The Consumer Financial Protection Bureau fined a group of the largest credit repair organizations in the country Tuesday, and some in the industry are happy it happened.
Paul Oster, of Better Qualified LLC in New Jersey, said credit repair organizations are still unregulated so it takes some action like this from the CFPB to get the industry’s attention.
“We want you to regulate the industry because you’ll get rid of 95% of the bad actors,” Oster said.
But he’s a realist.
“This ruling does not mean now they’re going to regulate the rest of the companies left,” Oster said.
Sam Parker, CEO of My Credit Guy, said the settlement will be "impactful."
"Automated processes of consumer reporting companies often leave issues unaddressed, necessitating extensive efforts from consumers to rectify errors," Parker said.
He pointed out that a CFPB report revealed a staggering 700,000+ complaints about major credit bureaus – Equifax, Experian, and TransUnion – between January 2020 and September 2021. This accounted for over 50% of all received complaints, with inaccuracies in credit and consumer reports being the primary concern.
Oster wishes there wasn't a need for his services, but most credit reports are full of errors, which has consequences for borrowers and, subsequently, loan officers looking to close a loan.
He hopes the decision sheds light on the credit reporting industry.
Terry Clemans, executive director of the National Consumer Reporting Association, doesn’t believe there’s a need for any credit repair companies “due to the fact that they cannot ‘legally’ do anything for a consumer that a consumer who does some very basic research and takes action can do a better job for themselves for free.”
But he doesn’t believe this settlement will result in meaningful future actions.
“This is just another example, added to the long list of examples spanning several decades of both the federal and state level of actions against credit repair firms for violating the laws and ripping off consumers,” Clemans said.
According to Clemans, the FTC Chicago regional director, Steven Baker, who was in charge of trying to clean up that industry in the 1990s, stated that he “has never seen a legitimate credit repair company.”
“Unfortunately, this is much closer to reality than finding one that is operating within the limits of the laws that regulate that industry,” Clemans said.
Oster said they want to be regulated, and this $2.7 billion settlement will maybe bring them closer to that goal.
The CFPB filed a lawsuit against the companies, and in March, a U.S. District Court in Utah judge ruled that they violated the Telemarketing Sales Rule. That complaint exposed a complex web of corporate entities, based primarily in Salt Lake City, Utah, which collectively operate some of the nation's most prominent credit repair brands. Among them are Lexington Law, CreditRepair.com, Progrexion PGX Holdings, Progrexion Marketing, and the law firm of John C. Heath, Attorney-at-Law PC. With a combined annual revenue of approximately $388 million in 2022, these companies have drawn in over four million customers nationwide through their credit repair services.
“Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law. These credit repair giants used fake real estate and rent-to-own opportunities to illegally bait people and pad their pockets with billions in fees,” said CFPB Director Rohit Chopra Tuesday in a release about the settlement. “This scam is another sign that we must do more to fix the credit reporting and scoring system in our country.”
