EXHIBIT

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COMPANY NEWS

Pros, Cons

Of Credit Clinics

Repair Claims Draw Scrutiny

By LEONARD SLOANE

Few things bedevil modera sumers more than a poor credit rat ing, especially when it is enfounded and they but treated as deadbeats.

To clean slate, more and more people are turning to credit clinics companies that help consumers dispute and remove what they believe to be erroneous data from credit bureau files. More than 1,000 such cridit clinics have sprung up across the country in recent years, charging free ranging from 25 to $2,000 for their servicm.

But while must credit clinics are apparently on the up and up, some have been cited by government agen cies or criticized by Better Bustness Bureaus and nonprofit credit counse lors for promising more than they can, or will, deliver. According to their critics, such clinics, also known as credit-repair companies, often imply that they correct anyone's poor credit record, whether or not the information in it is accurate.

"Accurate information magically be erased from a credit re port for any amount of money." Bar. bara Berger Opotowsky, president of the Better Business Bureau of Metropolitan New York, said.

The mounting criticism over credit clinics led to the passage this year of a new law in California-the first of its kind in the nation to regulate their advertising and business prac tices. Passage of the bill followed complaints that many clinics falsely ied individuals to believe they could obtain credit by upgrading their credit file.

Variery of Services

Credit clinics generally describe their function as that of belping the public remove erroneous, outdated or incomplete data from credit bureau files. Among their services are identi fying the credit bureaus that may have an individual's credit file, as sisting an individual in obtaining those tiles and preparing correspondence and forms to dispute informeuon listed there.

Their role, they say, is essentially one of assisting consumers in protect. ing and exercising what are their legal rights. Under a provision of the Fair Credit Reporting Act, individu als who have been denied credit are allowed to question the accuracy of any item in their credit bureau file. For a modest fee or no charge if credit has recently been denied some ane-a credit bureau itself will unally provide a person a copy of his or her credit record.

What the credit clinics do, there is offer a service for a fee that ta fore. basically no different from what com sumers themselves can choose to do. Consumers are often ware that they may request copies of their edit sports and dispute any items in them, without the aid of a compaay." the president of the New York Better Business Burean said.

Ronald A. Stewart, praside of Financial Planning Associates, a New York cliate, said, however, that when it comes to credit burents, people get very confused." What it comes down to, be said, is the ques on "Do you want to call an expert

How to Check Credit File

Any individual can investigate the contents of his or her credit Alle by directly contacting one or more of the approximately 2,000 credit bureaus, or consumer credit clearinghouses. in the

United States. The nearest ones can be found by calling a local Better Business Bureau of by looking in the telephone Yellow Pages under "Credit Rating or Reporting Agencies."

Although the Fair Credit Re porting Act requires that a bureau give a person no more than an oral or written credit history re view, many bureaus will go be yond the technical requirements of the law and furnish the same computer-generated compilation of facts that they give the banks, .retailers and other companies that subscribe to their service. An Individual who has been denied credit on the basis of negative in

enced person to do something, or do you want to do it yourself?"

Adolph Fleisher, a fund-raiser in North Hollywood, Calif., was satis fled with results achieved by the clinic he employed when he discov. ered inaccurate information in his file. It took the clinic almost twe years to achieve the results, and it cast Mr. Fleisher $350, but in the end the erroneous material was removed from his credit record.

"They know the system and they understand the workings of these retall credit companies," he said. "They engage in the letter-writing and the contacts, which is difficult for the average person. I don't think I would have been able to get it straightened out without them.

Catherine Brockier, however, had a different experience. A New York resident, Miss Brockunier was overdus as sure of bar lils not un long ago and, after anally catching up on bar payments, she contacted local credit clinic to make sure her record showed she had met her obligations. But she said in a telephone Interview and ir a letter to a local credit bureau that after paying the first 250 on a 330 charge by the clinic for its services, no changes were made in her record and the clinic contimised to dun ber for the remainder of its fee.

Increasingly, as credit clinics have expanded from their origins in Callfornia to other states, they have come under criticism from dissatisfied customers and from other quarters-in

formation from a credit bureau can obtain this review without charge within 30 days of the denial. Otherwise, the fée typically ranges from $8 to $12 for such a credit check.

