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A Deep Dive into the CFPB’s Suit Against Lexington Law Targeting the Credit Repair Organization’s Marketing Practices

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Credit repair organizations (CROs) have been flooding debt collectors with questionable mass disputes for a while now. One CRO—Lexington Law and its related entities (collectively, Lexington Law)—have caught the attention of the Consumer Financial Protection Bureau (CFPB or Bureau). On Thursday, the CFPB announced that it filed a lawsuit against Lexington Law for violations of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act.

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According to the 48-page complaint, Lexington Law relied on a marketing affiliate network that “used deceptive, bait advertising to generate referrals to Lexington Law’s credit repair service.” The Bureau focused on Lexington Law’s referral fees, stating that the organizations failed to observe the mandatory waiting period required by federal law. As summarized in the complaint, “fees can only be collected after a certain period has elapsed and it has been demonstrated that the promised results have been achieved.”

The complaint seeks an injunction against Lexington Law and its affiliates, the rescission or reformation of consumer contracts, refunds to consumers of monies paid, disgorgement for unjust enrichment, and payment of damages.

Lexington Law’s Lead Generation Program

The complaint provides a glimpse into how Lexington Law generates its large customer volume. Allegedly, the company uses a network of affiliates to generate its “massive quantities of leads.” The affiliates use telemarketing campaigns to market certain financial products (rent-to-own housing, mortgage, auto loans, or personal loans) and, when they get a consumer on the phone, they live-transfer the consumer to Lexington Law. This is called a “hotswap.”

The complaint states:

The Hotswap Partners also pitch Lexington Law’s and CreditRepair.com’s credit repair services, typically after telling the consumer that he or she has been denied a particular credit product or service, offering the consumer unfavorable terms on a loan, or telling the consumer that he or she will be eligible for the product or service, or for better terms on the product, if they first enroll in the credit repair service.

Some of the scripts that Lexington Law provided its hotswap affiliates include a statement that Lexington Law’s services “can just make the whole process of getting this loan funded easier,” and that “[Y]ou just need to get a few things taken care of with your credit in order to get qualified for a loan…that is exactly what Lexington specializes in.”

Editor’s Note: In April, a federal court compelled Lexington Law to produce its client communications related to lead generation for its mass credit dispute letters in a lawsuit filed by Ad Astra Recovery Services, Inc.

Misrepresentations by Hotswap Affiliates

The issue with Lexington Law’s lead generation program is that its hotswap affiliates gained their leads through misrepresentation, such as offering “illusory products or services” that the company did not actually offer and advertising “fake real estate ads, fake rent-to-own housing opportunities, fake relationships with lenders, false credit guarantees, and false and unsubstantiated statements about past consumer outcomes.”

One of Lexington Law’s largest lead generation affiliates would tell consumers on the phone that “their credit score was the only thing keeping them from their desired product.” This would follow with a lead-in to Lexington Law’s service to help increase the consumer’s eligibility for a product that did not exist.

According to the complaint, Lexington Law had knowledge that such misrepresentations were occurring and allowed the practices to continue.

insideARM Perspective

For quite some time, collection agencies and creditors have raised flags about practices of certain CROs that seemed to be harmful to consumers. Until now, regulators had not taken action.

With this complaint, the tides have turned. Some may be disappointed that the CFPB did not go further and target Lexington Law’s mass credit disputes; however, what the Bureau targeted could in fact help to alleviate that issue. Without its massive (and, according to the Bureau’s complaint, deceptive) lead generation program, Lexington’s source for these mass credit report disputes would not exist at its current scale.

There is also a question of whether Lexington Law’s business model can survive if the court sides with the Bureau on this matter. In addition to the high dollar value of the relief requested by the Bureau, the allegations themselves would require a big change in the way Lexington Law receives payment from consumers—specifically, following a waiting period and demonstrating that the company did what it promised.

It’s too early to tell what effect this lawsuit will have on the ARM industry, but one thing is for certain: all eyes are on this one.



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California’s vague new financial regulation law – Orange County Register

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Assembly Bill 1864 didn’t get much media or public attention as it zipped through both houses of the Legislature on the last day of the 2020 session.

Superficially, it appeared merely to reconfigure the state’s financial regulatory agencies into a new entity called the Department of Financial Protection and Innovation.

However, those in California’s vast financial industry were paying lots of attention because the bill creates an entirely new regulatory regime with broad powers, including fines of up to $1 million a day, to police financial players that hitherto have had little oversight.

The official rationale for the legislation is that President Donald Trump’s administration neutered the federal Dodd-Frank Wall Street Consumer Financial Protection Act of 2010, so the state must step in with an equivalent to guard against predatory financial practices that harm consumers.

The new California Consumer Financial Protection Law gives the reconstituted agency authority to go after “abusive practices” whose definition in the law is fairly vague. Thus, the agency itself will define the term as it also decides which businesses will face its scrutiny.

It appears that the new law will affect firms involved in debt settlement, credit repair, check cashing, rent-to-own contracts, payday lending, student loan servicing and financing for retail sales. However, its primary target seems to be financial services offered by non-banks, particularly what are called “fintech companies” that offer bank-like services via the Internet without maintaining physical offices.

Fintechs, many of them based in the San Francisco Bay Area, have blossomed in recent years as part of the digital economy, competing with traditional brick-and-mortar banks. Their disruptive nature is not unlike the challenge that technology-based ride services such as Uber and Lyft pose to taxicabs and buses.

Late-blooming changes in AB 1864 exempted traditional financial firms that are already regulated, such as banks and credit unions, from the new consumer protection law, leading some analysts to conclude that its unstated aim is to help them stave off competition from new kids on the financial block.

