Financial Education Services Fighting Back Against FTC Over Credit Repair Allegations

The Federal Trade Commission sued Financial Education Services and others for selling credit repair and an alleged pyramid scheme business opportunity.

Watching the court record, Financial Education Services is pushing back hard. However, the FTC just filed a document that makes a compelling argument why the credit repair company should have some concerns.

You can see all court documents in this case here.

Financial Education Services continues to feel the position of the FTC is incorrect and is fighting back.

Here is an excerpt from this document that appears to lay out a damning story.


“Plaintiff, the Federal Trade Commission (“FTC”), submits this supplemental brief in support of its motion for preliminary injunction. (ECF No. 3.)1 The FTC brought this action to halt a pernicious credit repair and pyramid scheme that has defrauded hundreds of millions of dollars from consumers nationwide. The FTC has already shown in its memorandum in support of a TRO (“TRO Memo”) and accompanying exhibits (ECF Nos. 3, 5 – 5-31) that Defendants have violated Section 5 of the FTC Act, 15 U.S.C. § 45(a), multiple provisions of the Credit Repair Organizations Act (“CROA”), 15 U.S.C. §§ 1679-1679l, and multiple provisions of the FTC’s Telemarketing Sales Rule (“TSR”), 16 C.F.R. Part 310. Additional confirmatory evidence obtained during the inspection of Defendants’ business premises bolsters the FTC’s case. Further, the Receiver’s Preliminary Report (ECF No. 55-1), based in part on this additional evidence as well as his own independent investigation, corroborates the FTC’s position that a preliminary injunction should issue and that the receivership and asset freeze should remain in place.

Neither should Defendants’ Oppositions (ECF Nos. 50, 51, 52)2 change the Court’s mind that it got things right the first time—preliminary injunctive relief is warranted. Defendants use misguided legal arguments and elevate form over substance in an attempt to obfuscate the issues of well-settled FTC law. The remainder is irrelevant or unconvincing factual assertions. In short, the Court should issue the FTC’s proposed preliminary injunction, continuing (with few modifications) the terms of the TRO until a final decision on the merits is made”

The FTC Has Established a Likelihood of Success on the Merits As discussed in the TRO Memo, Defendants, operating as a common enterprise, have deceptively marketed credit repair services and an investment opportunity online and through telemarketing. In particular, the FTC has demonstrated that Defendants:

  • falsely promise that they will substantially improve consumers’ credit scores by removing negative information and adding credit building products (ECF No. 3 at 30-48),
  • fail to make required CROA disclosures and provide written contracts (Id. at 48-50),
  • collect illegal advance fees (Id. at 50-52),
  • falsely promise that consumers will earn substantial income by becoming FES Agents (Id. at 53-60),
  • operate their investment opportunity as an illegal pyramid scheme (Id. at 60- 73), and
  • provide consumers with the means and instrumentalities to commit deceptive acts and practices. (Id. at 73-75)

And the Individual Defendants either participated in, controlled, or had the authority to control these practices and had the requisite degree of knowledge to hold them liable for injunctive and monetary relief.

Defendants Misrepresent the Efficacy of their Credit Repair Services

Evidence gathered at and since the inspection of Defendants’ offices corroborates the FTC’s complaint allegations that Defendants ran an illegal credit repair scam as the “cover” sales service for their pyramid scheme. Defendants promised to remove negative credit entries from any and all consumers’ credit histories, thereby substantially raising their credit scores.

Documents obtained from Defendants confirm that they were responsible for widespread credit repair representations. For example:

  • Financial Education Services is . . . the top credit restoration company in this country and we have a 100% customer satisfaction guarantee. What happens when you get started: your credit is pulled, a team of trained professionals and attorneys dispute every negative item on the reports from the three credit agencies. . . You will begin seeing items removed from your credit reports between 45-90 days after signing up for the service. (PX27 Att. F at 50.)
  • Text #2 Hey (Name) if your credit score begins with a 4,5 or 6 you NEED to watch this NOW. (PX27 Att. N at 585.) N
  • Post #2: Anyone need to improve their credit? I found a service that has gotten over a million items deleted from people’s credit scores. PM or comment below for more information. (PX27 Att. N at 586.)
  • Hello Kristin, here is the information on increasing your credit. My score went up over xxx points using this amazing credit restoration service. The company has been doing this for clients for over 14 years and they have an A++ BBB rating. Plain and simple it just works. (PX27 Att. N at 586.)
  • How soon will I see results? Many of our customers have seen an increase of 100 points or more. (PX27 Att. M at 565 (customer support answers for “Frequently Asked Questions”).)

Meanwhile, emails indicate Defendants attempted to conceal from law enforcement the credit repair nature of their business because of their perception that the credit repair industry is subject to enforcement lawsuits. For example, emails from Michael Toloff to employees contained the following: “No one in the credit world post (sic) their process…it tells the regulators exactly what we do and that is credit repair.” (PX27 Att. Q at 688.) “Avoid using credit repair in print material on our sites, use credit education.” (PX27 Att. Q at 689.)

