CFPB returns nearly $2 billion to victims of credit repair ripoff
By Amanda Jackson
Last month, the Consumer Financial Protection Bureau (CFPB) put $1.8 billion back into the pockets of 4 million people fleeced by credit repair companies Lexington Law and CreditRepair.com. This is one more example of the CFPB doing its job to hold corporate scofflaws accountable, stand up for working people, and get financial justice for people who were ripped off or scammed by predatory finance.
The CFPB has returned over $20 billion to consumers — not counting last week’s enforcement action — and estimates that it saves people $20 billion annually from the safeguards it has put in place to prevent junk fees as well as stopping unfair and deceptive practices before they occur. Elon Musk and other Trump confidantes have taken dead aim at eliminating the CFPB — misleadingly claiming it’s a duplicative agency that serves no purpose. In reality, the incoming administration is threatening one of the most effective agencies that delivers real, tangible results for people that are harmed by banks’ and other financial companies’ shoddy treatment, unconscionable junk fees, and unfair terms.
Last week’s action against unscrupulous credit repair firms is case and point. Misleading and fraudulent credit repair services are a giant problem for consumers. People with troubled credit histories and a backlog of household debts, often hounded by bill and debt collectors, can turn to credit repair firms in a last-ditch effort to help put their household finances in order.
Quality credit counseling can help people get their finances back on track, but many credit repair companies charge excessive fees (often burying these costs in the fine print of their contracts) or deceptively promise magic solutions that reel-in vulnerable customers.
Credit repair scammers target distressed consumers as a strategy to sell bogus, high-fee credit-related services that often misrepresent their company as means to improve peoples’ credit and provide access to more financial products (like credit cards or home or car loans). Usually, these operations lure consumers to purchase their services by falsely claiming that they will remove negative information from consumers’ credit reports or raise their credit scores, even if the companies cannot deliver on these promises. The truth is that no one can erase unwanted information from a credit report. Even disputed charges remain on a credit report with a notation that the item is contested.
This is a classic bait and switch. The credit repair firms misrepresent their services as a means to improve access to credit and the financial marketplace, and then gouge the customers they misled with high fees that only further harm consumers’ reports, creating a cycle of false repairs and stagnant access to credit — and the junk fees turn into profits for the scammers.
Credit repair hustlers that dupe people into paying junk fees for credit repair services that do nothing to improve their credit record, credit score, or access to financial services just reinforce the structural racism embedded in credit scoring and access to consumer credit. Credit scores reflect the historic and ongoing racial economic inequality (redlining, housing and lending discrimination, occupational segregation and more that drive racial wealth and income gaps) and consequently reinforce inequality. Credit repair scammers target people with distressed credit histories — meaning a lot of Black and Latine families — and then charge fees for worthless services that perpetuate the racial wealth gap.
Billionaires like Elon Musk and Vivek Ramaswamy have attacked the CFPB as unnecessary because billionaires don’t worry about junk fees or their credit scores, but the rest of us get real benefits from CFPB enforcement. The $1.8 billion returned to families ripped off by Lexington helps to provide relief from this company’s deception and shows that the agency stands up against all financial companies that target, deceive, and extract wealth from vulnerable consumers.
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