CFPB’s Multibillion-Dollar Settlement with Credit Repair Firms

On August 28, 2023, the Consumer Finance Protection Board (CFPB) announced that it had reached a $2.7 billion settlement with Lexington Law and CreditRepair.com to resolve allegations that the companies have been violating federal law with their telemarketing practices. As the nation’s two largest “credit repair” companies, the companies earned approximately $388 million in revenue in 2022 alone.

In March 2023, a federal district court ruled that Lexington Law and CreditRepair.com had both violated a provision of the Telemarketing Sale Rule. This rule requires that credit repair companies cannot bill clients until six months after they have provided customers with the documentation that proves they have successfully helped with the customers’ credit complaints.

The court found that “it is undisputed that Heath (doing business as Lexington Law) charges fees to clients every month, without waiting six months and without providing a consumer report at the six-month mark showing results have been achieved.” The court also concluded that CreditRepair.com was also doing these same illegal practices. The companies also allegedly conducted other additional deceptive practices. For example, Lexington Law suggested that attorneys would assist its clients, but the vast majority were never allowed to contact a lawyer.

Following the court’s ruling, the companies filed bankruptcy, saying they’d shut down 80 percent of their companies and laid off 900 employees.

To resolve the case, the CFPB and the defendants agreed to the following, pending court approval:

  • Lexington Law and CreditRepair.com must pay $2.7 billion for the victims of its schemes
  • The companies must bay another $64 million in penalties
  • The companies are both banned from doing any telemarketing for the next ten years
  • The companies are prohibited from working with certain marketing agencies that assisted them in the violations
  • The companies must notify all telemarketing customers of the lawsuit and their ability to cancel the services

While this is a major victory, these two firms are by no means the only credit repair companies that are taking advantage of American consumers. These “credit repair” companies often bill them for services they do not receive, mislead them in terms of what they will do to address problems with their credit, and more.

The reality is that American consumers can monitor their own credit by obtaining free credit reports, and if they discover any errors, the credit reporting companies are required by law to resolve them. If they fail to do so, you can sue them for damages.

That’s why, if you have had any issues with incorrect information on your credit report, don’t hire a credit repair firm. Instead, contact an attorney as soon as possible. The Credit Report Law Group can help you correct your credit record and obtain compensation for any damages you have sustained.