CreditRepair.com and Lexington Law billed customers before documenting any results, and their marketing affiliates also misled consumers, the CFPB alleges.
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The Consumer Financial Protection Bureau has taken legal action against two major credit repair firms.
The CFPB case, filed May 2 in Utah, alleges that PGX Holdings and its subsidiaries (including Progrexion Marketing and CreditRepair.com), and Lexington Law, a PGX associate, ran afoul of the Telemarketing Sales Rule in marketing their credit repair services.
CreditRepair.com and Lexington Law, both based in Salt Lake City, operate online and via telephone, offering to help consumers improve their credit scores and get rid of negative input from their credit reports.
The defendants received fees upfront for their credit repair services, the CFPB alleges. Legally, consumers are liable to pay for telemarketed credit repair services only after the marketer documents to the customer that it has achieved what it promised to do. The telemarketer also has to wait more than six months after achieving the results before providing them to customers.
Allegations of deceptive marketing tactics
The consumer protection agency also asserts that Progrexion and its subsidiaries went against the Telemarketing Sales Rule and the Consumer Financial Protection Act by misleading consumers in their marketing, or by enabling others to engage in deceptive marketing.
For instance, Progrexion’s marketing affiliates baited consumers to generate referrals for Lexington Law’s credit repair services, the CFPB alleges, by guaranteeing them a home loan irrespective of how bad their credit was before they participated in the credit repair program.
In fact, the affiliate did not provide any loans at all, according to the CFPB. Progrexion saw these tie-ups as effective since they helped connect people to credit repair “at the moment they’ve been denied credit,” the CFPB notes.
After customers signed up with Lexington Law or CreditRepair.com, they were usually charged about $100, and they would also incur recurring monthly fees of about $80 to $130, based on the level of services they wanted. They would then continue to pay those monthly fees until they acted to cancel their enrollment.
The CFPB is asking for refunds of the monies consumers paid, as well as payment of damages, among other things.
Responding to a request for comment, Eric Kamerath, a spokesman for Progrexion and Lexington Law said, “Progrexion denies that it’s marketing representations are deceptive, as alleged.”
According to him, “Progrexion advertising provides consumers certain information regarding the results achieved by past customers. This information conforms to approved regulatory guidelines for advertising practices and contains the appropriate disclosures. Progrexion’s policy expects partners to promote Progrexion’s services in a compliant manner and to provide qualified leads.”
The CFPB has taken action against other debt relief companies in the past.