’t meet strict criteria. If a credit repair company has accumulated many complaints, it’s usually a good sign that something in the business’s practices doesn’t sit well with consumers. The CFPB has the power to take enforcement action against the company if it investigates a complaint and finds that the law has been violated.

In reviewing each credit repair company, we looked up the number of complaints they had received in the CFPB database and assigned a score based on the following ranges:

Excellent (5) No complaints within the past three years
Great (4) No complaints within the past year
Good (3) One to five complaints within the past year
Fair (2) Five to 10 complaints within the past year
Poor (1) Ten or more complaints within the past year or enforcement action

Better Business Bureau Reviews

Contrary to what many consumers believe, the Better Business Bureau (BBB) is not an official government agency, but a private nonprofit that independently evaluates companies and fields customer complaints. The BBB allows companies to pay a fee for official accreditation and assigns ratings to all businesses, regardless of accreditation status.

In recent years, the validity of BBB ratings has been called into question by journalistic investigations that found discrepancies based on whether the business had paid for accreditation. Knowing this information, it’s important to take BBB ratings with a grain of salt.

Ultimately, we chose not to include BBB accreditation status or agency ratings into consideration when calculating companies’ overall score. However, we did include each company’s average customer review score. Customers can leave a review for businesses on the BBB website without filing a complaint, giving a score of 1 to 5 based on their experience with the company. We factored in these reviews based on the following point system:

Excellent (5) 5 stars
Great (4) 4 stars to less than 5 full stars
Good (3) 3 stars to less than 4 full stars
Fair (2) 2 stars to less than 3 full stars
Poor (1) Less than 2 full stars or no reviews

Google Reviews

A company’s Google profile is a common place for customers to go when they want to leave a review for a business they’ve interacted with. These reviews often appear when you search a company’s name using the Google search engine. Reviews consist of a star rating on a scale of 1 to 5 and an optional section for the customer to write a more detailed explanation of the score they gave.

In our methodology, Google reviews were assigned scores based on average star rating as follows:

Excellent (5) 5 stars
Great (4) 4 stars to less than 5 full stars
Good (3) 3 stars to less than 4 full stars
Fair (2) 2 stars to less than 3 full stars
Poor (1) Less than 2 full stars or no reviews

Customer Experience

A credit repair company’s dedication to customer experience is often a strong indicator of the quality of services they provide. When credit repair organizations don’t put enough effort into providing a good experience, customers tend to have difficulty contacting the company and getting updates on their case status. Since most credit repair services are now offered digitally, this generally means providing a helpful, easy-to-use website and virtual tools like an app or customer portal.

Taking all of this into account, we evaluated customer experience by looking into these three areas:

  • Website content
  • Website usability
  • Digital accessibility

Website Content

In the digital age, your first interaction with any company is often through its website. Credit repair companies use their websites to attract customers by providing information about their services and the benefits of credit repair. Unfortunately, not all companies are honest, and some publish inaccurate information that may mislead customers into thinking the company can do more than it really can.

While reviewing credit repair companies, we looked for three key items that illustrate the quality of information being presented:

  • Price disclosure
  • Online resources
  • FAQ page

Price Disclosure

One of the most common complaints about credit repair companies is that they aren’t upfront about their pricing, leading some customers to inadvertently accrue charges they weren’t aware of. Companies that value transparency should publish their pricing clearly online so that customers know exactly what they can expect to pay for services before they call.

For each credit repair company, we looked for pricing information on their website and assigned the following points:

Excellent (5) Price disclosed online
Poor (1) Price not disclosed online

Online Resources

A truly reputable credit repair company should approach fixing your credit as a multi-stage solution. In addition to disputing credit errors, the best companies will also provide resources that cover big-picture financial planning and debt management. Most companies that offer resources do so for free, demonstrating value to potential customers who are thinking about signing up for services.

We evaluated credit repair companies’ online resources based on this scale:

Excellent (5) Free app or interactive tool
Great (4) Free e-books and/or videos
Good (3) Blog
Fair (2) Basic information
Poor (1) None

FAQ Page

Credit repair can seem daunting for those who have never disputed an error on their report before. It’s completely normal to have questions about how the process works and what to expect along the way. To answer these questions transparently, credit repair companies should have an FAQ page that provides in-depth answers to questions not only about the credit repair process, but also the company’s specific practices such as pricing and policies.

