WASHINGTON—As a result of a Federal Trade Commission lawsuit, the owners and operators of a “sprawling” credit repair operation known as Financial Education Services (FES) will end the practices that the FTC alleged created a pyramid scheme and also violated the Credit Repair Organizations Act.
In addition, the proposed court orders include substantial monetary penalties, the FTC said.
The FTC first filed suit against the FES scheme in May, 2022, alleging that the company preyed on consumers with low credit scores by luring them in with the false promise of an easy fix and then recruiting them to join a pyramid scheme selling the credit repair services to others, costing them millions of dollars.
The Allegations
The FTC’s complaint charged that FES and its owners, operators and associated companies deceived consumers about their credit repair products and charged them upfront for the service. In addition, the pyramid scheme made overinflated income claims that consumers could make tens of thousands of dollars recruiting others into FES.
$12 Million in Refunds
The FTC reported the proposed settlements in the case will lead to more than $12 million being turned over to the FTC for use in providing refunds to affected consumers.
Prohibitions Issued
In addition, prohibitions have been issued against the following individuals, the FTC said:
- Defendant Parimal Naik, along with Financial Education Services, Inc., United Wealth Services, Inc., VR-Tech, LLC, Youth Financial Literacy Foundation, and LK Commercial Lending LLC will be permanently prohibited from numerous forms of unlawful activities related to credit repair services and pyramid schemes, and will be required to put a compliance monitoring system in place to ensure its employees and contractors do not violate the terms of the settlement. In addition, they will be required to turn over $5.5 million in cash.
- Defendant Michael Toloff, along with VR-Tech Mgt, LLC, and Statewide Commercial Lending LLC will be permanently banned from providing any credit repair services, as well as being permanently banned from any involvement in multi-level marketing. In addition, they (along with relief defendant Gayle Toloff) will be required to turn over cash and the value of numerous cars, a boat, and multiple real estate properties, totaling millions of dollars.
- Defendant Christopher Toloff, along with CM Rent Inc., will be permanently banned from providing any credit repair services, as well as being permanently banned from any involvement in multi-level marketing. In addition, they will be required to turn over $1.7 million.
- Defendant Gerald Thompson will be permanently banned from providing any credit repair services, as well as being permanently banned from any involvement in multi-level marketing. In addition, he will be required to turn over $215,000.