FTC Obtains TRO Against Alleged Credit Repair Pyramid Scheme

  • The FTC has obtained a temporary restraining order (TRO) against Financial Education Services, Inc., its owners, and five other affiliated entities (collectively the “Credit Repair Parties” or “CRPs”) for allegedly operating an unlawful credit repair pyramid scheme in violation of the FTC Act, the FTC’s Telemarketing Sales Rule, the Credit Repair Organizations Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act.
  • The FTC’s complaint alleges that the CRPs targeted consumers with low credit scores with the false promise that the company could improve their credit scores by removing negative information from credit reports and by sending positive “credit-building” information to the credit bureaus. According to the FTC, such tactics are rarely successful, and the purported “credit-building” information included rent payment information, which is generally not factored in to a consumer’s credit score. The FTC also alleges that the company would illegally charge consumers up front for credit repair services and push consumers to become “agents” for the company and sell the same ineffective credit repair services to other consumers.
  • Under the terms of the TRO, the CRPs, who were found to be conducting a common enterprise, are barred from misrepresenting the nature of their credit repair services, or releasing any customer information to a third party. The CRPs are also subject to an asset freeze, preservation of records, and various forms of cooperation with the FTC, among other things.