After inspecting this record of credit behavior, a consumer can question any item believed to be inaccurate, misleading or vague. The credit bureau must then investigate and remove any item that cannot be substantiated:

When a bureau affirms, rather than removes, a questionable item, an individual can present a 100-word explanation that must be placed in his or her file. And whenever an adverse item is deleted from a file or an explanatory statement is added to one, a consumer may request that the credit bureau inform every credit grantor who received a report within the last six months.

Under the Fair Credit Reporting Act, a credit bureau must investigate a disputed record "unless there is reasonable grounds" to believe a r quest "is frivolous or irrelevant." One complaint involves clinics that have been known to advise customers to dispute almost everything in a file, forcing the credit bureau to request verification of this data from the vari ous credit grantors.

the

The bureaus are required to complete the verification process "within a reasonable time." which has generally been considered to be 30 days. or else the data must be removed from consumer's record. If both bureaus and greators are swamped with such requests from men and women with bad credit records, the established system could become jammed and a plethora of consumer Information would have to be removed from credit bureau files.

Larry Smith, executive vice president of the Citon Corporation, which owns many credit bureaus. said of the credit clinics: "I think they are a business that is a business. There are cases where they pray upon people's lack of knowledge."

Ann Fortney, associate director for cralit practice at the Federal Trade Commission said: "We have run chail that when a crait-repit clinic makes the representation that It can remove all negative information, even when accurate, that's a false representation. There have been misrepresentations, and we have investigated some companies." 10 Cilales Cited

The New York Better Business Bureau recently cited 10 credit clinics in the greater New York City area for such activities as making misleading or potentially misleading statements making unsubstantiated claims and failing to disclose limitations on of fers. For example, the Correct Credit Company of Howell, N.J., the clinic with which Miss Brockunter dealt. other was charged with, among things, failing to substantiate its claim that "we can correct your bac credit rating."

A message left for comment from Pat Pasano, president of Correc Credit, was not returned. Attempts to contact the other companies on the Better Business Bureau list yielded no answers when telephoned, or a recording that a phone number had been disconnected, or no phone num ber at all for an address given.

"I hear stories every day where people are being told their credit re ports can be repaired to get bankrupt. cles, judgments and all other nega. uve things taken off their credit re port," said Luther R. Gatling, presi. dent of Budget and Credit Counseling Services, the New York affiliate of the National Foundation for Consumer Credit. "I'd like to see those fellows blown out of the water."

Three years ago, the National As sociation of Credit Counselors was es. tablished in Los Angeles to help improve the image of the credit clinic industry. The founder and president of the association is Daniel A. Kasth. who is also president of Teltrans Credit, a clinic in Los Angeles.

Last year the state of California brought a civil suit against both the company and Mr. Kasth. charging violations of the Business and Protes. sions Code and acts of unfair compeu. tion. The suit contends that Teltrans "through their advertising and sales presentation, lead prospective buyers to believe that defendants can cure their credit problems, clear up the:: credit history and enable them to obLain credit they would not otherwise be able to get."

Susan E Henrichsen, a state Deputy Attorney General, noted that the court ordered a default against Mr. Kosth because he did not respond to requests to produce certain docu ments. But Mr. Kasth said. "We have stopped using that type of advertis ing.

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YOUR
MONEY

MATTERS

By KATHLEEN A. HUCHES Staff Reporter of THE WALL STREET JOURNAL

"Is bad credit ruining your life? We erase black marks....

"Now get major credit cards easy!" "Bankruptcy no problem!"

Such are the claims of hundreds of "credit clinics" that have sprung up around the country. The companies say they can clean up an individual's credit history and help the desperate obtain credit cards.

But while some are legitimate, others have drawn fire from law-enforcement agencies for allegedly false or misleading advertising. Some operate for quite some time in a fraudulent manner collecting money with false promises." says Leonard Schapira, a consultant at the Better Business Bureau in Los Angeles.

Daniel Kosth, president of the National Association of Credit Counselors, which claims more than 500 credit-repair compa. nies as members, concedes that "there have been some problems in advertising techniques. But he says the companies do help people clear up credit reports and get credit cards.

California Law Suit

The state of California has filed a civil suit seeking to enjoin Mr. Kosth and Teltrans Credit. a Los Angeles-based creditrepair company he founded. from using misleading advertising. Mr. Kosth says the company has changed its advertising, but he terms the suit "bogus" and denies any wrongdoing.

