More than 4 million Americans who were gouged by credit repair companies like Lexington Law Firm and Credit Repair.com will soon receive refund checks totaling $1.8 billion, Consumer Financial Protection says. The department announced Thursday.
The payment represents the largest distribution to date from the CFPB’s Victim Relief Fund, which is funded by civil fines paid by companies that violate consumer protection laws, the bureau said.
Federal agencies say 4.3 million consumers who have been charged illegal up-front fees or been victimized by deceptive bait-and-switch advertising by Lexington Law Firm, CreditRepair.com and its parent company will now receive a refund. The checks are expected to be mailed within the next few weeks.
In August 2023, the CFPB obtained a legal judgment against credit repair companies, with a district court ruling that these companies violated a law that prohibits them from collecting fees for at least six months after their promised results. I put it down.
Following the court’s ruling, both companies filed for Chapter 11 bankruptcy protection and closed approximately 80% of their business activities, including telemarketing call centers.
“Exploited vulnerable consumers”
“Lexington Law Firm and CreditRepair.com exploited vulnerable consumers who were trying to rebuild their credit and charged illegal junk fees for results they never delivered,” said CFPB Director Rohit Chopra. said in a news release. “This historic $1.8 billion distribution demonstrates the CFPB’s commitment to keeping consumers well, even if businesses that harm them close down or declare bankruptcy. .”
Since its inception in 2011, the CFPB has distributed more than $3.3 billion to consumers harmed by a variety of illegal activities, including student loan and mortgage relief fraud and predatory lending. The Victim Relief Fund allows the CFPB to provide financial relief when directed compensation from the offending company is not possible.
The CFPB is the brainchild of Sen. Elizabeth Warren (D-Mass.) and was created after the 2008 financial crisis. The agency, which receives funding from the Federal Reserve, has survived several legal challenges from opponents. supreme court Upvoted in May Its funding structure was challenged by the payday loan industry.
Still, the agency’s efforts may be short-lived as some Republicans call for weakening the agency or abolishing it altogether. On Wednesday, billionaire Elon Musk was one of the people named by President-elect Donald Trump. put forth effort He called for dismantling government bureaucracy, cutting regulations and reducing government spending, arguing in social media posts that there are “too many overlapping regulatory agencies” and calling for the removal of the CFPB.
When will my refund check be sent?
Payments will be sent between December and January to eligible consumers harmed by businesses, and eligible consumers do not need to take any action to receive their checks.
If you believe you are eligible but have not received your payment by mid-January, please contact the JND Legal Administration (www.cfpb-lexlaw.org). Click here for distribution details.
How much will I pay?
The CFPB said the payments are based on a pro-rata share of the fees consumers paid to CreditRepair.com and Lexington Law, but the payments may not cover all of the fees incurred.
If the payments were split evenly, each person would receive approximately $419.
“If funds remain after distribution is complete, additional checks may be sent to consumers who cashed their initial checks. No additional action is required,” the agency said.
Can I file a claim?
No, according to the agency. “There will be no opportunity to file a claim for this relief action.”
Are refund checks taxable?
The CFPB says that’s unlikely because the checks are considered refunds for payments the consumer made to the credit repair company, not taxable income. “However, if you have tax-related questions, please contact your tax advisor,” it added.