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Defendants attempt to argue that credit repair is really just a small part of multiple “services” they offer consumers. (See, e.g., ECF No. 51 at 2.) Their expert declaration makes much about the FTC’s focus on Defendants’ credit restoration product and not the others. (ECF No. 52-11at 8-11.) Indeed, after the Complaint in this case was filed, FES agents received an impassioned message from FES employee Chet Seely to have customers in their downlines report positive experiences with the UCES Protection Plan, notably to report using products other than the credit restoration: “[T]he experiences they share shouldn’t just be about credit restoration” and “The emails your customers should send should share their personal experience with as many products as possible other than credit restoration.” (PX28, Att. A.) However, Defendants’ own documents admit that credit repair “is the bread and butter of the entire UCESPP.” (PX27 Att. L at 280, Att. M at 544.) Defendants’ internal correspondence shows that 85% of their customers used the credit restoration product and conversely, for example, only 9% use their budget calculator product. (PX27 Att. T at 705.) The Receiver has also concluded that Defendants’ credit restoration product is far and away the most used: “[I]t appears that credit restoration is the most popular and highly used Product.” (ECF No. 55-1 at 17.).

Moreover, Defendants’ credit repair services routinely failed to produce the promised results. Defendants concede that their information about the results of their credit repair products does not come from the credit bureaus. (ECF No. 51-3, p. 6.) Defendants’ expert, based solely on the analysis of Defendant Michael Toloff, claims Defendants’ promises to improve consumers’ credit scores must be true because, for 2019-2021, Defendants “successfully removed over 300,000 obsolete, unverifiable, and inaccurate credit events from their credit reports.” (ECF No. 51-21, p. 13.) However, even if Defendants could substantiate that 300,000 deletions occurred, there is no indication of whether the negative items remained off consumers’ credit histories for any amount of time. Testimony from the credit bureaus is that manual letter writing campaigns are not an effective method of removing negative items from consumers’ credit histories. (See ECF No. 5-20, pp. 3-5(Equifax); ECF No. 5-23, pp. 3-4(TransUnion).) Indeed, the FTC’s investigator found numerous letters from TransUnion rejecting Defendants’ letters. (PX27 Att. G at 118-21 (samples).) As discussed more below, Defendants did not produce proof of credit score improvements six months after their letter writing services, and they have failed to produce any evidence that Defendants are even aware of whether or not their customers’ scores improved. The TSR requires Defendants to produce proof of results at the six month mark prior to collecting fees. See 16 CFR 310.4(a)(2). Defendants have not produced proof that their letter writing business model produces results.

With respect to their Credit My Rent (“CM Rent”) service, while reporting rental income can have some modest effect on a consumer’s credit score, that improvement only occurs if Defendants actually do what they promise. In a December 2, 202,1 email from Anthony Fuller to Christopher Toloff regarding CM Rent, Fuller admits “Between you & me, 80% of the customer base should’ve never been charged because they were never worked. So you had a large total revenue & basically no expenses because the day to day function of the business wasn’t being executed.” (PX27 Att. I at 145.)

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Defendants filed a Declaration of Counsel in opposition to the Preliminary Injunction that quibbles about the dates and details cited in FTC’s consumer declarations and offers Defendants’ own customer notes in evidence. (ECF No. 51- 3). However, Defendants’ notes corroborate the FTC’s core allegation that consumers did not receive the credit improvement they purchased. For example:

  • I wanted to help people fix their credit but I feel like this is a scam. ECF No. 51-3 (email 12/18/2019 11:56:57)
  • Amber Harris called to cancel PP account due to not seeing any results on her credit. (ECF No. 51-3 (email 12/13/2019 15:08:23))
  • i contacted this company to find help to repair my credit score. They told me my account in collettion (sic) when are very old it would be easier and fast for fix it.it take no more than 4 month to my credit appear in 620.it was not true.i started paying from february an my credit is down. (ECF No. 51-3 (email 8/6/2021 10:22:37).)

Defendants assert that the FTC consumer declarations contain similar allegations of deception because they are contrived. However, the FTC has received at least 489 complaints from consumers that contain echoes of the same credit repair (and pyramid scheme) allegations from these declarations.3 (See PX 28 at Att. B.)

As outlined in the TRO Memo and supported by declarations from the credit bureaus and FICO, filing manual dispute letters does not result in permanent credit repair for most people. See ECF No. 3, Page ID 100-106, PX20 at 3-4 ¶ 14; PX23 at 3-4 ¶ 17. Defendants’ declarations of some happy customers is insufficient to defeat the evidence of widespread false credit repair promises. “The existence of some satisfied customers does not constitute a defense under the FTC [Act].” FTC v. Five-Star Auto Club, Inc., 97 F. Supp. 2d 502, 530 (S.D.N.Y. 2000) (quoting FTC v. Amy Travel Service, Inc., 875 F.2d 564, 572 (7th Cir. 1989)). Defendants’ promises to improve consumers’ credit scores were deceptive violations of the Federal Trade Commission Act, the TSR, and CROA.

