The Consumer Financial Protection Bureau (CFPB) reached a multi-billion dollar settlement with a collection of brands that offer credit repair services to American consumers, the agency announced on Monday.
The settlement includes some of the largest credit repair brands in the country, including Lexington Law and CreditRepair.com, following a court ruling that found the companies had collected illegal advance fees for credit repair services through telemarketing.
If the settlement is approved, the companies will also be banned from telemarketing credit repair services for a period of 10 years. They would also need to pay out compensation associated with a monetary settlement.
“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 in a statement. “This scam is another sign that we must do more to fix the credit reporting and scoring system in our country.”
Credit repair services offerings from impacted companies are marketed through a collection of related entities across the Salt Lake City, Utah area, including PGX Holdings, Progrexion Marketing, and John C. Heath, Attorney-at-Law PC law firm.
The companies operated had more than 4 million customers who were subjected to telemarketing, with defendants having combined annual revenues of approximately $388 million in 2022, the CFPB said.
The CFPB previously filed suit against these entities in 2019, demanding they “halt their illegal conduct” while the Bureau sought redress and other relief. Earlier this year, the district court ruled that the defendants violated the advance fee provision of the Telemarketing Sale Rule, which includes protective measures for consumers related to telemarketing and sets payment restrictions for certain goods and services.
That 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, the Bureau said.
That ruling preceded the companies filing for Chapter 11 bankruptcy protection when they “shut down about 80% of their business, including their call centers, and laid off about 900 employees in response to the court’s ruling,” the Bureau said.