The Consumer Financial Protection Bureau (CFPB) has finalized a significant enforcement action against Lexington Law and CreditRepair.com, two of the countryās largest credit repair companies. In August 2023, the CFPB obtained a $2.7 billion judgment against these companies for violating federal consumer protection laws. By December 2024, the CFPB began distributing $1.8 billion to 4.3 million consumers from its victims relief fund, representing the largest distribution in the agencyās history.
The Case Against the Credit Repair CompaniesĀ
The CFPB alleged that Lexington Law and CreditRepair.com collected illegal advance fees for credit repair services through misleading telemarketing practices. Consumers were charged upfront fees for services based on false claims, such as opportunities for rent-to-own housing, and often did not receive the promised results.Ā
CFPB Director Rohit Chopra emphasized the impact of the companies’ practices:Ā
āLexington Law and CreditRepair.com exploited vulnerable consumers who were trying to rebuild their credit, charging them illegal junk fees for results they hadnāt delivered. This $1.8 billion distribution demonstrates the CFPBās commitment to making consumers whole, even when the companies that harm them shut down or declare bankruptcy.āĀ
Timeline of Key EventsĀ
- March 2023: A district court ruled that the companies violated the Telemarketing Sales Rule, which requires credit repair companies to provide documented results and wait at least six months before charging consumers.Ā
- August 2023: The CFPB secured a $2.7 billion judgment against the companies. As part of the ruling, the companies were banned from telemarketing credit repair services for 10 years. In response, they filed for Chapter 11 bankruptcy, closed 80% of their operations, and laid off 900 employees.Ā
- December 2024: The CFPB began distributing $1.8 billion to affected consumers using its victimās relief fund, which is financed by penalties paid by companies violating consumer protection laws.Ā
Settlement TermsĀ
- Telemarketing Ban: The companies are prohibited from telemarketing credit repair services or working with telemarketing affiliates for a decade.Ā
- Consumer Redress: Notices were sent to affected consumers, outlining their right to cancel services and explaining the settlement terms.Ā
- Civil Penalties: Progrexion Marketing was fined $45.8 million, while the John C. Heath law firm faced $18.4 million in penalties.Ā
CFPBās Commitment to Consumer ProtectionĀ
The $1.8 billion distribution highlights the CFPBās dedication to holding financial companies accountable for unfair practices. Despite the companiesā insolvency, the victims relief fund enabled compensation for consumers impacted by the violations.Ā
This case underscores the importance of protecting consumers from deceptive financial practices and demonstrates the CFPBās role in enforcing fair practices within the credit repair industry.Ā
Author:Ā Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clientsā criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jenniferās guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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