For the second time this month, the Federal Trade Commission has filed a lawsuit against a credit repair operation, which it claims combined false promises to quickly and significantly raise people’s credit ratings with a proposal to make a false opportunity to make money by selling repair services. on loans. In the latter case, the FTC says the alleged opportunity to make money is a pyramid scheme.
The lawsuit alleges that Michigan-based Financial Education Services (FES), five affiliated companies and owners Parimal Naik, Michael Toloff, Christopher Toloff and Gerald Thompson have snatched more than $ 213 million from consumers. At the request of the Federal Trade Commission, a federal court froze the defendants’ assets, appointed a trustee in bankruptcy and ordered the cessation of alleged illegal operations pending further proceedings.
The FTC says FES, which also does business as United Wealth Services, uses social media, telemarketing and a national network of sales agents to promote its credit repair services in Spanish and English. He claims that he can raise the credit rating of people by hundreds of points in a short time by permanently removing negative information – such as collection bills and late payments – from their credit reports and adding positive information.
But the FTC says the FES does neither. For example, to remove negative information, FES sends customers emails that cannot be edited to be printed, signed and sent to credit bureaus. The letters challenge all or most of the negative elements in customers’ credit reports. But challenges – without supporting documents – rarely lead to the removal of the elements, says the FTC.
The complaint says the FES charges people $ 99 in advance for its services and a recurring fee of up to $ 89 each month. It is illegal for a credit repair company to charge people before fully fulfilling the services it promises. In addition, the complaint states that the FES does not provide people with important information required by the Credit Repair Organizations Act (CROA), including signed contracts disclosing the services it will provide, the total cost of its services and its policies. recovery and cancellation.
The complaint alleges that the loan repayment scheme and the pyramid scheme are intertwined. The FTC says the FES is pressuring customers interested in 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 users and recruiting those users to become FES agents themselves. And it details a complex system that says FES agents qualify for ever-increasing commissions and bonuses by building a “bottom line” of recruits who in turn sell FES services and recruit new agents who to do the same.
But, says the FTC, FES’s alleged business opportunity requires its agents to pay FES $ 299 in advance to participate in the business, plus $ 89 a month thereafter for FES’s credit repair services – even if they don’t need them. And, according to the FTC, in the style of the classic pyramid scheme, the FES encourages the recruitment of new agents in the business instead of selling credit repair services. The complaint claims that few people, if any, make the promised income and lose a lot of money.
The complaint alleges that the company’s practices violate the Federal Trade Commission Act, CROA and the Telemarketing Rules. This follows a complaint by the FTC earlier this month accusing The Credit Game and its owners of carrying out a fraudulent credit repair operation that also offers a fake business opportunity. There, the Federal Trade Commission said the “opportunity” was essentially for people to hand over their government COVID-19 benefits to defendants to learn how to start their own credit repair business.
If we seem to be looking closely at money-making schemes aimed at people who are in financial difficulties or trying to move forward, we are. With regard to the following, it is worth noting that in February the Commission launched the development of rules to tackle fraudulent or unfair marketing using profit claims. If finalized, the rule will allow the Federal Trade Commission to recover damages from fraudulent consumers and seek harsh penalties against all traders at many levels and other bad players who take advantage of people’s hopes for economic progress. Stay on the line.