Customers charged illegal fees by two of the largest credit repair companies will soon see a refund check, the Consumer Financial Protection Bureau recently announced.
The CFPB says it will distribute $1.8 billion to 4.3 million consumers who were charged illegal upfront fees by Lexington Law and CreditRepair.com, which used telemarketing to offer credit repair services to customers.
“Lexington Law and CreditRepair.com exploited vulnerable consumers who were trying to rebuild their credit by charging them illegal junk fees for results they didn’t deliver,” CFPB Director Rohit Chopra said in a statement. press
What are credit repair services?
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Credit repair services can help consumers build their credit by doing the tedious work of disputing outdated or incorrect information found on credit reports and tracking the results to ensure the errors don’t reoccur. It can cost upwards of $100 a month, with no guarantee of results.
There are a number of errors that a credit repair service can look for on a person’s credit report, such as accounts or legal actions that do not belong to the customer and negative information that is too old to be included. Typically, a consumer can take these actions on their own behalf.
Refunds come from the 2019 demand
The CFPB refund announced today stems from a 2019 lawsuit the bureau filed against two Salt Lake City-based companies that own Lexington Law and CreditRepair.com. The bureau accused the companies of violating the Telemarketing Sales Rule by asking customers to pay fees before receiving any services. Under federal law, credit repair companies that use telemarketing can’t collect payment until six months after proving to clients that they’ve gotten results.
The lawsuit also accused the companies of using “misleading” advertising to convince people to sign up for their services.
A district court agreed with the CFPB, and in 2023, the companies were ordered to pay $2.7 billion to customers, plus additional civil penalties. The court also banned the companies from telemarketing credit repair services for 10 years. The companies have since filed for Chapter 11 bankruptcy, according to the CFPB, and have shuttered about 80% of their business, including their call centers.
The payments to consumers, averaging $435, will come from the CFPB’s victim assistance fund, which is funded by civil penalties that companies are required to pay for violating consumer protection laws. “This historic distribution of $1.8 billion demonstrates the CFPB’s commitment to making consumers whole, even when the businesses that hurt them close or file for bankruptcy,” Chopra said.
Who gets a refund?
Consumers who are eligible for a refund check will receive payment in January.
Eligible people don’t have to do anything to get paid. But anyone who believes they’re eligible and hasn’t received a payment by mid-January can contact JND’s Legal Administration, which administers the payments and answers consumer questions about this case on behalf of the CFPB .
More details about the distribution are available on the CFPB website at cfpb.gov/payments/lexlaw.
Alternatives to credit repair services
When trying to build a credit score, consumers don’t have to pay hundreds of dollars for credit repair services. Instead, consumers can repair their credit on their own using many of the same steps that credit repair companies take on behalf of customers.
Consumers can check their credit reports for free at the three major credit reporting agencies: Experian, Equifax and TransUnion. Then use each office’s dispute processes to report errors or fraudulent activity. Also, look for unverifiable information, such as a debt owed to a company that is no longer in business. Even if it is accurate, it could be removed if it cannot be substantiated.
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