The Federal Trade Commission (FTC) has announced proposed settlements in a case involving the owners and operators of credit repair operation Financial Education Services (FES).
The proposed court orders include permanent bans for those behind an alleged credit repair pyramid scheme and a requirement to turn over more than $12 million in assets, the regulator said in a Monday (Aug. 5) press release.
“These companies promised to clean up people’s credit but failed to deliver,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in the release. “Meanwhile, honest businesses make money selling products and services, not by recruiting, and the drive to recruit, especially when coupled with inflated income claims, is the hallmark of an illegal pyramid.”
The FTC filed its suit against FES in May 2022, alleging that the company falsely promised an easy fix to consumers with low credit scores and then recruited those consumers to join a pyramid scheme that sold credit repair services to others, according to the release.
When that suit was filed, a federal court temporarily shut down FES in response to the FTC’s allegations, PYMNTS reported at the time.
The regulator’s complaint charged that FES and its owners, operators and associated companies deceived consumers about the credit repair services, charged them upfront for the service and made inflated claims about the income consumers could make by recruiting others into FES, the report said.
In one of the proposed settlements, defendant Parimal Naik, along with Financial Education Services, United Wealth Services, VR-Tech, Youth Financial Literacy Foundation and LK Commercial Lending will be permanently prohibited from several unlawful activities, will be required to put a compliance monitoring system in place and will be required to turn over $5.5 million in cash, according to the release.
In other proposed settlements, defendant Michael Toloff, along with VR-Tech Mgt and Statewide Commercial Lending; defendant Christopher Toloff, along with CM Rent; and defendant Gerald Thompson will be permanently banned from providing credit repair services or having any involvement in multi-level marketing.
Those three defendants will also be required to turn over assets worth “millions of dollars,” in assets, $1.7 million and $215,000, respectively, per the release.
“The FTC is committed to stopping deceptive credit repair tactics and shutting down illegal pyramid schemes that prey on struggling consumers,” Levine said in the release.
