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Ask John: Interview with a Piggybacker

Last month I had the opportunity to chat with the owner of one of the companies that currently offers “piggybacking” services. Essentially, they target market their services to consumers who have poor credit scores and sell access to credit card accounts.

If you are unfamiliar with the practice, please read our recent article on piggybacking and FICO’s response at Credit.com.

There were five things that I wanted to glean from this interview:

  1. Was the business a “one man show,” or did he employ a staff?
  2. Was he familiar with state and federal laws regulating companies that provide credit repair services and had he ever received any feedback from regulators regarding his services?
  3. Was he aware of the firestorm ignited in both the credit and regulatory communities by the emerging “piggybacking” industry?
  4. Did he believe that his company could still prosper, indeed even survive, in an environment where FICO® is closing the scoring loophole regarding “piggybacking” in September?
  5. Was he and/or any other member of his staff familiar – at any level - with credit reporting, credit scoring and/or the workings of the credit system?

About the Company

He is a fairly young fellow. Under 30, he has been running this business for some three years. He said he has never worked in the credit industry. It would appear, for his purposes, he was simply in the “right place” at the “right time” when lightening struck.  In his world, he hit the lottery: his annual revenues exceed $1,000,000.

He said that his business was thriving before all of the press coverage. However, in light of recent developments, one might argue that coming up so hard and fast over the public radar may not have been such a positive development for his growth prospects (or that of similar organizations) as it has stirred the sleeping behemoths of the credit industry and peaked the curiosity of a number of politicians and regulators.

The company employs two “credit experts” that consult with people on the best way to improve their credit scores. When I inquired as to their qualifications, he said that they knew how to read and interpret a credit report. Further, he said that he has a former loan officer on staff.

As a credit industry veteran of 16 years, I was pretty unsettled by this response. Afterall,  these folks are advising consumers as to the best course of action to take with their credit. They have placed themselves in a position of trust and the best he could say was that “they knew how to read and interpret a credit report.”

Reflecting upon our conversation, I believe – if pressed -- he would admit that his own knowledge of credit is somewhat limited.

This opinion was reinforced when I read a recent email he sent to his subscribers with credit “facts.” I wasn’t particularly comfortable with the accuracy of the information that I reviewed.

I remain concerned that neither he, nor his staff, possesses the knowledge base of even entry-level customer service reps at the credit bureaus.

About The Law

In our interview, the owner said that he was “somewhat” familiar with the Credit Repair Organizations Act ( CROA ). In response to one of my questions, he grudgingly admitted that they are, by legal definition, a credit repair company but believed that they comply with the provisions of CROA. He then told me that they are not bonded in every state where they have customers. Most, if not all, states require companies that perform credit repair services for a fee to post bonds.

I think I struck a nerve when we talked about the legality issue. He quickly gave me the marketing mantra of most, if not all, credit repair companies: i.e., we sell consulting services rather than credit repair services and credit repair services are a free secondary offering of our company.  Problem -- his website clearly markets their services as helping consumers to “raise your scores.”

What Now?

When I asked him what was next for his company given that FICO was altering its scoring model in an effort to combat “piggybacking,” he said that he is in the process of creating a similar service which will compensate consumers for adding another person to a credit card account as a joint cardholder. This, of course, would allow both cardholders to get credit for the account in their FICO scores.

The issue for all parties: they’re in now bed with people they don’t even know and personally financially liable for any payments on the account. If the payments aren’t made, the credit reports and credit scores of everyone involved will suffer because the lender will attempt to collect the debt from ALL joint cardholders.

Considering the legal and financial ramifications, anyone who would knowingly choose to be involved with the credit card account of a complete stranger as a joint cardholder is playing with fire.

Note: Credit.com Educational Services, Credit.com and CreditBloggers.com do not endorse any piggybacking credit repair services. We believe that consumers should earn good credit scores through solid credit management rather than buying their way onto the account of another – particularly someone they don’t know.

If you have a comment for John or would like to ask him a question then please feel free to drop him a note at CreditExperts@credit.com

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