In a significant move to protect consumers, the Consumer Financial Protection Bureau has announced the distribution of $1.8 billion to 4.3 million former customers of a defunct credit repair conglomerate. This marks the largest-ever distribution from the bureau's victim-relief fund. The funds aim to compensate individuals who were charged illegal advance fees by companies such as Lexington Law and CreditRepair.com.
The CFPB secured a $2.7 billion settlement with these credit repair firms, which were found to have violated consumer protection laws by collecting advance fees through telemarketing—a practice prohibited under the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994. Prior to the settlement, a district court had determined that the companies had exploited vulnerable consumers seeking to rebuild their credit by charging them illegal fees for results they hadn't delivered.
Director Rohit Chopra emphasized the bureau's commitment to safeguarding American consumers from deceptive practices. "Lexington Law and CreditRepair.com exploited vulnerable consumers who were trying to rebuild their credit, charging them illegal junk fees for results they hadn't delivered," Chopra stated. The distribution of these funds reflects the CFPB's dedication to making consumers whole, even when the companies that harmed them have ceased operations or declared bankruptcy.
The settlement also includes a ban on the companies from telemarketing credit repair services for ten years. This action underscores the CFPB's ongoing efforts to enforce consumer protection laws and hold companies accountable for their actions. The bureau's intervention serves as a reminder of the importance of vigilance and due diligence when seeking credit repair services.
Consumers who were affected by these practices are encouraged to review their eligibility for compensation and take necessary steps to claim their share of the relief fund. The CFPB continues to monitor the credit repair industry to ensure compliance with federal regulations and to protect consumers from fraudulent schemes.
