The Consumer Financial Protection Bureau announced Tuesday that it is fining four California-based companies for misleading consumers and charging illegal fees for credit repair services.

According to an announcement from the CFPB, Prime Credit, IMC Capital, Commercial Credit Consultants, and Park View Law, formerly known as Prime Law Experts, and several executives in charge of the various companies will pay more than $2 million for the alleged illegal actions.

“Today, the Bureau is taking action against companies that charged illegal fees and misled consumers about their ability to fix their credit,” CFPB Director Richard Cordray said. “We will remain vigilant about protecting consumers from companies that mislead them to turn a dishonest profit.”

The CFPB said Wednesday that it filed two complaints and proposed final judgments against the companies that allege that the companies charged illegal advance fees for credit repair services and misrepresented their ability to repair consumers’ credit scores.

According to the CFPB, the companies allegedly made “misleading, unsubstantiated claims that they could remove virtually any negative information from consumers’ credit reports and could boost consumers’ credit scores by significant amounts.”

The companies made those claims to “thousands of customers” through sales calls and their websites, and targeted consumers who recently tried to get a mortgage, refinancing, or other extension of credit.

The CFPB alleges that the companies charged those consumers “millions of dollars” in illegal advance fees for their services.

Specifically, the CFPB alleges that the companies (taken directly from the CFPB):

  • Charged illegal advance fees: Federal law bars telemarketers and certain companies from requesting or collecting fees for credit repair services until certain conditions are met about the delivery of those services. The companies charged a variety of fees for their services before demonstrating that the promised results had been achieved as required by law. Specifically, the companies charged consumers fees for an initial consultation to review a consumer’s credit report. The company also charged set-up fees totaling hundreds of dollars and monthly fees that often equaled $89.99 per month. 
  • Failed to disclose limits on “money-back guarantees”: The companies offered a money-back guarantee for certain services. However, they failed to disclose that the guarantee had significant limits, including that the consumer must pay for at least six months of the service to be eligible for the guarantee.
  • Misled consumers about the benefits of their services: The companies misrepresented that their credit repair services would result in the removal of negative entries on consumers’ credit reports. The companies also misrepresented to customers that their credit repair services would, or likely would, result in a substantial increase to consumers’ credit scores. The companies lacked a reasonable basis for making these claims. 

The relationship between the four companies is a bit complex, but according to the CFPB, each of the companies offered some form of credit repair services.

Commercial Credit Consultants is a Wyoming corporation that did business n Los Angeles. The company also operated under the name Accurise. According to the CFPB, the company offered and sold credit repair services to consumers from the summer of 2009 until the summer of 2012.

Prime Credit, also known as Prime Marketing, and Prime Credit Consultants, is a Los Angeles-based company that offered similar services from the summer of 2012 through the fall of 2014.

IMC Capital is a Los Angeles-based company that also provided credit repair services in 2012.

According to the CFPB, Blake Johnson was the founder and majority owner of Commercial Credit Consultants, Prime Credit, and IMC Capital, and Eric Schlegel Schlegel was the president and a minority shareholder of Commercial Credit Consultants and Prime Credit. 

Under one of the proposed judgments, Prime Credit, IMC Capital, Commercial Credit Consultants, Johnson, and Schlegel would pay a civil money penalty of $1.53 million.

Under the other proposed judgment, Park View Law and its owner Arthur Barens would pay $500,000 in relinquished funds to the Department of the Treasury

The CFPB stated that from March 2013 through September 2014, Prime Credit used Park View Law’s name to market and sell credit repair services to consumers, and also provided credit repair services to consumers on behalf of Park View Law. Park View Law continued to offer and provide credit repair services through a similar arrangement until as late as June 2015, the CFPB said.

In a separately released statement, Prime Credit, IMC Capital, and Commercial Credit Consultants said that the companies chose to settle the CFPB charges but does not admit or deny the bureau’s allegations.

According to the companies, their services “generated scores of testimonials from satisfied customers” during the companies’ four years of operation.

“We decided, with great reluctance, to settle this investigation in order to avoid the further time and expense of a legal battle over an enterprise that we sold several years ago. The investigation already had dragged on for more than two years,” the companies said in a jointly released statement.

According to the release, a “private equity group” bought the three companies in 2014.

In their statement, the companies state that when they began marketing their services to consumers, they asked the California Department of Justice, to review their materials.

“During the years we operated the business, professionals with the California DOJ spent many hours redlining our consumer contracts and examining our operational policies in order to ensure our full compliance with the U.S. Credit Repair Organizations Act,” the companies state.

According to the companies, the CFPB’s investigation stemmed from a former employee who left for a “rival agency,” not a consumer complaint.

The companies also say that the CFPB’s issue is not with the “appropriateness” of the companies’ billing practices, but rather with when the bills were issued.

“During the course of the CFPB investigation, which was instigated not by a consumer complaint but by a former employee who had left us for a rival firm, we felt blindsided by the Bureau's reliance not on CROA but on the Telemarketing Sales Rule, a set of Federal Trade Commission regulations which to our knowledge had never before been used in this context,” the companies said.

“Under both CROA and TSR, credit-consulting firms are required to bill in arrears – that is, after services are performed. The key difference is that while CROA allows firms to send out bills after services are performed, the TSR bars firms from even beginning to seek compensation until at least six months after all work is completed,” the companies continue.

“Such an interpretation conflicts not just with best practice but, as far as we know, all practice in the credit-repair industry,” the companies add. “The timing of our billing – not the appropriateness – was the thrust of CFPB's objection.”

The companies close by stating that they are “proud” of the work they performed for consumers.

“For us, the credit-repair business was a sideline, which we exited when we sold it three years ago,” the companies conclude. “We have no intention of returning, but we believe in the industry and we urge Congress and the President to examine the Bureau's enforcement strategies with an eye towards safeguarding consumers without choking off access to a service that betters the lives of working Americans.”

The companies state that they have “no intention of returning” to the credit repair business, and according to the CFPB, they won’t even be able to return to the business even if they wanted to.

The proposed final judgments would prohibit any of the parties involved from doing business within the credit repair industry for five years. The parties would also be permanently prohibited from violating the Dodd-Frank Act or the Telemarketing Sales Rule.