On June 27, the Consumer Financial Protection Bureau announced it had filed two consumer protection lawsuits against four credit repair companies and three executives for allegedly misleading consumers and charging improper advance fees. On that same day, the CFPB filed corresponding stipulated final judgments providing for approximately $2 million in penalties against the named defendants.
On June 30, Central California U.S. District Court Judge John E. McDermott approved an agreed-upon $1.53 million settlement between the CFPB and three of the credit repair companies. Prime Credit LLC, IMC Capital LLC, and Commercial Credit Consultants, as well as founder Blake Johnson and former president Eric Schlegel, were the subjects of the settlement which, in addition to the monetary component, prohibits all parties from participating in the credit repair business for five years. Johnson sold the credit repair companies approximately two years ago.
The settlement requires the defendants to pay the entire penalty to the CFPB within ten days of entry of the order.
The six-count complaint alleged that the defendants charged consumers at least $31 million in advance fees between 2009 and 2015 in violation of the Consumer Financial Protection Act and the Telemarketing and Sales Rule. The defendants are also alleged to have misrepresented the effectiveness of their credit repair services, failed to clearly convey the terms of their refund guarantee, and misrepresented the total cost of their services. In the settlement agreement, the defendants neither admitted nor denied the allegations.
The CFPB's lawsuit against Prime Credit LLC's partner Park View Law and its owner Arthur Barens remains ongoing. However, the CFPB and Barnes have agreed to a $500,000 settlement which is currently awaiting the Court's approval.
We will continue to monitor this and similar cases, and will report on further developments.
The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here
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