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Defendants Fail to Make Required CROA Disclosures or Provide Consumers with Written Contracts

Defendants do not dispute the FTC’s allegations that they fail to make specific disclosures and provide consumers with written contracts that comply with the requirements of CROA. Indeed, the Receiver’s report describes the disclosures as not being conducted, noting that implementing CROA-required disclosures would be a step required to operate the credit repair function of Defendants’ business. (ECF No. 55-1 at PageID 4299.)

Defendants Collect Prohibited Advance Fees

Defendants do not dispute that they collect advance fees for their credit repair services. Additional evidence confirms these facts. For example, Defendants’ Protection Plan Credit Restoration script includes collecting payment and contact information as the first step in enrollment. (PX 27 Att. N at 614.) In the call notes filed by Defendants’ counsel, the earliest dated entry for several consumers is “CC Approved” with a redacted credit card number. (See ECF No. 51-3 at PageID 3816, 3836, 3851, 3862, 3870, 3877, 3880.) The Receiver also notes: “currently, payment for credit repair services are taken upon enrollment and each month thereafter, regardless of whether a customer actually initiates the credit repair process and prior to any service being provided.” (ECF No. 55-1 at 38.)

Defendants Make False Claims Regarding the Amount of Income Consumers Can Earn as FES Agents

Defendants fail to refute the substantial evidence that they and their agents claim that FES Agents will earn substantial income from their sale of Defendants’ products. For example:

  • Defendants provide scripts and guidance for recruiting new agents focus on earned income and other financial rewards. (PX27 Att. N at 585 (text message scripts state “I found the best kept secret… 14 years of success, Billionaire owner, A++ BBB and the best bonus structure I’ve ever seen” and “(Name) do you know anyone that needs to increase their credit score and would be interested in earning an extra 500 dollars per week?”); Id. at 585 (social media post suggestion states “If you’re my Facebook friends and you need to improve your credit score and would like to earn some serious extra money per week… Comment now.”); Id. at 588–89 (proposed ad scripts state “WIFE WANTED! . . . IF YOU, have the desire to earn excellent part-time (establish your own hours) or full-time income, apply here . . . This is a lucrative commission only position with all the training and tools to make you successful” and “Thanks, Trump, for my amazing new side hustle! . . . [O]ur agents and affiliates are experiencing record levels of inquiries – and record levels of revenue.”).
  • Defendants promote testimonials purporting to describe significant income and wealth derived from work as FES Agents. (E.g., PX13 at 7 ¶ 31, Att. D at 33; PX24 Att. JJ at 629; PX27 Att. L at 361 (agent testimonials claim “Becoming an entrepreneur with UWE has transformed my life,” “I became an entrepreneur and achieved the American Dream!”)
  • Defendants’ training materials encourage consumers to “SECURE YOUR FINANCIAL FUTURE” by joining “THE 16.5 MILLION AMERICANS WHO ARE ALREADY MAKING ADDITIONAL INCOME.” (PX27 Att. L at 349.) Defendants tell consumers that work as an FES Agent can “work for you!” because it is “the complete turnkey business.” (PX27 Att. L at 356.)

    Nor have Defendants demonstrated that these express claims of substantial income are realized for more than a small percentage of FES Agents. To the contrary, the available evidence indicates that few, if any, consumers earn the promised income. For example:

  • Internal documents reveal that the income disclosure Defendants post on their website (which itself is poorly disclosed, and reveals that Defendants’ earning claims are false for most consumers, see ECF No. 3 at 38–39 & n.8) significantly overstates amounts earned by those at the bottom of Defendants’ compensation structure. Defendants report that, in 2021, 91.59% of FES Agents were at the lowest rank, and that their average annual income was $3,636.78. (PX24 Att. MM at 689.) Defendants’ internal documents reveal, however, that these earnings figures considered only those FES Agents who were actually paid, and excluded the vast majority who earned nothing. (PX27 Att. J at 173.) When all of the lowest-ranked FES Agents are taken into account, their true average weekly income was just over $2.25, which converts to only $117.36 per year. (PX27 Att. J at 195.)
  • Of the 16 consumers who submitted declarations in support of the FES Defendants’ opposition claim to have earned substantial income as FES Agents, only one states that he has earned enough with FES to leave his fulltime job, and even so he continues to work as a personal trainer. (ECF No. 51-16 at 6 ¶ 22.)
  • Indeed, in May 2022, the BBB’s National Programs initiated an inquiry into Defendants’ questionable earnings claims. (PX27 Att. O at 628-42.)
  • Paralegal Elena Hoffman found recent consumer complaints submitted to the FTC since the filing of the complaint in this action, and interviewed Everett Johnson, Jr. whose experience corroborates the failure of other consumer witnesses to obtain the earnings they were promised by FES. (PX28 ¶¶ 7- 19.)
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