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CFPB Sues Companies Behind Lexington Law, CreditRepair.com

The Consumer Financial Protection Bureau has filed a lawsuit against Lexington Law and a number of companies operating under PGX Holdings, Inc. for violating the Telemarketing Sales Rules by engaging in “bait advertising” and “requesting or receiving payment upfront for certain telemarketed credit repair services,” according to a copy of the complaint, which was filed in District Court for the District of Utah.

The suit was brought against PGX Holdings, Inc., and its subsidiaries, Progrexion Marketing, Inc., Progrexion Teleservices, Inc., eFolks, LLC, and CreditRepair.com, Inc., and John C. Heath, Attorney at Law, PLLC, doing business as Lexington Law Firm or Lexington Law.

A copy of the complaint can be accessed by clicking here.

Lexington Law and CreditRepair.com are considered to be two of the largest credit repair companies in the country, according to the complaint. The defendants are accused of using “bait advertising” such as guaranteeing “ANYONE a 0-3.5% Down Home Loan no matter how bad their Credit is when we start!” even though none of the defendants originated loans. Consumers were told they had to sign up with Lexington Law in order to participate in the “(non-existent) program,” according to the complaint.

The defendants were also charged with forcing consumers to pay fees when they signed up for the service and on a monthly basis thereafter, even though credit repair companies are only allowed to collect fees after a certain period of time has elapsed and the promised results have been achieved.

Most of the defendants’ customers come from what the complaint calls a “hotswap” program, where partners that offer certain products, such as auto loans, connect individuals to the defendants via a live-transfer. The hotswap program “is intended to convince consumers to purchase credit repair services when they have been denied a product or service they wanted,” according to the complaint.

But the hotswap partners are accused of using “fake real estate ads, fake rent-to-own housing opportunities, fake relationships with lenders, false credit guarantees, and false and unsubstantiated statements about past consumer outcomes,” according to the complaint. “The ads have also included false and unsubstantiated statements about consumers’ likelihood of success in obtaining products and services such as rent- to-own housing contracts, mortgages, or personal loans.”

One partner, referred to as HSP1 in the complaint, marketed mortgages and rent-to-own housing contracts even thought it was nothing more than a call center. The partner transferred 100,000 consumers who signed up for Lexington Law’s services, according to the complaint.

Despite never checking the consumer’s credit, HSP1 representatives told consumers “you’d be the perfect candidate for rent-to-own, but your credit is the only thing holding you back – this makes you a great match for credit repair.”

The CFPB accused the defendants of knowing that some of the hotswap partners were engaging in deceptive marketing tactics, but allowed the misrepresentations to remain, and also reviewed HSP1’s scripts used in conversations with consumers.

When signing consumers up for its services, the defendants allegedly charged between $9.99 and $14.99 for a copy of the consumer’s credit report, according to the complaint. Between five and 15 days later, the defendants would charge consumers $99.95 for their first credit repair service work fee, and then charge between $79.95 and $129.95 per month afterwards, the CFPB alleged.

The complaint charges the defendants with five different counts of violating the Consumer Financial Protection Act and the Telemarketing Sales Rule.

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