The Justice Department’s Civil Division announced today that RMCN Credit Services Inc. (RMCN), of McKinney, Texas, and the Texas residents who own it, Doug and Julie Parker, have agreed to settle a federal court case charging them with falsely disputing negative information on consumers’ credit reports and collecting illegal upfront fees from customers. The defendants have agreed to an order that puts an end to these practices, which are illegal under the Credit Repair Organizations Act (CROA), and pay civil penalties.
“This consent order sends a strong signal to the credit repair industry that we will enforce the law against companies that abuse the credit reporting system by flooding it with false disputes,” said Assistant Attorney General Stuart F. Delery of the Civil Division. “This conduct degrades the accuracy of credit reports and raises costs for all consumers.”
In a complaint filed on behalf of the Federal Trade Commission (FTC) in the U.S. District Court for the Eastern District of Texas, the United States alleged that the defendants operated a credit repair company that offered to improve consumers’ credit scores by disputing negative information on their credit reports. The complaint alleged that RMCN and Doug and Julie Parker lodged false disputes with credit bureaus by sending “consumer” letters raising fabricated disputes over negative information in its customers’ reports. For example, the letters made false statements such as “I was never late” or “This is not my account.” The government’s case further alleged that these letters were not written by consumers. According to the government’s court filings, RMCN sent more than a million dispute letters during the five-year period preceding the complaint (October 2006 to October 2011). This forced credit bureaus and creditors to incur costs responding to bogus letters, which ultimately raised the cost of credit for all consumers.
The complaint also alleged that RMCN charged their customers for credit repair services before those services were fully performed. In particular, the government alleged that defendants charged a significant portion of their fee before any credit repair work began.
The agreed order prohibits defendants from making any untrue or misleading statements to consumer reporting agencies or creditors, prohibits them from charging advance fees for credit repair services, and bars them from making misrepresentations in connection with the sale of any good or service. The order also imposes a civil penalty of $2.35 million. If the defendants pay $400,000, the remainder of the judgment will be suspended based on the defendants’ inability to pay the full amount of the penalty.
Congress enacted CROA to protect the public from unfair and deceptive advertising and business practices by credit repair organizations. CROA prohibits credit repair companies from making false statements, or statements they reasonably should have known were false, to credit bureaus and creditors concerning consumers’ credit standing or creditworthiness. CROA also forbids credit repair companies from charging customers for credit repair services before those services are fully performed.
In agreeing to settle this matter, defendants have not admitted that they knowingly violated CROA.
The case was handled by Trial Attorney Tim Finley of the Civil Division’s Consumer Protection Branch, Assistant U.S. Attorney Kevin McClendon of the U.S. Attorney’s Office for the Eastern District of Texas, and Tom Carter, Emily Robinson and Luis Gallegos of the FTC.