FTC and DOJ End Credit Repair Operation Over Deceptive Practices | Sheppard Mullin Richter & Hampton LLP
On March 18, the U.S. District Court for the Southern District of Texas issued an injunction against a Texas-based credit repair company that allegedly made false promises to remove negative information from credit reports and filed false theft reports. identification to explain negative items on credit reports. . The court issued an injunction against the company, finding violations of Section 5 of the FTC Act, the Credit Repair Agencies Act, and the Telemarketing and Fraud and Abuse Prevention Act to consumption. The permanent injunction places financial restrictions on the defendants and halts their operations.
The lawsuit was filed by the DOJ at the request of the FTC against the company and its owner. The credit repair operation claimed it could remove damaging information from consumers’ credit histories by challenging negative items and adding “credit enhancement products” to improve credit scores. The company promised results in 40 days, including false claims that credit scores could be boosted by up to 200 points. Consumers were forced to illegally pay an upfront fee of $1,500 before receiving the promised services. The scam cheated customers out of millions of dollars, according to the FTC and DOJ.
According to the complaint, the company filed false reports of identity theft, often without customers’ knowledge, through the FTC’s Identity Theft Reporting website and misleadingly claimed that the negative material on his clients’ credit reports were the result of identity theft. The company also failed to post information about cancellation policies.
Put into practice : This recent complaint and the resulting injunction are significant for two reasons. He emphasizes that the FTC and DOJ will continue to work together to protect consumers – the FTC voted unanimously to refer the complaint to the DOJ. It also demonstrates how seriously federal agencies and courts take credit repair scams that target financially vulnerable consumers (we previously discussed another FTC action targeting a debt relief component in a recent Consumer Finance and FinTech blog post here).