Bureau begins sending checks totaling $1.8 billion to victims of credit repair scheme

Return of $1.8 billion in illegal junk fees – allegedly charged in a credit repair scheme – from Salt Lake City firms to 4.3 million Americans was announced Thursday by the federal consumer financial protection agency.

The Consumer Financial Protection Bureau (CFPB) said the payment of redress for the allegedly illegal advance fees or “bait-and-switch” advertising by credit repair companies including Lexington Law and CreditRepair.com constitute the largest-ever distribution from the CFPB’s victims relief fund. The fund is made up of proceeds from civil penalties paid by companies that violate consumer protection laws, the bureau said.

The bureau said checks are being mailed to victims of the alleged scheme beginning today (Dec. 5) and ending by Jan. 6. On April 6, checks become void if they have not yet been deposited by recipients, according to the website of the firm handling the distribution (JND Legal Administration).

CFPB said it alleges that the firms illegally charged upfront fees and engaged in deceptive, bait-and-switch advertising to encourage people to sign up for credit repair services in violation of the Consumer Financial Protection Act (CPA) of 2010 and the Telemarketing Sales Rule.

The agency said it has identified all eligible consumers for the return of fees, and that there is no opportunity for additional claims in the matter.

According to the bureau, it secured in August of 2023 a legal judgment against the firms, after a district court ruled that the companies had violated the Telemarketing Sales Rule’s advance fee prohibition. Under federal law, the CFPB said, credit repair companies that engage in telemarketing cannot collect fees until they provide documentation showing they have achieved the promised results for consumers, at least six months after the results were achieved.

“Following the district court’s ruling, the companies filed for Chapter 11 bankruptcy protection, shuttering approximately 80% of their business operations, including their telemarketing call centers,” the agency said.

It noted that the $1.8 billion distribution to consumers harmed by the credit repair companies is a result of its enforcement action.

CFPB Announces Return of $1.8 Billion in Illegal Junk Fees to 4.3 Million Americans Harmed in Massive Credit Repair Scheme

Payment distribution details: CFPB versus Lexington Law and CreditRepair.com matter