Credit-repair firms agree to settle CFPB claims for $2.7 billion

Some of the country's largest credit-repair businesses agreed to settle Consumer Financial Protection Bureau allegations of illegal telemarketing practices for $2.7 billion. 

Included in the settlement were Lexington Law and CreditRepair.com, which are marketed "through a web of entities" including PGX Holdings Inc., the CFPB said in a statement Monday. PGX filed for bankruptcy after the court ruled in favor of the CFPB in March, finding that the credit-repair brands violated rules banning the collection of fees upfront. 

"Americans across the country looking to improve their credit scores have turned to companies like CreditRepair.com and Lexington Law," CFPB Director Rohit Chopra said in the statement. "This scam is another sign that we must do more to fix the credit reporting and scoring system in our country."

Because the companies are insolvent, the CFPB said it would determine whether its victims' relief fund could be used to make payments to affected consumers.

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The proposed settlement, if entered by the US District Court for the District of Utah, would also ban the brands from telemarketing their credit-repair offerings for 10 years.

Lawyers listed as representing PGX in bankruptcy proceedings didn't immediately respond to a request for comment. 

The companies try to improve consumers' credit scores by disputing components of their credit reports for a fee. The CFPB has warned that the industry often doesn't live up to many of the promises it makes to its clients.