Companies were given the following points depending on whether or not they had an FAQ page:

Excellent (5) Has an FAQ page
Poor (1) Does not have an FAQ page

Website Usability

The information included in a credit repair company’s website is important, but it won’t do you any good if you can’t locate it. We gave companies more points if they had dedicated resources to designing a responsive website that made it easy to find what you’re looking for.

We made our website usability analysis as objective as possible using these criteria:

Excellent (5) Intuitive design, interactive tools, easy to locate information
Great (4) Well-designed, highly informative but few tools
Good (3) Average design, includes useful information
Fair (2) Design lacking, information is difficult to find
Poor (1) Outdated design, poor experience, missing key information

Digital Accessibility

The technology available today enables companies to offer much more than just a website. We rewarded credit repair businesses for making additional technologies available that help customers more easily navigate the credit repair process. These technologies are:

  • Online customer portal
  • Mobile app
  • Web chat

Online Customer Portal

An online customer portal is a tool that customers can access using a username and password. Upon logging in, customers might find information such as important documents, dispute status, and updates from the credit repair specialist handling their case.

The credit repair companies we reviewed earned the following points for the presence or absence of a customer portal:

Excellent (5) Has an online customer portal
Poor (1) Does not have an online customer portal

Mobile App

Mobile apps are another trend in technology that make a big difference in the credit repair experience. Since most consumers spend more time on their phones than their computers throughout the day, a mobile app can make it easier to receive information and access resources.

Our rubric assigned points to companies with mobile apps using this scale:

Excellent (5) Has a mobile app
Poor (1) Does not have a mobile app

Web Chat

Not everyone wants to pick up the phone or wait for an email every time they have a question. Web chat is a convenient customer service channel that tends to be much faster and more efficient than traditional contact methods.

The companies we reviewed were rewarded for having a web chat as follows:

Excellent (5) Has a web chat
Poor (1) Does not have a web chat

Credit Repair Services

Credit repair isn’t a one-size-fits-all service. Most companies offer several different options which might include different credit repair options, tiered service levels, and additional non-credit repair offerings. To further explore the scope of services available, we broke them down into two main categories:

  • Credit repair service packages
  • Additional services offered

Credit Repair Service Packages

No two credit repair services are the same. Credit repair organizations often split their services into tiered packages that vary by the number or type of services included. For example, some companies may ask you to pay more for unlimited disputes per month, while others exclude services like credit monitoring from base packages but offer them in premium plans.

Some companies offer just one service package while others let customers choose from several different options. No matter how many choices a company makes available, not all of them include the same scope of services in their monthly fee.

To create a standardized method of evaluating credit repair service packages, we looked at data in three main areas:

  • Variety of service packages offered
  • Whether credit monitoring is offered
  • How many monthly disputes are included

Service Packages Offered

Every credit repair customer has a different set of needs. While some only have one or two minor errors to remove from their report, others require significant help with a major discrepancy. Ideally, a credit repair company will offer packages at various price points so that customers don’t overpay for a full-service option they don’t need.

The credit repair companies we reviewed were given points for the number of service packages they offered according to this scale:

Excellent (5) More than three service packages
Great (4) Two or three service packages
Good (3) Single service package

Credit Monitoring

Credit monitoring is a type of service that tracks your credit report and notifies you if there are any significant changes you should know about. If you need credit repair services, chances are you should also enroll in credit monitoring so that you’re always up to date on changes to your report as they happen.

Unfortunately, not all credit repair companies include credit monitoring in their service packages. Some even make credit monitoring mandatory but require customers to pay an additional fee for this service, often through a third party.

We used the following points system to grade credit monitoring availability from each company:

Excellent (5) Credit monitoring included
Great (4) Additional charge
Good (3) Not offered or not disclosed

Monthly Disputes Included

Each time a credit repair company contacts a credit bureau on your behalf to contest inaccurate information, the company counts this as a dispute. Some credit repair companies place a limit on the number of disputes they’ll file on your behalf in a given month. If you have a lot of information to dispute on your report, this could mean it takes much longer than planned to have it all corrected.

