If you’ve been following the news on the credit repair industry, you would know that CFPB, the consumer watchdog agency has alleged the owners of 2 of the biggest credit-repair companies and accused them of charging illegal fees from their consumers and also adopting abusive and deceptive sales strategies. According to a complaint that was filed in the American District Court in Utah, the CFPB accused Lexington Law and CreditRepair.com’s owners and other affiliated entities of violating the telemarketing laws by gathering unlawful fees from the consumers. It was also mentioned in the lawsuit that they leveraged deceptive methods to get customers sign-up with their credit repair services.
As per the complaint, the CFPB said it is striving hard to stop advance fees and put an end to all sorts of deceptive practices that are used for promoting their services. In this process, the CFPB tries to save the harmed consumers and offer them relief.
What does the law say?
As per federal law, the companies are allowed to charge money for offering credit repair services only after positive results have been achieved and the results are proved in a credit report that arrives 6 months later.
According to the lawsuit, it is being said that during the time a consumer enrolled with Lexington Law or with the other accused company, CreditRepair.com, consumers are immediately charged an amount for receiving a copy of their credit report and told them that the fee ranged between $9.99 and $14.99 and that the consumer had to pay this for the credit repair procedure to begin. On top of this fee, there are other monthly fees of $79.95.
The CFPB also found that that from 2012 to 2017, a partner company called HSP1 provided consumers low-rate mortgages and even access to rent-to-own housing and other services, none of which could be actually done. The lawsuit later on revealed that this aforementioned firm was an affiliated call center that had a goal of transferring clients to Lexington Law.
Through the efforts of this third-party firm, more than 100,000 consumers signed up with Lexington Law’s credit repair programs, as per the complaint. The victims either knew about the kind of misrepresentation or were indifferent about the deception that was being done to them. Despite knowing that the third-party firm was trying to send customers to the 2 accused companies, the defendants still signed up through the affiliate company or used the company’s products.
Despite all the accusations, the victims, Lexington Law and CreditRepair.com have planned to fight the accusations and emerge as winners. A spokesman for both the companies, Eric Kamerath reportedly said that they found themselves in a perplexed situation. They don’t understand why the CFPB is barring consumers from seeking professional assistance within a system that is weighted heavily against the consumer.