CFPB proposes billion-dollar settlement against national credit repair entities

On August 28th, the Consumer Financial Protection Bureau (CFPB) proposed a settlement against some of the largest credit repair companies in the country for an unlawful and abusive telemarketing strategy. If entered, the settlement would officially mark the ending of a four-year long civil battle.

The proposed judgment and order would require $2.7 billion in consumer restitution payments from each company involved, including major names in the credit repair industry, like Lexington Law and Progrexion.

Over 4 million customers subject to 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 2019, where the CFPB originally alleged illegal telemarketing tactics.

In March 2023, the district court ruled the companies guilty of violating the Telemarketing Sales Rule (TSR) through requesting and receiving illegal advance fees through telemarketing. Over 4 million customers nationwide were subjected to these unlawful practices during the time period relevant to the suit. What’s more, in 2022, the companies had a combined annual revenue of $388 million.

“These credit repair giants [CreditRepair.com and Lexington Law] used fake real estate and rent-to-own properties to illegally bait people and pad their pockets with billions in fees,” said CFPB Director Rohit Chopra in a recent press release.

Telemarketing Sales Rule was violated through illegal fees and payments

According to the TSR, credit repair companies are required to wait six months after the customer has received the documentation proving the promised results before requesting or accepting payments.

However, the companies — some of which are the biggest credit repair entities in the country — were found guilty of violating federal law through collecting illegal advance fees through telemarketing.

While this lawsuit isn’t a reflection on the credit repair or debt relief industry as a whole, it does bring awareness to the need for more oversight and consumer awareness when it comes to most forms of debt relief.

“Americans across the country looking to improve their credit score have turned to companies like CreditRepair.com and Lexington Law,” said Chopra. “This scam is another sign that we must do more to fix the credit reporting and scoring system in our country,” he added later on in the press brief.

Settlement calls for over two billion in consumer redress

As per the court’s decision back in March, the companies involved have filed for Chapter 11 bankruptcy protection. They also reported shutting down 80 percent of their business and laying off about 900 employees.

The CFPB’s proposed settlement would require $2,660,926,481 for consumer redress against all of the defendants as well as a $45,817,452 civil money penalty against Progrexion and a $18,408,726 civil penalty against Lexington Law.

The settlement also would ban the companies from any telemarketing credit repair services of any kind for 10 years and are banned from conducting business with certain marketing affiliates.

What impacted consumers need to know

The CFPB has stated that due to the companies’ “financial insolvency’ it will determine whether its victims relief fund can be used to satisfy the redress payments.

While nothing has been requested of those negatively affected, if constituted, the settlement will require that a notice be sent out to consumers detailing the following:

• The settlement
• The court’s summary judgment holding
• The consumer’s right to cancel their services with the companies
• How to cancel your credit repair service