Keep in mind that there are three major credit bureaus, each of which requires disputes to be filed separately. Credit repair companies almost always count disputes per credit bureau, even if the same information is being called into question. For example, if the same misspelling appears across all three of your credit reports, the credit repair company will count that as three individual disputes.

We looked at the number of disputes included per month with each credit repair company and rated them using this scale:

Excellent (5) Unlimited with all plans
Great (4) Unlimited with higher-tier plans
Good (3) Limited number of monthly disputes (>30)
Fair (2) Limited number of monthly disputes (<30)
Poor (1) None or not disclosed

Additional Services

As we’ve discussed, credit repair is often a single part of a much larger effort to repair your finances. This might involve debt management and/or refinancing your current loans, both of which are offered by certain credit repair companies. If a company offers this, you may find it easier to come up with a more comprehensive financial plan for your personal credit issues.

Oftentimes, credit repair services are required by someone’s business, which falls outside the scope of what credit repair companies offer to individuals. To meet this demand, some credit repair providers have additional services tailored to business owners who need help improving their business’s credit.

Companies were awarded a point if they offered the following additional services:

  • Debt management
  • Financing and loans
  • Business services

Costs and Fees

Costs and fees made up 50% of our overall weighted score when evaluating credit repair companies. This is because cost is one of the main pain points for credit repair customers who may already be in a difficult financial situation.

We evaluated the cost of credit repair services based on five key points:

  • Fee structure
  • Cost of services
  • Money-back guarantee
  • Discounts
  • Cancellation policy 

Fee Structure

There are generally three different types of fee structures with credit repair companies. Some ask for a one-time fee that covers the entire cost of all agreed upon services, no matter how long they take. Others charge customers by the month for the duration that it takes to address all disputes. However, some companies charge both a one-time fee to get started (often called a “discovery fee”) and a monthly fee as services continue.

Since customers tend to pay more when companies charge both types of fees, we graded fee structure using the following system:

Excellent (5) Either a one-time or monthly fee
Poor (1) Both a one-time and monthly fee or not disclosed

Cost of Services

Once a credit repair company’s fee structure has been determined, it all boils down to how much they charge for services. We gathered pricing information from all the companies we evaluated and compared them to one another, creating separate tiers for both one-time and monthly fees. 

One-Time Fees

Average one-time fees usually fall in the range of $51 to $100, although some companies charge more and others less. Points were assigned for pricing using this scale:

Excellent (5) $0
Great (4) $1 to $50
Good (3) $51 to $100
Fair (2) $101 and up
Poor (1) Not disclosed

Monthly Fees

Typical monthly fees we saw started between $71 and $90 for the most entry-level service package, although some are cheaper and others more expensive. Companies were rated based on the following price brackets:

Excellent (5) $0
Great (4) $1 to $70
Good (3) $71 to $90
Fair (2) $91 and up
Poor (1) Not disclosed

Money-Back Guarantee

There are certain claims that credit repair companies cannot legally make according to the Credit Repair Organizations Act. For example, companies can’t guarantee results in their marketing materials in order to attract customers. This is because there’s no way to completely guarantee a certain outcome from the credit dispute process, even if you hire a credit repair company.

However, some companies offer money-back guarantees if no results are seen within a certain period of time. This is essentially a way for the company to stand by their services and give customers their money back if no successful disputes are made.

We looked into the money-back guarantees advertised by each company we reviewed and gave points using these criteria:

Excellent (5) Results guaranteed within 30 days
Great (4) Results guaranteed within 31-60 days
Good (3) Results guaranteed within 61-90 days
Fair (2) Results guaranteed within 91+ days
Poor (1) No money back guarantee or not disclosed

Discounts

As with most services, some credit repair companies offer discounts to those who qualify. Discounts vary by company, but common ones include military discounts and reduced pricing for couples who sign up for services together.