The vagueness of the new law was encapsulated in what Gov. Gavin Newsom said during a signing ceremony. The new law and the new department, he said, will “create conditions for innovation to flourish in a way where we can steward that and we can just work against its excesses. So we support risk-taking, not recklessness.”

Newsom also signed two other financial protection measures, one that requires debt collectors to be licensed beginning in 2022 and the other creating a Student Loan Borrower Bill of Rights.

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Erie Homecoming 2020 to take place virtually

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Erie Homecoming 2020: “Erie’s Economic Evolution” is happening this week.

Erie Homecoming is an event that shares the vision of where we are going as a business community and the specific projects that will be taking us there.

Yoselin Person was live outside of the Erie Regional Chamber to tell us more about what’s taking place at this year’s homecoming.

Get your favorite hot drink because Erie Homecoming is happening virtually. 

Rooms full of people just aren’t happening in the midst of a pandemic, so Erie Homecoming is an event that will inspire you from comfort of your home or office.

The purpose of homecoming is to give attendees the opportunity to learn how they can invest in the Erie community.

During this two day event, you will be able to learn how you can invest the time, talent and treasure in creating a more diverse and prosperous Erie community.

Erie’s Black Wall Street will be featured this year. It’s a nonprofit organization that’s known for improving black business.

“So, having it geared towards helping black businesses expand and spread their wings, I think that’s amazing,” said Alexandria Ellis, owner, She Vintage.

Ellis began her business six months ago. She says Erie Black Wall Street is a safe space where black entrepreneurs can connect and collaborate with others.

The organization also helps others with credit repair.

“They’ve helped me by connecting me with resources if someone is looking for a nail tech or a boutique that’s black owned, they have connected customers of their clients to me through their organization,” said Ellis.

Speakers from the black owned organization will speak about creating regional equity.

There will also be a discussion about Flagship Opportunity Zones and what it means in terms of tax and other investment incentives.

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RiverBend Growth Association announces new members | Business

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RiverBend Growth Association encourages use of face coverings

The RiverBend Growth Association announces its new members:

5 Diamond Campground

Brian Campbell and Matt Diamond

2 Fun Lane

Hartford IL 62048

(618) 254-1180

facebook.com/5-Diamond-Campground-103976501423687

Alton Pride Inc.

Jason Heeren, director of sponsorship

P.O. Box 662

Alton IL 62002

(618) 204-7420

https://altonpride.com

Alton Pride is a charitable and educational organization established to bring awareness, understanding, and advocacy to the LGBTQ+ community with an emphasis on the specific needs of the youth within the community. We are setting ourselves apart from other Pride organizations by focusing on giving back to our community, rather than hosting just a parade or festival. We will be depositing a majority of event proceeds into a structured account funding our goal to develop a local teen suicide prevention line and a teen resource center to help youth in need.

 

Imo’s Pizza – Bethalto

Lori Bromberg, president/treasurer and managing partner

515 N. Bellwood

Bethalto IL 62010

(618) 258-0011

www.imospizza.com

Bethalto Imo’s is owned by Charles and Barbara (Babs) Pelan. Barbara was a nurse and Charles has had a varied career but has always had an entrepreneurial spirit. He and Babs purchased the Bethalto Imo’s in 2013 and seeing the success of the brand and the store in Bethalto were anxious to purchase the Edwardsville Imo’s franchise in 2014.

Their daughter, Lori Bromberg, is the managing partner and provides leadership and daily oversight to the business. Lori has a bachelor of science degree in management and has 31-plus years in corporate leadership roles, including customer experience, supply chain, distribution strategy, change management, hr/talent management, training and safety. Lori also is a certified mentor for SCORE providing mentoring and coaching to small businesses.

While it is our goal to have a financially successful business, we believe the cornerstones to achieving success is ensuring a superior product and customer experience, investment in our employees, positive contributions to our community, while demonstrating a strong commitment to safety. We pride ourselves on our commitment to Imo’s corporate mission, “To maintain the Imo’s tradition of uncompromising quality, pride in Imo’s products, and passion for success and for customers to experience a genuine, original St. Louis pizza of the highest quality, served in a pleasant atmosphere or at home, so that they too will have reason to say: “Imo’s is my favorite pizza.”

If you frequent our Bethalto location, we will be moving down the street a little over a mile, still on 111, within the next month or so.  We will continue to have delivery and pick-up as well as offer new patio seating.

 

Lewis and Clark Community College Foundation Inc.

Mark Kratschmer, president

5800 Godfrey Road, ER 0210

Godfrey IL 62035

(618) 468-2010

www.lc.edu/About_the_Foundation/

The Lewis and Clark Community College Foundation is a nonprofit corporation organized under the laws of the state of Illinois. The foundation supports Lewis and Clark Community College and its students through scholarships, awards, and other assistance.

Piasa Body Art

Cody Hinkle, owner

560 E. Broadway

Alton IL 62002

(618) 462-1720

Alton’s best body art shop, offering tattoos and piercing services. Now with The Salon for all your hair care and barbering needs!

Prosper Credit Consultants

Jerheart Huntley, owner

525 Wyss Ave.

Alton IL 62002

(877) 503-7465

prospercreditconsultants.com

Credit repair that works! Prosper Credit Consultants uses the most innovative processes to make sure our clients are educated on how credit repair works! Prosper Credit Consultants is dedicated to educating our clients on how to get and keep good credit! We have become a one-stop shop for all things from credit repair, building credit for beginners, trade lines, putting our clients in position to purchase that new car, and home they want. Give us a call (877) 503-7465 or set up a free credit consultation.

The RiverBend Growth Association is the chamber of commerce and economic development organization for the 12 communities known as the Riverbend.  For more information about the Growth Association, visit www.growthassociation.com or call (618) 467-2280.

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