On August 28, the Consumer Financial Protection Bureau (CFPB) proposed a settlement against some of the nation’s largest credit repair companies for an unlawful and unlawful telemarketing strategy. If implemented, the settlement would officially mark the end of a four-year civil war.
The proposed judgment and order would require $2.7 billion in consumer restitution payments from each company involved, including big names in the credit repair industry such as Lexington Law and Progrexion.
More than 4 million customers are victims of illegal telemarketing
The companies involved in the lawsuit, PGX Holdings Inc. and its subsidiaries, collectively known as Progrexion (including CreditRepair.com) and Lexington Law, have been involved in the suit since 2019where the CFPB originally alleged illegal telemarketing tactics.
In March 2023, the court ruled that the companies were guilty of violating the Telemarketing Sales Rule (TSR) by soliciting and receiving illegal advances through telemarketing. More than 4 million customers nationwide were subjected to these unlawful practices during the period relevant to the lawsuit. Additionally, the companies had combined annual revenues of $388 million in 2023.
“These credit repair giants [CreditRepair.com and Lexington Law] used fake real estate and rental properties to illegally lure people and line their pockets with billions in fees,” said CFPB Director Rohit Chopra in a recent release. press release.
The telemarketing sales rule was violated through illegal fees and payments
According to the TSR, credit repair companies must wait six months after the customer receives documentation proving the promised results before they can request or accept payments.
However, the companies – some of which are the largest credit repair companies in the country – were found guilty of violating federal law by collecting illegal advances through telemarketing.
While this lawsuit is not reflective of the credit repair or debt relief industry as a whole, it does raise awareness about the need for increased oversight and consumer awareness when it comes to most forms of debt relief.
“Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law,” Chopra said. “This scam is yet another sign that we must do more to fix our country’s credit reporting and scoring system,” he added later in the press letter.
The settlement requires more than two billion euros in compensation for consumers
According to the court’s ruling in March, the companies involved have filed for Chapter 11 bankruptcy protection. They also reported that they had closed 80 percent of their business and laid off approximately 900 employees.
The CFPB’s proposed settlement would require $2,660,926,481 for consumer recovery against all defendants, as well as a civil penalty of $45,817,452 against Progrexion and a civil penalty of $18,408,726 against Lexington Law.
The settlement would also ban the companies from providing telemarketing credit repair services of any kind for a period of ten years and from doing business with certain marketing partners.
Consumers need to know what the impact has been
The CFPB has said that due to the companies’ “financial insolvency,” it will determine whether the emergency relief fund for victims can be used to pay reparations.
While nothing has been asked of those negatively affected, the settlement, if reached, will require a notice to be sent to consumers containing the following details:
- The settlement
- The court’s summary judgment judgment stands
- The right of the consumer to cancel his services with the companies
- How to cancel your credit repair service