Our credit repair review methodology rewarded the companies that offered discounts based on this points scale:

Excellent (5) Discounts available
Poor (1) No discounts available or not disclosed

Cancellation Policy

If you’re enrolled in credit repair services and want to cancel your monthly subscription, there are generally two factors to note. First, some companies charge a fee to those who cancel before a certain period of time has elapsed. Second, many require customers to give notice a specific number of days before their next billing period, typically 30. If a credit repair company has this type of policy, you may be charged for an additional month after you cancel.

By law, credit repair companies must allow customers to cancel and have all their fees refunded within the first three days of signing up for service. Since this is required of every company, no additional points were given to those that advertised this type of policy.

Our rating system gave points to companies based on how customer-friendly they made their cancellation policy. Points were assigned using the following guide: 

Excellent (5) No cancellation fee or notice required
Great (4) No cancellation fee, notice required
Good (3) Cancellation fee, no notice required
Fair (2) Cancellation fee and notice required
Poor (1) Legal minimum (first three days) or not disclosed

Shopping for Credit Repair Companies

No consumer financial industry is immune to pitfalls, but credit repair is particularly known for being rife with scams. While there are plenty of respectable credit repair companies, you should use extreme care when shopping for a service provider.

The FTC maintains up-to-date information regarding the credit repair industry on its website, including specific warnings as potential scams come to light. The agency recommends avoiding companies that show any of these five red flags:

  • Asking for payment before any work has been performed
  • Instructing you not to contact the credit bureaus
  • Suggesting that you dispute information you know to be accurate
  • Telling you to provide false information to a lender or financial institution
  • Failing to explain your legal rights during the credit repair process

When dealing with a credit repair company, you are entitled to certain rights outlined by the Credit Repair Organization Act. The company should provide a written contract up front that includes the following information:

  • The full cost you will pay
  • How long services will take
  • Any guarantees the company offers
  • A clause entitling you to cancellation and a full refund within three days

If a credit repair company doesn’t meet the above guidelines, the safest bet is to walk away and look for a more reputable organization. However, if you’ve already paid and are unhappy with the services provided, you can file a complaint with the FTC.

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Credit Repair Companies

Sky Blue Credit Repair Review

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Just getting started with credit repair and not sure what type of service you need? If so, Sky Blue Credit may be a good place to start. The company’s flexible credit repair service can be tailored to meet the needs of those preparing to buy a home, facing debt collectors, or simply trying to rebuild their credit score. But as with all credit repair companies, there are a few drawbacks to consider, too. Our review lays out all the pros and cons to help you decide whether Sky Blue Credit is the right credit repair choice.


Pros Explained

  • Simple cost structure: Sky Blue Credit charges a $79 setup fee and an additional $79 for each month of service.
  • Tailored services: The single service plan covers optional services like mortgage preparation and debt settlement consultations.
  • Offers a 90-day guarantee: If you aren’t happy with the service you receive from Sky Blue, the company will refund all fees paid within the first 90 days.
  • Easy to pause or cancel membership: Pause or cancel your membership in seconds through the Sky Blue Credit membership portal, by email, or over the phone.

Cons Explained

  • Limited monthly disputes: Sky Blue Credit will only send 15 disputes per month, or five per credit bureau. Many competitors offer unlimited disputes.
  • Lacks online resources: The company doesn’t provide a library of free educational resources as offered by some other credit repair companies.
  • Doesn’t offer credit monitoring: If you’re interested in ongoing credit monitoring, you’ll need to sign up through a third party.
  • No free consultation: Initial consultation costs are included in Sky Blue Credit’s $79 setup fee. The gold standard in credit repair is to offer an initial consultation for free.

Types of Services

It’s fairly common for credit repair companies to offer multiple tiers of service packages, selling premium services at a higher monthly cost. Sky Blue Credit offers just one. However, this single plan is more flexible than most, covering a broad scope of services that can be personalized to suit individual needs.

Professional Credit Analysis

One of the main benefits of working with a credit repair company is having an expert set of eyes check your credit report for potential discrepancies. A seasoned credit repair professional may be able to spot errors you would have otherwise missed. Sky Blue provides a detailed analysis of each credit report upon signup.

Credit Disputes

Once Sky Blue Credit has gone through your credit reports, the company begins sending disputes to the credit bureaus on your behalf. Up to 15 disputes, or five per bureau, are included with each month’s membership fee.

