A judge has temporarily shut down a nationwide credit repair service after the Federal Trade Commission accused it of being a giant pyramid scheme that took advantage of people whose finances had been disrupted by the pandemic. .
Michigan-based Financial Education Services offered to help people fix their bad credit, but instead they charged high commissions for the services they never offered. He then linked many of his clients to a high-pressure sales scheme to lure other victims, the FTC said.
The company and its owners are accused of accumulating $ 213 million in false customer fees over the past three years. The FTC filed its complaint in Detroit Federal Court, where Judge Bernard Friedman issued a temporary restraining order last week closing the company and freezing its assets. In his temporary removal order, which was revealed Monday, Friedman said there was good reason to believe that Financial Education Services generated a total of $ 467 million as a result of “illegal practices. legal “.
“These defendants charged millions in garbage commissions as part of a pyramid scheme that sold counterfeit credit repair products,” said Samuel Levine, director of the FTC’s Office of Consumer Protection. “We are pleased that the court will close this operation and freeze its assets, and we will continue to prosecute companies that take advantage of the economic hardship of families.”
It was not immediately clear whether the company or its owners had hired a lawyer. A phone call to the company’s offices was answered with a recording saying: “We are currently subject to a court order. We will respond as soon as we can. “
The company had previously operated under various names, including United Wealth Service, VR-Tech LLC, CM Rent Inc. and the Youth Financial Literacy Foundation, according to the FTC.
In court statements, the FTC said the company and its owners, Parimal Naik, Michael Toloff, Christopher Toloff and Gerald Thompson, would aggressively market their credit repair services through social media, offering will help people with their luck to quickly increase their credit scores. and eliminate old debts.
Customers who called the company’s hotline would be told that to take advantage of the company’s services required an initial fee of $ 99, followed by additional fees of $ 89 a month later. Customers were told they could expect their credit scores to improve in 90 days.
But to reduce rates and make money, callers were told that they could become financial education agents themselves and that if they could attract five additional customers, they could earn $ 1,000 a week. and get the services of the company at a discount.
In the end, the FTC said that the company never offered any real credit repair services and that much of what they said they would do, including the fact that a borrower’s rent payments count as credits against their low credit scores, it was not possible even legal.
False credit repair operations were first discovered in Georgia, where in 2019 the company reached a $ 1.75 million deal with the state attorney general’s office, which was in the The company allegedly engaged in deceptive and illegal practices as part of a sophisticated multilevel marketing scheme. Georgia officials referred their findings to the FTC, which led to recent action.