Federal financial consumer protection agency sounds alarm about credit repair companies

FCAC warned Canadians of the steep cost associated with this type of borrowing: “Be aware this type of loan usually has a high-interest rate.”

One loan application viewed by Global News entailed a cost of over 50 per cent in fees and interest over the value of net savings accrued to the customer.

Canadians wishing to start their credit history anew have cheaper options, Douglas Hoyes, a licensed insolvency trustee at Kitchener-Ont.-based Hoyes Michalos, told Global News.

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A secured credit card such as the Home Trust Secured Visa[5], costs only up to $60 a year in fees and nothing in interest, as long as the monthly balance is regularly paid in full. Late payments incur interest of 14.9 per cent, or 19.99 per cent for the no-fee version of the card. Repayments to a secured credit card also appear on the customer’s credit report, helping to build or rebuild credit.

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FCAC also warned that with some companies offering savings or credit repair loans, “you may never actually receive any money because the company will tell you the loan amount will cover its services or programs,” according to FCAC.

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Canadians should also keep in mind that, “it’s impossible to change or erase information that’s part of your credit history unless information is inaccurate. Improving your credit score will take time. You have to show your creditors that your habits have improved and that you are paying back your debt on time,” FCAC noted.

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Other types of debt-management products flagged by FCAC

  • Companies that guarantee they can solve your debt problems

Some companies claim they can negotiate a deal with your creditors so you’ll have to pay back only a fraction of what you owe.

“You may still need to pay fees even if your creditors refuse to negotiate or make a deal to settle your debt,” noted FCAC, adding that, “you could end up in even more debt than you were in before.”

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