The Consumer Financial Protection Bureau (CFPB) has reached a proposed settlement with major credit repair firms, including Lexington Law and CreditRepair.com. This follows a court ruling that these firms had unlawfully collected advance fees via telemarketing, in violation of federal regulations. If accepted, this would result in a $2.7 billion penalty against the companies, and they would also be prohibited from telemarketing credit repair services for a decade.
In a landmark decision, the Consumer Financial Protection Bureau (CFPB) is looking to hold some of the most prominent credit repair brands in the U.S. accountable. They have pinpointed illegal fee collection practices and are now stepping in to protect consumers. This article dives deep into the CFPB’s proposed settlement and what it means for the future of credit repair services in America.
Illegal fee collection through telemarketing
Central to the case is the manner in which these credit repair giants, most notably Lexington Law and CreditRepair.com, conducted their business. The firms reportedly collected advance fees for their credit repair services via telemarketing, violating federal law.
The weight of the settlement
The settlement is not a light one. With a staggering $2.7 billion judgment looming over them, this could reshape the credit repair industry’s operations for years to come.
Behind the brands
The role of Lexington Law and CreditRepair.com
These two are not just any brands; they represent the pinnacle of credit repair services in the country. Both are interconnected with other entities like PGX Holdings and Progrexion Marketing, all operating predominantly from the Salt Lake City area.
Financial impact
By 2022, these entities had made a combined total of approximately $388 million in revenue. The breadth of their operations and the sheer number of customers affected makes the situation even more significant.
Legal consequences and impacts
District court’s verdict
In March 2023, the district court declared that the companies were guilty of infringing the Telemarketing Sales Rule’s advance fee provision. This rule is pivotal in safeguarding consumers against malpractices in telemarketing and imposing payment restrictions.
Bankruptcy and layoffs
Following the court’s judgment, these companies sought Chapter 11 bankruptcy protection, leading to the closure of a major portion of their operations and laying off nearly 900 employees.
What will the settlement entail?
The settlement, if approved, will impose several restrictions and penalties, including a 10-year ban on telemarketing, notices to consumers, a $2.7 billion redress, and over $64 million in civil penalties.
Key takeaways
- The CFPB is proposing a massive $2.7 billion settlement against major credit repair brands.
- The telemarketing practices of these companies were reportedly in direct violation of federal laws.
- Lexington Law and CreditRepair.com are central to this case, with ties to other entities.
- The fallout has already seen layoffs and bankruptcy filings.
- The focus now is on increasing transparency and safeguarding consumer rights in the credit repair industry.
View Article Sources
- Consumer Financial Protection Bureau Official Press Release – CFPB
- Chapter 11 Bankruptcy Basics – U.S. Courts
- How to Get Recovery Partners From Your Credit Report – SuperMoney
