high cost of bad credit

high cost of bad credit

The allure of credit repair as a profession, and its vulnerability to questionable practices, was demonstrated last May when FTC attorneys, investigators and data specialists, along with local law enforcement, appeared at the Financial Education Services headquarters . upscale Detroit suburb Farmington Hills. The FTC claimed that FES was running a “vast, bogus credit-repair scheme” that promised to significantly improve customers’ credit scores permanently. Removing negative information from their credit reports. The company took in nearly half a billion dollars in gross revenue, according to federal prosecutors, all of which was spent on “useless credit-repair services,” as the FTC called it. (FES has denied the allegations.)

FES had built a nationwide network of more than 400,000 credit-repair sales agents. Agents recruited new agents and clients through social media and telemarketing. “If you have a 400-675 credit score and want a 700-800 credit score, David can legally erase the negatives… repos, foreclosures, late payments,” one post declared in typical fashion. . Another: “My credit score went up 140 points from 530 to 670 in my first 30 days, allowing me to buy a new home!” According to the FTC analysis, some agents made a much higher living – the average weekly earnings were just over $2.25, or $117.36 per year. (In a recent year, less than 1 percent of agents averaged more than $300,000.)

In 2020, as pandemic-era stimulus payments to low-income households created a boom for loan repair, FES’s customer base swelled to nearly 900,000. Revenue rose to $134 million from $73 million a year earlier, according to court filings. Following the FTC’s unannounced visit to its Farmington Hills office, Samuel Levin, director of the agency’s Consumer Protection Bureau, vowed in a news release to “continue to pursue firms that prey on families’ economic pain.”

When I first read the FTC’s lengthy complaint, the scale of the operation was a complete surprise, although I had reported extensively on the firm and its business model. A few months ago, I visited an office storefront run independently by two FES agents and located between a community health clinic and a used car lot on Chicago’s Near West Side. A vinyl banner for the used car next door read, “No Credit Bad Credit, We Finance.” Inside, colorful upright banners with Growth and Wealth in capital letters were arranged sideways. I interviewed a few of their recruits, including a couple who joined hoping to earn enough money to buy a home. After the FTC investigation came to light, they stopped working as FES agents and declined to be named in this article — “We wouldn’t put ourselves out there like that,” one of them told me.

This February, at the FES’s annual convention held in Orlando, the theme was “Rise,” according to a report by a court-appointed monitor, and Parimal Naik, an FES founder, presented $100 bills to the winners of a “money ball” drawing. , (Nike declined to comment for this article.) The Monitor also noted that of the 500 people in attendance, at least 95 percent of the attendees were either black or Latino.

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