Consumer watchdog sues two credit repair companies for fees and practices

The country's consumer monitoring agency on Thursday filed lawsuits against owners of two major credit repair companies, accusing them of paying illegal fees to consumers and engaging in tactics of misleading and abusive sales.

In a lawsuit filed in a US District Court in Utah, the Bureau of Consumer Financial Protection accuses CreditRepair.com and Lexington Law, their owners and various affiliated entities, of violating the laws on telemarketing by collecting before they are legally allowed. The lawsuit also alleges that deceptive methods were used to get customers to sign up for credit repair services in both companies.

The office is seeking an end to the upfront costs, ending misrepresentations used in the marketing of services, and seeking redress for aggrieved consumers, the complaint said.

Under federal law, companies can only charge fees for credit repair services when the promised results have been achieved and proven by a credit report six months later.

The complaint states that at the time of registering with Lexington Law or CreditRepair.com, consumers must pay a fee to obtain a copy of their credit report and be told that the fees – which range from $ 9.99 to $ 14.99 since July 2011 – must begin the credit repair process, says the complaint. The current monthly fee ranges from $ 79.95 to $ 129.95.

The complaint also states that Lexington Law and CreditRepair.com rely on a shared network of marketing affiliates that use deceptive tactics to get consumers to sign up.

For example, the lawsuit says that at least from 2012 to 2017, an unidentified partner (identified as "HSP1") would have offered consumers low-interest mortgages, access to a housing without roommate or other products and services. could actually do it. The lawsuit states that the unnamed company was simply an affiliated call center for the purpose of transferring potential customers to Lexington Law.

The complaint indicates that more than 100,000 consumers have subscribed to Lexington Law's credit repair services through the efforts of this unidentified company.

The lawsuit alleges that the defendants were aware of these inaccurate statements or had a "reckless indifference" or awareness of the high probability of their existence.

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"Despite this knowledge, the … defendants continued to register consumers through the subsidiary or participated in the misleading conduct of it," the complaint said.

Both companies plan to fight the charges.

"We are a bit confused," said company spokesman Eric Kamerath. "In a system that already weighs heavily on the consumer in favor of opportunistic and opaque processes, why the [bureau] choose to prevent consumers from getting professional help? "

Kamerath also stated that the lawsuit was based on "a non-advertised, incorrect and unworkable change in the interpretation of an obscure billing provision that is outdated, previously unenforced and contradicted by the Ontario Consumer Organizations Act." credit repair ".

"We have been providing information to the CFPB for over four and a half years," Kamerath said. "During this time, we frequently asked to meet with us and discuss any concerns of the office regarding billing or other practices.

"Why has the agency chosen to wait until now to reveal its interpretation of the rule is a mystery to us."

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