Credit clinics operate in a variety of ways. In the case of credit reports, most take advantage of a federal law that gives consumers the night to challenge the accuracy of information kept on file by creditreporting agencies. Negative Information. such as failure to pay a bill or paying late. often makes it difficult to get a mortgage or any type of consumer loan.

Under the law, all consumers have a right to find out what is in reports on them. selves. Reports must be provided free of charge to people who have been denied credit based on information in them. In other cases, credit-reporting companies charge fees ranging from $8 to $20. If a customer requests verification of the infor mation, the agency generally must confirm it and respond within a 'reasonable" ame-usually 30 days-or erase the infor mation.

The clinics' critics argue that consumers can check their credit records on their own for a lot less money than the

clinics charge. And some industry execu tives agree, at least in part.

"We don't do anything that consumers with chutzpah couldn't do on their own." says Enc Phillips, the vice president of op erations at Amencan Credit Clearing Inc. in Los Angeles, which charges a minimum fee of $225. But he adds that some people simply don't want to bother with the procedure of challenging the information.

Law-enforcement officials say their big gest concern is that many of the companics advertisements either imply or guar antee that all negative information can be wiped off a credit report. That just isn't true as an unqualified promise." says Su san Henrichsen, a deputy attorney general in San Diego.

The credit repair companies do have

A CLAIM that all

negative information can be wiped off a credit report 'just isn't true as an unqualified promise,' says

a law-enforcement official.

ways to remove some negative information. however. A tactic used by some of them is inundating credit agencies with requests that they venty information in consumers files. A customer s creditors often don't respond in time, and the information is crased.

They dispute everything in the file and hope that someone drops the bail. savs Diane Terry, a manager at Trans Union Credit Information Co.. Fullerton, Calif.. one of the largest credit-reporting compa.

nies.

Mr. Phillips of American Credit Clearing says that 50% to 60% of the time the creditor doesn't respond, and the informa tion is removed. But credit agencies are fighting back with stepped-up efforts to verify information quickly. Appealing to Creditors

So some clinics now appeal directly to a customer's creditors to remove negative entries in exchange for payment of outstanding debts. Mr. Kosth says many ma jor creditors agree.

This irks credit agencies. "It's unethi cal for creditors to remove accurate infor mation on the reports. says Marvin Kaplan, spokesman for Associated Credit Bu reaus in Houston, which represents about 1.400 credit agencies. The credit clinics are a threat to the entire credit-reporting system. he adds.

Many credit clinics also claim to help people get credit cards. According to a re

port by the Better Business Bureau ins Angeles. however, most of their advertisements don't indicate that an individual of ten must deposit money in an out-of-state savings and loan to get a secured carc The deposit, usually $300. becomes the maximum credit line.

Most financial institutions dont fe secured credit cards, because the rute deliquent payments is usually higher than for unsecured cards. Even those issuing se cured cards often require customers meet minimum credit standards.

Mr. Kosth of the National Association of Credit Counselors says he knows of at eas: six lenders that will offer a secured card to anyone. He says some credit clinics senc people credit-card applications from 1g gressive lenders that use rock-bottom ene ing standards and don't require deposits. Information Requirements

In an effort to crack down on fa:se claims. California passed a law last ye requiring the credit services to provide more information to customers. The aw also requires the companies to post a conc to protect consumers with legitimate com plaints. Pennsylvania and Utan have 1:5 taken steps.

Still, the Califorma aw hasn't come anywhere close to eliminating the lem. says Ms. Henrichsen of the state torney general's office. People set up business using fictitious names. more jaw and by the time we find nut them, they ve closed down. sne says Ms. Henrichsen says the office has

I number of credit-repair companies. 3 ng to enjoin them from using misie. advertising, and she expects more sus be filed this year.

In one of the suits, the face that Service One International Corp Angeles made inisleading statements indicating that it could obtain Visa, Mas terCard and other credit cards for who bought its services. The suit filed state court in Los Angeles, says that company often failed to obtain the and didn't disclose that a customer nac open a savings account to get the care The suit also says the company offered to refund a customer's fee in full within days if the card didn't arrive in the prom ised time. But customers haven received the refunds or haven't got them within th promised time. the suit maintains

A lawyer for the company, which has changed its name to Service One Corp... nies the allegations. The company as intentionally misrepresented what t do. he says. and if some people were misied, the company has taken steps to fund their noney. He adds that there inay be instances where 4 credit wasn't obtained due to the conduct of the applicant