For the second time this month, the FTC has sued the credit repair operation, which it says has combined false promises to quickly and significantly increase people’s credit scores by offering false opportunities to make money from selling credit repair services. In the latter case, the FTC says the alleged earning opportunity was a pyramid scheme.
The lawsuit alleges that Michigan-based Financial Education Services (FES), five affiliated companies and owners of Parimal Naik, Michael Toloff, Christopher Toloff and Gerald Thompson, drew consumers more than $ 213 million. At the request of the FTC, the federal court froze the property of the accused, appointed a bankruptcy trustee and ordered the suspension of the alleged illegal operations until further proceedings in the case.
The FTC says FES, which also operates as United Wealth Services, uses social media, telemarketing and a network of sales agents across the country to promote its credit repair services in Spanish and English. He claims that he can increase people’s credit scores by hundreds of points in a short time by permanently removing negative information - such as billing accounts and late payments - from their credit reports and adding positive information.
But, the FTC says, the FES does neither. For example, in order to allegedly remove negative information, the FES sends clients emails that cannot be changed to be printed, signed and sent to credit bureaus. The letters dispute all or most of the negative items in the clients’ credit reports. But challenges - without supporting documents - rarely result in the removal of items, the FTC says.
The complaint says the FES charges people $ 99 in advance for its services, and a periodic fee of up to $ 89 each month. It is illegal for a credit repair company to charge people before it has fully performed the services it promises. In addition, the complaint says, the FES does not provide people with important information required by the Credit Institutions Act (CROA), including signed contracts disclosing the services they will provide, the total cost of their services, and a refund and cancellation policy.
The complaint states that the loan repair scheme and the pyramid scheme are intertwined. The FTC says the FES is putting pressure on customers inquiring about its credit repair services to become “FES agents.” The company says agents can earn tens of thousands of dollars a month by selling FES services to other consumers and recruiting those consumers to become FES agents themselves. And he describes in detail the complex system that says FES agents become eligible for ever-increasing commissions and bonuses by building a “lower line” of recruits who, in turn, sell FES services and recruit new agents to do the same.
But, the FTC says, the FES’s alleged business opportunity requires its agents to pay the FES $ 299 in advance for participating in the deal, plus $ 89 a month thereafter for the FES’s credit repair services - even if they don’t need it. And, the FTC says, in the classic pyramid scheme style, the FES encourages the recruitment of new agents into the business instead of selling credit repair services. The complaint states that few people, if any, make the promised income, and many lose money.
The complaint alleges that the company’s practice violates the FTC Act, CROA and the Telemarketing Sales Rule. This followed an appeal by the FTC earlier this month accusing The Credit Game and its owners of conducting a credit fraud repair operation that also presented a fake business opportunity. There, the FTC said that the “opportunity” was essentially for people to hand over their government benefits from COVID-19 to the accused to learn how to start their own credit repair company.
If it seems like we’re looking seriously at money-making schemes that target people who are in financial trouble or trying to make progress, we are. As for the following, it is worth noting that the Commission initiated the adoption of rules in February to address fraudulent or unfair marketing using earnings claims. If finalized, this rule would allow the FTC to recover damages from deceived consumers and seek harsh penalties for all high-level marketing professionals and other bad actors who rely on people’s hopes for economic progress. Stay updated.