There are many credit repair organizations in our country, and many of them have the best interest of their clients at their core. However, it is true there are some bad actors in this industry. The quality of work provided by many of these companies is in direct correlation to their knowledge and experience of how credit works, how items are to be presented on credit reports and knowledge of the law and rights of consumers. Sadly, the vast majority of credit repair companies simply “go through the motions” of credit repair. They mean well, they just don’t have the knowledge to properly advise their clients.
There are a few extremely large credit repair companies that acquire hundreds of thousands of clients each year with the intention to only collect fees and put forth minimal effort for their clients. Three such companies filed for Chapter 11 Bankruptcy in Federal Court on June 6th, 2023. Here’s a bit of the back story as to why.
PGX is the holding company for CreditRepair.com, Credit.com, and Lexington Law. You might have seen their ads on television, in your email inbox or on social media posts. On June 5th, 2023, the Federal Court in Utah ordered a judgement of $3.1 Billion against PGX and its subsidiaries due to illegal practices by their credit repair organizations. The CFPB (Consumer Financial Protection Bureau) has been investigating Lexington Law and their business practices since 2016. However, like most credit repair organizations, these repair companies in the lawsuit were following the guidelines of CROA (The Credit Repair Organizations Act). In a unique strategic move, the CFPB prosecuted PGX and its subsidiaries under the seldom used “TSR” (Telemarketing Sales Rule) to notify the court of the illegal acts and practices of these three credit repair organizations. The TSR is the law that dictates how consumers may be marketed.
Ultimately, the TSR argument was successful against PGX and their subsidiaries. The Court found that these companies were using illegal and unethical practices to draw in unsuspecting clients. For example, it was found that these companies were marketing and advertising “Rent to Own” home and Home Loans for people with bad credit. Once a consumer indicated interest in “renting to own” a home, PGX would sell the individuals information to affiliate credit repair companies in order to sign them up for credit repair….even though the company had no homes to rent and no intention of supplying home loans. They were simply a gateway to get leads to the credit repair companies. This activity was deemed illegal and unethical.
As a result, the CFPB had what they needed to go ahead with a lawsuit against PGX and its holdings via the TSR. With a $3.1 Billion judgement against them and only $4 Million of cash on hand, PGX was forced to ask for, and has been granted a Chapter 11 Bankruptcy. The carnage has been swift and immediate. The assets of the company are being liquidated through auction and massive employee layoffs have begun. According to published reports, 900 employees of the company have been laid off and 80% of the operations have been shut down.
The woes continue. Since PGX is located in Salt Lake City, Utah… they must comply with the State’s WARN Act. The Act requires employers with 100 or more full-time employees provide sixty (60) day’s notice prior to being laid off. Since this ruling was abrupt and damages were high, the layoffs were enacted almost immediately, not giving their employees the 60-day notice required by law. This has resulted in a class action lawsuit with damage relief unknown at this point.
What this all boils down to is… do you research. Just because a company is the most advertised doesn’t mean they are the best at what they claim to do. That’s why Credit Law Center is structured the way we are. We are a pay for performance Law Firm. We have filed over 500 cases in Federal Court and have gained significant settlements for our clients via FDCPA and FCRA violations. If you, a friend, a family member have ever worked with or are currently working with any of those three companies above, we would love to step in and do the right thing for you.
