http://credit.about.com/cs/fraud/a/050703a.htmNew Credit Identity ... A Dangerous Game Beware! You may be the target of a fraud called "file segragation" Thanks to the Federal Trade Commision (FTC), this information about file segregation is available to you. So what is "file segregation"? File segragation is a credit ID Fraud scheme you need to be aware of. If you have filed for bankruptcy or have bad credit generally, you may be the target of a credit repair scheme called "file segregation." In this scheme, you are promised a chance to hide unfavorable credit information by establishing a new credit identity. That may sound perfect except "file segregation" is illegal and you could face fines or even a prison sentence. You might see an ad from a credit repair company that promises to eliminate all negative remarks on your credit file including a bankruptcy and establish a new credit identity to use when you apply for credit. If you sign up for the service (which you pay for), you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs â?? which resemble Social Security numbers â?? are used by businesses to report financial information to the IRS and the Social Security Administration. After you receive your EIN, the credit repair service will tell you to use it in place of your Social Security number when you apply for credit. Theyâ??ll also tell you to use a new mailing address and some credit references. To convince you to establish a new credit identity, the credit repair service is likely to make a variety of false claims. Listen carefully; these false claims, along with the pitch for getting a new credit identity, should alert you to the possibility of fraud: 1. "You Can't get credit for 10 years after bankruptcy" - each creditor has its own criteria for granting credit. While one may reject your application because of a bankruptcy, another may grant you credit shortly after you filed for bankruptcy. And, given a new reliable payment record, your chances of getting credit will probably increase as time passes. 2. The "file segregation" program is affiliated with the federal government - The federal government does not support or work with companies that offer such programs. 3. The "file segregation" program is legal - It is a federal crime to make any false statements on a loan or credit application. The credit repair company may advise you to do just that. It is a federal crime to misrepresent your Social Security number. It also is a federal crime to obtain an EIN from the IRS under false pretenses. Further, you could be charged with mail or wire fraud if you use the mail or the telephone to apply for credit and provide false information. Worse yet, file segregation likely would constitute civil fraud under many state laws. The law prohibits false claims about credit repair and makes it illegal for these operations to charge you until they have performed their services. It requires these companies tell you about your legal rights. Credit repair companies must provide this in a written contract that also spells out just what services are to be performed, how long it will take to achieve results, the total cost, and any guarantees that are offered. Under the law, these contracts also must explain that consumers have three days to cancel at no charge. Under the law, you also have the right to sue in federal court. The law allows you to seek either your actual losses or the amount you paid the company â?? whichever is more. You also can seek "punitive" damages: sums of money to punish the company for violating the law. You also may wish to contact the FTC. Although the Commission cannot resolve individual credit problems for consumers, it can act against a company if it sees a pattern of possible law violations. You can call FTC toll free at 1-877-FTC-HELP (1-877-382-4357) ~ Michael T. Killian
