The credit repair industry just took a big hit. It is very doubtful you will be hearing about credit repair. With the two largest credit repair companies fined billions this week, the credit repair business is facing a big reckoning.
What happened?
Lexington Law and CreditRepair.com have been fined a $2.7 billion judgment and a ten year ban for illegally charging customers. They charged “Advanced fees” for submitting disputes to the three major credit agencies. They offered no real counseling or offer a bonafide plan-of-action to improve credit scores.
What is wrong with that? Since the companies are for-profit, it is illegal for them to charge upfront fees to do credit repair. They cannot charge for services until the items they complete the services they offer to provide.
The companies are additionally assessed $64 million in civil penalties and must reimburse about four million consumers.
In March 2023, a federal court ruled that they charged fees that violated the Telemarketing Sales Rule. That law requires that a consumer may sign up for services, but must be given a 3 day right of recission, and may not be charged until six months after the contract has been signed when credit repair is offered. Lexington Law and CreditRepair.com charged consumer upfront and charged a monthly fee, oftentimes with little to no benefit many consumers complained.
The two companies have filed for bankruptcy and their solvency is questioned. They are also banned from engaging in credit repair for ten years.
Where does that lead them? How can you make money if you cannot make money? It appears their days are numbered and we won’t have to listen to those annoying radio ads how they can fix practically anyone’s credit.
The best option is the non-profit certified credit counselors. Such entities as MyCreditPlan.org managed by Family Financial offers many more opportunities to improve credit scores.