Score Rebuilding

In reviewing your credit, Sky Blue Credit will offer suggestions for steps you can take to improve your credit score. This may include prioritizing paying off certain balances or opening a secured credit card. The company will also work with you to form a long-term credit rebuilding plan.


Optional Add-Ons

Since Sky Blue Credit’s service package is all-inclusive, there aren’t any paid upgrades to mention. However, the monthly membership fee does cover a list of services the company considers optional as they’re only applicable to a handful of specific cases.

Debt Validation

If you’ve received a letter from a collections agency for a debt you believe is erroneous, Sky Blue Credit will help you navigate the debt validation process by asking the agency to provide proof of the amount owed.

Goodwill Letters

In some cases, goodwill letters can be sent to ask creditors to remove an accurate derogatory mark from your report. Sky Blue Credit advises that these letters are useful if the event (such as a late payment) was a one-time occurrence and you’ve been making payments on time for at least six months since.

Cease and Desist Letters

Sky Blue Credit customers who have been inundated with debt collection calls can ask the company to send cease and desist letters to stop communications. However, the company notes, this is only used as a last resort as it may trigger a lawsuit from the collection agency.

Debt Settlement Consultations

While Sky Blue Credit isn’t a debt settlement company, customers can ask for advice regarding the possibility of negotiating a reduced payoff amount with the creditor.

Mortgage Preparation

If you’re fixing your credit in preparation to purchase a home, Sky Blue Credit specializes in mortgage lender requirements and will adjust your credit repair strategy according to your timeline.


Customer Service

The best way to get in touch with Sky Blue Credit is by phone or email. Note that phone lines are only open from 9:00 a.m. until 5:00 p.m. EST, hours that might be inconvenient for busy professionals. Sky Blue doesn’t offer live webchat or a smartphone app, although customers can manage their account by logging into an online portal.


Company Reputation

To gauge the reputation of credit repair companies, we often turn to the complaint database maintained by the Consumer Financial Protection Bureau (CFPB). Sky Blue Credit has been named in two complaints in the past three years, both related to customer service issues. The CFPB notes that both complaints were closed in a timely manner.

Sky Blue Credit also has a profile with the Better Business Bureau, although the company isn’t accredited and has a rating of C-. Despite this, customer reviews on the website average an impressive 4.5 stars. Sky Blue also maintains a 4.3-star rating on Google.

If you have a complaint about the services of a credit repair company, you can file a complaint with the FTC or call 877-FTC-HELP.


Contract Duration

Customers who sign up with Sky Blue Credit are not subject to any long-term contracts. The company’s cancellation policy is among the most customer-friendly in the industry. Memberships can be canceled at any time by logging into the online portal, calling the customer service phone line, or sending an email. There are no fees associated with canceling.

If you need a break from paying membership fees but don’t want to cancel entirely, Sky Blue Credit lets you pause service at any time and pick things back up when you’re ready. By taking advantage of this option, you won’t have to pay another $79 setup fee when you resume service.


Cost

Sky Blue Credit’s cost structure is fairly straightforward. Customers pay a $79 upfront fee for the initial setup and consultation process. There’s also a $79 membership fee for each month of service. Both fees are right around average for the credit repair industry.

If you’re not happy with your service for any reason, Sky Blue Credit will refund all fees paid within the first 90 days.

Sky Blue Credit’s money-back guarantee sets the company apart from competitors as it doesn’t depend on a specific outcome. Most companies only offer a refund if no successful disputes have been made within a certain period of time.


The Competition: Sky Blue Credit vs. Ovation Credit Services by Lending Tree

There’s a lot of competition in the credit repair industry, so we compared Sky Blue Credit to longstanding rival Ovation Credit Services by Lending Tree to see which offers better value. Ovation prices its base package in the same range as Sky Blue Credit’s sole offering, although the company also makes a premium membership available with unlimited credit disputes and TransUnion credit monitoring.

But Ovation also provides members with comprehensive educational tools designed to empower them to take control over their own credit, resources that Sky Blue Credit doesn’t come close to matching. For this reason, we’d pick Ovation Credit Services by Lending Tree as the better value.


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