Colorado Attorney General John Suthers has sued a credit repair company for charging upfront fees and failing to disclose the total cost of its services, thereby violating federal and state law.

The suit, filed in Denver District Court, says that Veracity Credit Consultants charges consumers initial fees of up to $99, and subsequent monthly fees as high as $79. Colorado law prohibits credit repair companies from charging fees until their services are complete.

According to the complaint, Veracity has promoted credit-optimization services specifically aimed at helping consumers improve their credit scores. The company boasts of results and claims to be one of the best credit-repair outfits available.

According to Suthers, many of the company's claims are exaggerated at best. He specifically pointed to the company's claim that it can optimize consumers' credit reports by repairing or erasing bad credit as worthy of suspicion. Both the federal Fair Credit Reporting Act and Colorado Consumer Credit Reporting Act provide that credit bureaus can continue to report negative information about a consumer's credit for up to seven years, and can report bankruptcies for up to ten. The statutes seem to throw water on Veracity's claim that it can quickly clean up consumers' credit reports.

Veracity's website says that the company uses knowledge of the law and years of experience perfecting a proven formula to provide results while protecting your rights. Once a consumer opens an account, according to the site, Veracity investigates and works with credit bureaus and creditors and works to remove errors, delete negatives, and highlight good accounts.

Despite these impressive claims, Veracity's client-services agreement explicitly says that the company doesn't represent or warrant that it will achieve specific results for client.

The company offers two levels of accounts Select and Platinum. Select accounts include a free credit report, analysis and translation of a consumer's credit history, access to highly trained credit consultants, and disputes of inaccurate information on a consumer's credit report. The service has a $69 signup fee and $49 monthly charges after that. The Platinum account has all the features of the Select plus a personalized credit optimization plan. That account has a $99 signup fee and subsequent monthly charges of $79.

Suthers emphasized that, despite the panic and desperation that can accompany serious financial problems, consumers should take a sober look at the often-extravagant claims made by credit repair agencies.

Consumers trying to work their way out of debt and improve their credit should carefully examine the promises any credit repair company makes, Suthers said. Consumers also should beware of any company that charges upfront fees for any credit repair services. Upfront fees are prohibited under Colorado and federal law.

In a statement, Veracity said that it firmly believes that it operates in full compliance with the letter and the spirit of both the Colorado and federal law and insisted that it provides a legal and valuable service to consumers, and has in fact helped consumers remove tens of thousands of inaccurate items from their credit histories.