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The Federal Trade Commission (FTC) has announced proposed settlements in its case against the operators of Financial Education Services (FES), a credit repair company accused of running a pyramid scheme.
The proposed settlements include permanent bans for the individuals involved and the forfeiture of over $12 million in assets. According to a press release issued on August 5, 2024, these measures aim to address the alleged misconduct of FES and its affiliates.
“These companies promised to improve people’s credit but failed to deliver,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Honest businesses generate revenue through legitimate products and services, not through recruitment. The focus on recruitment, especially with exaggerated income claims, is indicative of an illegal pyramid scheme.”
The FTC’s lawsuit, filed in May 2022, accused FES of misleading consumers with false promises of easy credit repair solutions. The company allegedly recruited customers into a pyramid scheme that sold credit repair services to others. In response to the lawsuit, a federal court temporarily shut down FES.
The FTC’s complaint detailed how FES and its associated entities deceived consumers by making inflated claims about the effectiveness of their credit repair services, charging upfront fees, and exaggerating the potential income from recruiting others into the scheme.
Under 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 barred from various illegal activities. They will also be required to implement a compliance monitoring system and surrender $5.5 million in cash.
In other settlements, defendants Michael Toloff (along with VR-Tech Mgt and Statewide Commercial Lending), Christopher Toloff (with CM Rent), and Gerald Thompson will face permanent bans from providing credit repair services or participating in multi-level marketing schemes. They will also be required to turn over significant assets, including $1.7 million and $215,000, respectively.
“The FTC remains dedicated to halting deceptive credit repair practices and dismantling illegal pyramid schemes that exploit vulnerable consumers,” Levine added.
These proposed settlements are a significant step in addressing fraudulent practices within the credit repair industry and ensuring that consumers are protected from deceptive and harmful business models.
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