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Volume XII, Number 336

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FTC, DOJ Halt Credit Repair Operation Over Deceptive Practices

On March 18, the U.S. District Court for the Southern District of Texas issued an injunction against a Texas-based credit repair company that allegedly made false promises to remove negative information from credit reports and filed false identity theft reports to explain negative items on credit reports. The court granted an injunction against the company, finding violations of Section 5 of the FTC Act, the Credit Repair Organizations Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act. The permanent injunction imposes financial restrictions on the defendants and halts their operations.

The complaint was filed by the DOJ at the request of the FTC against the company and its owner.  The credit repair operation claimed it could remove damaging information from consumer credit histories by disputing negative items and by adding “credit building products” to boost credit scores. The company promised results in 40 days, including false claims that credit scores could be boosted by up to 200 points. Consumers were forced to illegally pay an upfront fee of $1,500 before receiving the promised services. The scam deceived customers out of millions of dollars, according to the FTC and DOJ.

According to the complaint, the company filed false identity theft reports, often without the knowledge of the customers, through the FTC’s identity theft reporting website and deceptively claimed that negative items on its customers’ credit reports were the result of identity thefts.  The company also failed to issue disclosures with information regarding cancelation policies.

Putting it Into Practice:  This recent complaint and resulting injunction are important for two reasons. It highlights that the FTC and DOJ will continue to collaborate in order to protect consumers—the FTC voted to refer the complaint to the DOJ unanimously. It also demonstrates the seriousness with which both agencies and federal courts take credit repair scams that target financially vulnerable consumers (we previously discussed another FTC action aimed at a debt relief compony in a recent Consumer Finance and FinTech blog post here).

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 84
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Katie Daw Government Investigations Attorney Sheppard Mullin Law Firm
Associate

Katie’s practice focuses on government investigations into antitrust and competition issues and antitrust litigation.

Prior to joining the firm, Katie completed internships with United States Senator Dianne Feinstein and with United Kingdom Member of Parliament Graham Allen, for whom she conducted nutritional poverty research and drafted initiatives. She also served as a law clerk for the Baltimore Police Department, where she focused on compliance with the city’s consent decree entered into with the Department of Justice.  

202-747-2191
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