CFPB Clamps down on Credit Repair Companies, Leadership
The CFPB on June 27 filed two complaints and proposed final judgments in federal court against four California-based credit repair companies and three individuals for “misleading consumers and charging illegal fees.”
The bureau alleges that the companies not only charged illegal advance fees for credit repair services but also misrepresented their ability to repair consumers’ credit scores, according to an announcement. Under a proposed final judgment, Prime Credit LLC, IMC Capital LLC, Commercial Credit Consultants, Blake Johnson and Eric Schlegel would pay a civil money penalty of more than $1.5 million. Under a second proposed final judgment, Park View Law, formerly known as Prime Law Experts Inc., and its owner Arthur Barens would pay $500,000 in relinquished funds to the U.S. Treasury.
In complaints filed with the proposed final judgments, the CFPB alleges that the defendants made misleading, unsubstantiated claims that they could remove virtually any negative information from consumers’ credit reports and could boost consumers’ credit scores by significant amounts. The companies attracted thousands of customers through sales calls and their websites, at times targeting consumers who had recently sought to obtain a mortgage, loan, refinancing or other extension of credit. The CFPB alleges that the companies charged these consumers millions of dollars in illegal advance fees for their services. The bureau alleges that these practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule. Specifically, the CFPB alleges that the defendants:
- Charged illegal advance fees: Federal law bars telemarketers and certain companies from requesting or collecting fees for credit repair services until certain conditions are met about the delivery of those services. The companies charged a variety of fees for their services before demonstrating that the promised results had been achieved as required by law. Specifically, the companies charged consumers fees for an initial consultation to review a consumer’s credit report. The company also charged set-up fees totaling hundreds of dollars and monthly fees that often equaled $89.99 per month.
- Failed to disclose limits on “money-back guarantees”: The companies offered a money-back guarantee for certain services. However, they failed to disclose that the guarantee had significant limits, including that the consumer must pay for at least six months of the service to be eligible for the guarantee.
- Misled consumers about the benefits of their services: The companies misrepresented that their credit repair services would result in the removal of negative entries on consumers’ credit reports. The companies also misrepresented to customers that their credit repair services would, or likely would, result in a substantial increase to consumers’ credit scores. The companies lacked a reasonable basis for making these claims.
In addition to paying the amounts contained in the proposed final judgments, all defendants would be prohibited from doing business within the credit repair industry for five years and permanently prohibited from violating the Dodd-Frank Act or the Telemarketing Sales Rule. They have been filed with the U.S. District Court for the Central District of California, and they are only effective if approved by the presiding judge.
In September 2016, the CFPB filed a lawsuit alleging similar violations of federal law against Prime Marketing Holdings, a credit repair company that partnered with Park View Law from September 2014 to June 2015. That litigation is ongoing.
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