CFPB Sues Credit Repair Company Over Telemarketing Sales Rule Violation

court scale with bookAs part of its (failed) defense, Progrexion told the court it offers no promised results or “any result whatsoever” to its customers.

03/22/2023 8:00 A.M.

2.5 minute read

In a recent Utah federal court case, CFPB v. Progrexion Marketing, Inc., No. 2:19-CV-00298-BSJ, 2023 WL 2548008 (D. Utah Mar. 10, 2023), the Consumer Financial Protection Bureau sued the credit repair organization alleging it violated the advance-fee provision of the Telemarketing Sales Rule (TSR).

Progrexion, through its Lexington Law and brands, is the dominant provider of credit repair services to U.S. consumers.

The court held that Progrexion is subject to the advance-fee provision of the TSR, which states that requesting or receiving payment of any fee for services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating is an abusive telemarketing act unless until two specific conditions are met:

“First, the time frame within which the seller has represented that all of the goods or services will be provided to the purchaser must have expired. Second, the promised results must have been achieved. In order to ensure the achievement of the promised results, the Final Rule requires the seller to provide the purchaser with a consumer report from a consumer reporting agency that was issued more than six months after the results were achieved.”

The court found that Progrexion and its brands violated the TSR because they made no attempt to comply with the express payment preconditions and routinely charged customers for credit repair services on a monthly basis for services already provided.

“During a pretrial conference, [the d]efendants confirmed that they do not wait six months after providing results before billing clients,” said Utah district court judge Bruce S. Jenkins. “Rather, [the d]efendants bill at the end of each month, indefinitely, until a customer affirmatively terminates the agreement (or the agreement expires, in those states prohibiting indefinite contracts). These month bills violate the express language of the advance-free provision.”

In its defense, Progrexion insisted that it is excused from compliance with the advance-fee provision because it offers no promised results, or “any result whatsoever,” to their customers.

The court found this argument unpersuasive, “even assuming [the d]efendants do not promise any results (this assumption is, of course, contradicted by [the d]efendants’ advertising online and through hotswap partners …).”

The court granted the CFPB’s partial motion for summary judgment. Consistent with the request in the CFPB’s motion, the court made no determination regarding damages.

An article from the Consumer Data Industry Association noted that days after the decision was issued, “the defendants filed a notice of appeal to the 10th Circuit and asked the judge for a stay, saying that ‘absent a stay, the…order strands defendants between the Scylla of potential multi-billion-dollar enhanced penalties and the Charybdis of insolvency and dissolution,’ this being a reference to Odysseus in Homer’s ‘The Odyssey.’ The order, the defendants said, is ‘injunctive in practical effect’ noting that the companies may be on the hook for penalties that could reach $1.3m per defendant, per day, and they could be held in contempt if they continue ‘receiving or requesting’ money from its customers.”

Read the district court’s decision here.

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