In an era where financial well-being is crucial, credit repair services have gained significant popularity. Lexington Law, a well-known credit repair company, is no stranger to controversy. With a reputation built on promising to help consumers improve their credit scores, they have faced both criticism and accolades over the years. However, recent developments have brought the company into the spotlight once again, as it finds itself at the center of a lawsuit. In this blog post, we will delve into the details of the lawsuit against Lexington Law, examining the allegations, potential consequences, and the implications for the credit repair industry as a whole.
The Allegations:
The lawsuit filed against Lexington Law alleges several deceptive practices and violations of consumer protection laws. Plaintiffs claim that the company misled customers with false promises and engaged in unlawful billing practices. According to the allegations, Lexington Law charged upfront fees for credit repair services before any work was completed, a practice prohibited under the Credit Repair Organizations Act (CROA) and similar state laws. Additionally, the lawsuit claims that the company made misleading statements about its ability to remove negative items from consumers’ credit reports, false acceptance promises to consumers who were looking to purchase property and breaking the Telemarketing Sales Rule. Lexington is not the only property of Progrexion that is facing this lawsuit as CreditRepair.com has also been found at fault for their deceptive practices as well. The plaintiffs claim that CreditRepair.com made misleading promises and guarantees about its ability to repair credit scores, leading consumers to believe that their credit scores would significantly improve within a short period. The lawsuit alleges that CreditRepair.com not only failed to deliver on these promises but also charged exorbitant fees for their services, leaving consumers disappointed and financially burdened.
Legal and Regulatory Ramifications:
The CFPB has filed a motion for partial summary judgment, stating that Lexington “had violated a provision of the TSR dating back to 2016”. The Bureau is requesting the judge to award Lexington consumers who had undergone their credit repair process $2.75 billion in restitution and $367 million to those who paid for CreditRepair.com’s services. Finally, the request of $17 million in civil penalties for John C. Heath, and $35 million in civil money penalties to the other defendants was made to set the total suit to pay out over 3 billion
Dollars.
So what does this mean for Lexington?
Violations of the CROA and other consumer protection laws carry penalties, including financial restitution, injunctive relief, and potential damage to the company’s reputation. The CROA, in particular, grants consumers certain rights, including the right to cancel credit repair contracts within a three-day cooling-off period and the prohibition of upfront fees. As of June, 6th 2023, Lexington announced it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The firm will continue to service its current clients undergoing their process, but new members and services to be provided after the bankruptcy process are yet to be determined.