CFPB slams credit-repair companies targeting those searching for mortgages

by Ryan Smith29 Jun 2017

The Consumer Financial Protection Bureau has filed complaints and proposed penalties totaling $2 million against four credit-repair companies that targeted consumers seeking a mortgage. According to the CFPB, the companies misrepresented their ability to repair consumers’ credit scores and charged illegal advance fees.

The CFPB has proposed that California-based companies Prime Credit, IMC Capital, Consumer Credit Consultants, and Park View Law, along with executives from the companies, should pay a total of $2 million in penalties for misleading consumers.

“Today, the bureau is taking action against companies that charged illegal fees and misled consumers about their ability to fix their credit,” CFPB Director Richard Cordray said. “We will remain vigilant about protecting consumers from companies that mislead them to turn a dishonest profit.”

According to the CFPB, the companies made “misleading, unsubstantiated claims” that they could remove “virtually any negative information” from their customers’ credit reports. They also allegedly claimed that they could boost consumer credit scores. The companies, which targeted consumers who had recently tried to obtain a mortgage, refinance or other loan, “attracted thousands of customers through sales calls and their websites,” according to the CFPB. The companies allegedly charged those customers millions of dollars in illegal advance fees for their services.

Specifically, the CFPB alleges that the companies:

  • Charged illegal advance fees. Federal law prohibits telemarketers and certain other companies from requesting or collecting fees for credit repair unless they can meet certain conditions about the delivery of that service. According to the CFPB, the four companies charged “a variety of fees” before they demonstrated that they had achieved the promised results.
  • Failed to disclose limits on “money-back guarantees.” While the companies offered money-back guarantees for some services, they didn’t disclose the “significant limits” on those guarantees – including a requirement that the customer had to pay for at least six months of service to be eligible.
  • Misled consumers about the benefits of their services. The CFPB alleges that the companies claimed that their services would result in the removal of negative information from customers’ credit reports. They also misrepresented that their services would “result in a substantial increase” to their customers’ overall credit scores, the CFPB said.

If the penalties are approved by a federal court, the defendants would also be prohibited from doing business in the credit-repair industry for five years.

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