December 5, 2024 — The Consumer Financial Protection Bureau (CFPB) has initiated the distribution of $1.8 billion to 4.3 million consumers affected by illegal practices of major credit repair companies, including Lexington Law and CreditRepair.com. This comes after a historic $2.7 billion settlement for violations of federal telemarketing laws and consumer protection regulations.
The companies, part of a network including Progrexion and PGX Holdings, were accused of charging illegal upfront fees for credit repair services that were never delivered and using deceptive marketing tactics. The CFPB found that Lexington Law and CreditRepair.com engaged in illegal practices such as demanding advance payments and falsely claiming they could remove negative credit information, violating the Telemarketing Sales Rule (TSR) and the Credit Repair Organizations Act (CROA).
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Settlement and Redress Process
The settlement mandates that the companies pay $2.7 billion in consumer redress and civil penalties. Between December 5, 2024, and January 6, 2025, JND Legal Administration will distribute the $1.8 billion in relief funds. Consumers do not need to take any action to receive their checks; they will be automatically sent based on records provided by the companies.
Eligible consumers will receive compensation for the illegal fees they paid. On average, consumers will receive $419, though the amount may vary depending on the total amount of eligible claims.
Violations and Fraudulent Practices
The fraudulent activities of Lexington Law and CreditRepair.com were vast, with the companies collecting hundreds of millions of dollars in illegal advance fees. Consumers were often charged initial fees ranging from $99.95 to $199.90 and monthly fees between $89.95 and $129.95, despite the companies failing to deliver on their promises.
Additionally, the companies used deceptive advertising techniques, such as fake listings for non-existent properties, to lure vulnerable consumers. The CFPB’s investigation revealed that the companies misled clients by promising to remove accurate negative credit information from their reports and making unrealistic claims about the services they provided.
Following the court ruling, Lexington Law and CreditRepair.com filed for Chapter 11 bankruptcy protection in August 2023, shutting down 80% of their operations. The bankruptcy left many consumers stranded with unfinished services, and thousands of employees were left without jobs. Multiple state investigations and class action lawsuits have since been launched against the companies, highlighting the widespread impact of their deceptive practices.
CFPB Director Rohit Chopra remarked that “a business built on deception cannot stand forever,” and the collapse of these companies marked the end of an era of unregulated fraud in the credit repair industry. The CFPB’s action serves as a warning to other companies that deceptive practices will no longer be tolerated in the financial services sector.
Consumer Protection and Warning Signs of Scams
The CFPB has issued a reminder for consumers to be cautious of credit repair services that ask for upfront payments or promise quick fixes to credit issues. Legitimate credit repair services do not require advance fees, and consumers should be wary of companies making guarantees to remove accurate information from credit reports or pressuring clients to act quickly.
Consumers are advised to monitor their credit reports regularly, dispute inaccuracies directly with credit bureaus, and avoid paying for services that are not clearly outlined in contracts. The CFPB also encourages individuals to choose ethical credit repair companies that are compliant with federal regulations and provide transparent services.
FAQs
Who is Eligible for Payouts?
Consumers who were charged illegal fees by credit repair companies like Lexington Law and CreditRepair.com between 2014 and 2020 are eligible for compensation. The CFPB has identified 4.3 million eligible individuals based on records provided by the companies involved in the lawsuit.
How Much Will You Receive?
The total payout fund is $1.8 billion, which will be distributed to affected consumers. While the exact amount you will receive varies depending on the fees you paid and your eligibility, on average, consumers are expected to receive $419. The payout will cover illegal advance fees charged by these companies.
Do You Need to Apply for the Payout?
No action is required on your part to receive the compensation. The CFPB has already identified eligible individuals using company records. If you are eligible, you will automatically receive a refund check.
How Will You Receive Your Refund?
Refunds will be distributed between December 5, 2024 and January 6, 2025. The checks will be sent via mail to the address on file with the credit repair companies.
What If You Have Questions About Your Eligibility?
If you have questions regarding your eligibility or need further assistance, it’s best to wait until after January 6, 2025, as the volume of checks being processed could delay responses. However, if you require immediate assistance, you can contact the CFPB’s support team or refer to the FAQs provided by JND Legal Administration, the company handling the distribution.
What is the Deadline for Receiving Payments?
Refund checks will be distributed until January 6, 2025. If you believe you are eligible but have not received a payment by then, it’s important to follow up with the CFPB for further clarification.
What Should You Look Out For?
Be cautious of scammers pretending to be part of the payout process. The CFPB will not ask for your personal information over the phone or by email to process the payout. If you are contacted by someone claiming to help you collect your refund, do not provide personal details or payment information.
Can You File a Claim If You Don’t Receive a Payment?
If you believe you should have received a payment but did not, you may be able to file a claim. Check the CFPB website or the JND Legal Administration portal for instructions on how to file a claim if you believe you were wrongfully excluded from the payout.
Looking Ahead
The CFPB’s $1.8 billion redress distribution marks a significant step forward in consumer protection. This case highlights the dangers of predatory credit repair practices and sets a strong precedent for future enforcement. With the settlement, the CFPB aims to ensure that consumers are better protected from deceptive practices, signaling a new era of transparency and accountability in the credit repair industry.
