The Consumer Financial Protection Bureau (CFPB) reached a settlement with the largest credit repair companies in the country for violations related to telemarketing and collecting advanced fees.
Specifically, the settlement agreement follows a ruling from the court that two of the largest in this space — Lexington Law and CreditRepair.com, and related entities — collected illegal advance fees for credit repair services through telemarketing in violation of federal law. If approved, the settlement would impose a $2.7 billion judgment against the companies and would ban them from telemarketing credit repair services for 10 years.
“Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law. These credit repair giants used fake real estate and rent-to-own opportunities to illegally bait people and pad their pockets with billions in fees,” CFPB Director Rohit Chopra said. “This scam is another sign that we must do more to fix the credit reporting and scoring system in our country.”
Lexington Law and CreditRepair.com market their credit repair services through a web of related entities in the Salt Lake City area, including PGX Holdings, Progrexion Marketing, and John C. Heath, Attorney-at-Law PC law firm.
During the time period relevant to the lawsuit, the companies operated nationwide and had more than 4 million customers who were subjected to telemarketing. In 2022, the defendants had combined annual revenues of approximately $388 million.
Previously, the CFPB sued the companies to halt their illegal conduct and seek redress and other relief. In March of this year, the district court ruled that the defendants violated the advance fee provision of the Telemarketing Sales Rule. This rule requires credit repair companies to wait until six months after they provide the consumer with documentation reflecting that the promised results were achieved, before they request or receive payment from the consumer.
Following the district court’s ruling, the companies filed for Chapter 11 bankruptcy protection. They had shut down about 80 percent of their business, including their call centers, and laid off about 900 employees in response to the court’s ruling.
If entered by the court, the settlement will, among other things, ban the perpetrators from telemarketing for 10 years. It will also require them to send a notice of the CFPB settlement to any remaining enrolled customers who were previously signed up through telemarketing.
It will also impose a $2.7 billion judgment for redress. Due to the companies’ financial insolvency, the CFPB will determine whether the CFPB’s victims relief fund can be used to make payments to those harmed by the perpetrators. It will also impose more than $64 million in civil penalties.