08/05/2024 | Press release | Distributed by Public on 08/05/2024 10:48
As a result of a Federal Trade Commission lawsuit, the owners and operators of a sprawling credit repair operation known as Financial Education Services (FES) will end the practices that the FTC alleged created a pyramid scheme and also violated the Credit Repair Organizations Act. In addition, the proposed court orders include substantial monetary penalties.
The FTC first filed suit against the FES scheme in May, 2022, alleging that the company preyed on consumers with low credit scores by luring them in with the false promise of an easy fix and then recruiting them to join a pyramid scheme selling the credit repair services to others, costing them millions of dollars.
"These companies promised to clean up people's credit but failed to deliver. Meanwhile, honest businesses make money selling products and services, not by recruiting, and the drive to recruit, especially when coupled with inflated income claims, is the hallmark of an illegal pyramid," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. "The FTC is committed to stopping deceptive credit repair tactics and shutting down illegal pyramid schemes that prey on struggling consumers."
The FTC's complaint charged that FES and its owners, operators and associated companies deceived consumers about their credit repair products and charged them upfront for the service. In addition, the pyramid scheme made overinflated income claims that consumers could make tens of thousands of dollars recruiting others into FES.
The proposed settlements in the case will lead to more than $12 million being turned over to the FTC for use in providing refunds to affected consumers, as well as conduct prohibitions against the defendants as follows:
The Commission vote approving the stipulated final orders was 5-0. The FTC filed the proposed orders in the U.S. District Court for the Eastern District of Michigan.
NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.