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Financial Services Law Insights and Observations

FTC secures TRO against credit repair scheme

Federal Issues FTC Enforcement Consumer Finance Credit Repair Fees Courts FTC Act CROA TSR UDAP Deceptive

Federal Issues

On May 31, the FTC announced that the U.S. District Court for the Eastern District of Maryland granted a temporary restraining order against a credit repair operation for allegedly engaging in deceptive practices that scammed consumers out of more than $213 million. According to the FTC’s complaint, the operation targeted consumers with low credit scores promising its products could remove all negative information from their credit reports and significantly increase credit scores. The operation allegedly violated the FTC Act, the Credit Repair Organizations Act, and the Telemarketing Sales Rule by, among other things, (i) making misrepresentations regarding its credit repair services; (ii) selling a product that purportedly sends rent payment information to credit bureaus even though “this information is not generally part of consumers’ credit score and many credit bureaus don’t accept this kind of information directly from consumers”; (iii) charging illegal advance fees; (iv) failing to provide consumers required information such as refund and cancellation policies; and (v) recruiting consumers to sell credit repair products to other consumers as part of a pyramid scheme even though few consumers ever received the promised earnings (and many consumers actually lost money as agents). Beyond the temporary restraining order, the FTC is seeking a permanent injunction, monetary relief, and other equitable relief.

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