“It was the best of times, and it was the worst of times.” Nothing could be truer for this time in the credit rating repair industry –we are at a turning point. It is time to examine the credit rating repair industry’s customer business payment models and decide going forward what models and methods are in the best interests of consumers, credit rating repairers and associated companies.
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs and www.fixmybadcredit.com.au.
Consumer demand in recent years has demonstrated the true value of third party credit rating repair. Unfortunately much of the consumer recognition has been lost from a credibility standpoint under a wave of confusion over the credit rating repair industry’s customer business payment models. I examine the current credit rating repair business models in terms of best interest for consumers with a view to the application of some best practice standards for fee structure.
In this post, I share my examination of credit rating repair customer costs with you and show how both business models can co-exist to benefit consumers, provided going forward, some recommendations are taken on board across both models to streamline transparency and fairness for consumers.
In the article Credit Rating Repair Customer Costs – A Tale of 2 Business Models, I investigate the two customer payment business models current in the credit rating repair industry, ‘fee for service’ and ‘no win no fee’ payments.
The fee structure for the credit rating repair industry must be investigated with a view to creating some best-practice reforms in the interests of consumers. The industry is ripe for criticism for confusing consumers due to the vast differences in fee structure across credit rating repair companies and lack of clear guidelines for advertisement and configuration of customer payments.
Where the credit rating repair industry falls down, is that there are some inconsistencies in the way companies are delivering and advertising their services – some are not advertising their fees, some are charging way too much and delivering too little – and this creates mistrust across the board and tarnishes the reputation of what is actually a necessary service.
Differing customer business models in the credit rating repair industry
‘Fee for service’ in the credit rating repair industry, means a fixed amount charged to a client for an agreed level of service. This is charged based on the level of service and or performance. This means that the fee structure is provided to the client up front, and as the client approaches each stage of service, the fee for that service will be due.
The fee for service business payment model, by its very nature is more transparent, and applies principles which are in the best interest of the consumer – for these reasons:
Upfront fees give the consumer more reassurance they will be told what they are going to get, how much it will cost, and because money has changed hands – the credit rating repairer will be bound to deliver what they have promised.
This model allows the credit rating repairer to give better service to the consumer, through the increased level of commitment by the consumer.
The introduction of a refundable assessment fee takes the benefits of fee for service to another level – by assuring those that enter into this business payment model are refunded any monies should they not proceed beyond the assessment stage of credit rating repair.
The difficulty in a fee for service model is its restriction on consumers who can’t afford upfront payment, and can’t borrow due to a bad credit rating. At the same time, the fee for service credit rating repairer would likely impose less ‘defaults’ on consumer credit files.
‘No win no fee’ cost agreements are also known as conditional cost agreements. No win no fee broadly means that the client only pays credit rating repair costs if their claim is successful.
The definition of a “successful claim” may vary between credit rating repairers. Ideally a best practice scenario should be where a successful claim is defined as a negative listing removed from the client’s credit file.
When contrasted with fee for service, the win no fee business payment model has some significant disadvantages for consumers – particularly where the disclosure of fees and charges are concerned.
Extra costs; and hidden costs dumped on consumers regardless of their success in credit rating repair can lead to confusion and anger over fees and charges.
There is also the potential to skip vital steps in assessment which can lead to an inadequate volume of information prior to the engagement of credit repair – potentially leading to promises of credit repair not based in fact.
Furthermore, should non-payment arise, the company may be forced to place defaults on credit files– a woeful situation that no credit rating repairer wishes to be in.
Despite the disadvantages, the no win no fee business payment model has merit due to the ability to help those people who otherwise could not afford credit repair.
In deciding which customer business payment model to adopt for the credit rating repair industry, I address other professions where these debates have occurred.
The financial planning industry is on the cusp of streamlining a fee for service payment model across the entire financial planning sector. This has been in response to demand for better transparency to combat criticism of conflict of interest – and uses a ‘best interest’ approach.
This consumer ‘best interest’ approach has strong merit when constructing any best practice customer payment model in the credit rating repair industry.
In the legal arena, the no win no fee model popular in personal injury claims has been criticised for misleading advertising and hidden costs, something which the credit rating repair industry should keep in mind when making any reforms.
With both business models having merits for credit rating repair, a number of recommendations across the board on both models would need to be instigated to create a level playing field for consumers.
These include refundable upfront fees plus full disclosure of all fees, charges, terms and conditions on advertising. These changes make customer payments fair and simple to understand.
These best practice reforms to business payment models would create transparency and credibility and would vastly contribute to providing a valid place for credit rating repair in Australasia’s credit reporting landscape in the future.
The biggest criticism of the credit rating repair industry is that professional credit rating repairers are seen to be charging fees for what consumers can technically do for themselves.
In reality, credit reporting can be a minefield for the individual to navigate. A good professional credit rating repairer can do much more for a consumer, and has a much greater chance of success, through knowledge of legislation and relationships with and ability to negotiate with creditors.
This greater transparency will allow the industry to focus on the real issues within credit reporting which have previously been hidden under a cloud of heresay and confusion from outsiders.
It can be said, that the footsteps the credit rating repair industry leaves during this time will allow credit rating repairers to march forward, revolutionising credit reporting itself in Australasia.
Full article can be read on Graham Doessel blog here: http://grahamdoessel.com/wp/credit-rating-repair-customer-costs-a-tale-of-two-business-models/.
