A recent court document in the Consumer Financial Protection Bureau (CFPB) case against Lexington Law, John C. Heath, PGX Holdings, Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com has produced an interesting section on credit repair billing.
The CFPB states, “Plaintiff Bureau of Consumer Financial Protection (“Bureau”) alleges that Defendants John C. Heath, Attorney-at-Law, P.C., d/b/a Lexington Law (“Heath PC” or “Lexington Law”), PGX Holdings, Inc. (“PGX Holdings”), Progrexion Marketing, Inc. (“Progrexion Marketing”), Progrexion Teleservices, Inc. (“Progrexion Teleservices”), eFolks, LLC (“eFolks”), and CreditRepair.com, Inc. (“CreditRepair.com”) violated the Telemarketing Sales Rule (“TSR”), 16 C.F.R. § 310.4(a)(2), by requesting or receiving payment for services represented to remove derogatory items from, or improve, consumers’ credit history, record, or rating without (i) providing consumers a time frame in which all of the services will be provided and waiting for the expiration of that time frame, and (ii) waiting more than six months after achieving the promised results of their services, as demonstrated by a credit report provided to the consumer issued more than six months after the results were achieved. Plaintiff alleges that Defendants are sellers or telemarketers and that their practice of charging consumers fees for credit repair services at the time of signup, 5 to 15 days after signup, and on a monthly basis thereafter, violated 16 C.F.R. § 310.4(a)(2).
There are no material disputes of fact relevant to the Bureau’s TSR billing claim. There are two disputed legal questions — Contested Issues of Law (1) and (2), infra. As to the first, the Bureau’s position is that Defendants are subject to the TSR regardless of whether they make deceptive guarantees or promises, because deceptive guarantees or promises are not an element of a § 310.4(a)(2) claim. Had the Bureau wanted to sue Defendants for making deceptive guarantees or promises about its credit repair results, it would have done so under a different legal provision, 16 C.F.R. § 310.3. As to the second contested legal issue, the Bureau’s position is that all of Defendants’ credit repair services are covered by the regulation.
For Defendants’ TSR billing violations, Plaintiff seeks monetary relief, in the form of legal or equitable restitution and refund of moneys, for consumers who paid for Defendants’ credit repair services on or after March 8, 2016; civil monetary penalties for each violation of § 310.4(a)(2) that occurred on or after March 8, 2016; and injunctive relief going forward, including a requirement that Defendants fundamentally change their billing practices to comply with the law.
If it is determined that Defendants’ credit repair billing practices have violated 16 C.F.R. § 310.4(a)(2), Heath PC and Progrexion will be liable, jointly and severally, without further showing, to refund all moneys paid by any consumer for Lexington Law credit repair services during the actionable period (March 8, 2016 to the present), and Progrexion will likewise be liable to refund all moneys paid by any consumer for CreditRepair.com credit repair services during the actionable period. Defendants are liable to make full refunds to their credit repair customers because Defendants never conformed their billing practices to § 310.4(a)(2)’s requirements during the actionable period, and thus each billing fortheir credit repair services was unlawful. No deduction for any alleged “benefits” or “value” provided by Defendants is appropriate.” – Source
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