Key Takeaways
- Lexington Law and CreditRepair.com were found to have violated federal law by charging illegal upfront fees and using deceptive advertising, resulting in a landmark $2.7 billion settlement with the Consumer Financial Protection Bureau (CFPB).
- Over 4 million consumers are eligible for refunds, with the CFPB overseeing the distribution of $1.8 billion in payments to those harmed by the companies’ practices.
- The case underscores the importance of regulatory oversight in the credit repair industry and highlights the need for consumers to be vigilant about unlawful business practices.
Overview of the Lexington Law Lawsuit
The legal proceedings involving Lexington Law and CreditRepair.com have drawn national attention due to the scale of the alleged misconduct and the resulting enforcement action by the Consumer Financial Protection Bureau (CFPB). The CFPB accused these companies of violating the Credit Repair Organizations Act (CROA) by charging consumers illegal upfront fees and engaging in deceptive advertising. These actions misled consumers who were seeking help to repair their credit, often at vulnerable points in their financial lives.
The CFPB’s lawsuit, filed in federal court, alleged that Lexington Law and CreditRepair.com collected payments from consumers before performing any credit repair services. This practice is explicitly prohibited under federal law. The companies were also accused of making misleading claims about the effectiveness and speed of their services. The official CFPB case page provides detailed documentation and updates on the proceedings: CFPB Lexington Law Case.
Background: The Credit Repair Organizations Act
What is the CROA?
The Credit Repair Organizations Act (CROA) is a federal law designed to protect consumers from deceptive practices by credit repair companies. Under the CROA, it is illegal for such organizations to charge or receive any payment for services until those services have been fully performed. The law also requires companies to provide consumers with a written contract and a clear statement of their rights.
Violations by Lexington Law and CreditRepair.com
According to the CFPB, Lexington Law and CreditRepair.com systematically violated the CROA by charging consumers before providing any tangible results. The companies also allegedly misrepresented the nature and effectiveness of their services, leading consumers to believe they would see quick and significant improvements to their credit scores. These practices were found to be both deceptive and unlawful.
The CFPB Lawsuit and Settlement
Details of the Lawsuit
The CFPB filed its lawsuit against Lexington Law and CreditRepair.com in 2019. The complaint outlined a pattern of illegal conduct, including the collection of upfront fees and the use of misleading marketing tactics. The court ultimately ruled in favor of the CFPB, finding that the companies had violated federal law.
The $2.7 Billion Settlement
In 2023, the lawsuit culminated in a historic settlement. Lexington Law and CreditRepair.com agreed to a $2.7 billion judgment, one of the largest ever secured by the CFPB. Of this amount, $1.8 billion is earmarked for direct payments to consumers who were harmed by the companies’ practices. The settlement also includes provisions to prevent future violations and ensure ongoing compliance with federal law.
More information about the settlement and the distribution of funds is available on the CFPB’s official blog: CFPB Blog on Refund Checks.
How Refunds Will Be Distributed
The CFPB has identified approximately 4.3 million consumers who are eligible for refunds. These individuals will receive letters and payments directly from the CFPB. The agency has set up a dedicated website to provide updates, answer questions, and help consumers check their eligibility: CFPB-LexLaw.org.
The official FAQ page offers detailed information on the refund process, eligibility criteria, and what consumers can expect: CFPB-LexLaw FAQ.
Additional Legal Actions: TCPA Class Action
Telephone Consumer Protection Act (TCPA) Lawsuit
In addition to the main CFPB enforcement action, Lexington Law faced a separate class action lawsuit related to violations of the Telephone Consumer Protection Act (TCPA). This law restricts telemarketing calls, including the use of automated dialing systems and unsolicited text messages.
The class action alleged that Lexington Law used unsolicited calls and texts to market its services, in violation of the TCPA. The lawsuit was resolved with an $11 million settlement, providing compensation to affected consumers. This separate action highlights a broader pattern of questionable marketing practices by the company.
The Impact on Consumers
Who is Eligible for a Refund?
Consumers who paid Lexington Law or CreditRepair.com for credit repair services during the relevant period may be eligible for a refund. The CFPB has used company records to identify affected individuals. Eligible consumers will receive a letter and a check in the mail. No action is required to claim the refund, but consumers should be cautious of scams and verify any communications through the official CFPB website.
How to Get More Information
Consumers can visit the CFPB’s dedicated website for the Lexington Law case at https://cfpb-lexlaw.org/ to check their eligibility, review frequently asked questions, and find contact information for further assistance. The CFPB also provides a toll-free number and email address for consumers who need additional help.
Media Coverage and Public Awareness
The scale of the settlement and the number of affected consumers have led to widespread media coverage. According to CBS News, the companies’ practices had a significant impact on individuals trying to rebuild their credit. The media has highlighted the importance of regulatory oversight and the need for consumers to be vigilant when seeking credit repair services.
Regulatory Oversight and Industry Implications
The Role of the CFPB
The CFPB’s enforcement action against Lexington Law and CreditRepair.com demonstrates the agency’s commitment to protecting consumers from predatory practices. By securing a large settlement and ensuring refunds for affected consumers, the CFPB has set a precedent for future actions in the credit repair industry.
Lessons for Consumers and Businesses
This case serves as a reminder for consumers to be cautious when engaging with credit repair companies. It is important to understand your rights under the CROA and to avoid companies that demand payment before providing services. For businesses, the case underscores the need for transparency, compliance with federal law, and ethical marketing practices.
Resources and Next Steps
- CFPB Case Page: https://www.consumerfinance.gov/enforcement/payments-harmed-consumers/payments-by-case/lexlaw/
- Refund Information: https://www.consumerfinance.gov/about-us/blog/creditrepaircom-and-lexington-law-refund-checks-what-you-need-to-know/
- Settlement Website: https://cfpb-lexlaw.org/
- FAQ: https://www.cfpb-lexlaw.org/faq
If you believe you are eligible for a refund or have questions about the settlement, visit the official CFPB resources or contact their support team for assistance.
Disclaimer: This guide is for informational purposes only and does not constitute legal advice. The details provided are based on publicly available information as of June 2024. If you are involved in or affected by this case, consult a qualified attorney for advice specific to your situation. The facts and outcomes discussed may be subject to change as new information emerges or as legal proceedings continue.
