More than 4 million people to share $1.8 billion in refunds, the CFPB says. Here’s what to know.

More than 4 million Americans gouged by credit repair companies including Lexington Law and CreditRepair.com will soon collectively receive $1.8 billion in refund checks, the Consumer Financial Protection Bureau announced Thursday.

The payments make up the biggest distribution yet from the CFPB’s victims relief fund, financed by civil penalties paid by companies that violate consumer protection laws, the agency said.

Checks will be mailed in coming weeks to 4.3 million consumers who were charged illegal advance fees or subjected to allegedly deceptive bait-and-switch advertising by Lexington Law, CreditRepair.com and their parent companies, according to the federal agency. 

The CFPB in August 2023 obtained a legal judgment against the credit repair businesses, with a district court ruling the companies had violated a law that prohibits such companies from collecting fees until at least six months after their promised results. 

The companies filed for Chapter 11 bankruptcy protection after the court ruling, shutting about 80% of their business operations, including telemarketing call centers. 

“Exploited vulnerable consumers”

“Lexington Law and CreditRepair.com exploited vulnerable consumers who were trying to rebuild their credit, charging them illegal junk fees for results they hadn’t delivered,” CFPB Director Rohit Chopra stated in a news release. “This historic distribution of $1.8 billion demonstrates the CFPB’s commitment to making consumers whole, even when the companies that harm them shut down or declare bankruptcy.” 

Since its launch in 2011, the CFPB has distributed more than $3.3 billion to consumers harmed by a range of illegal practices, such as student loan and mortgage relief scams and predatory lending. The victims relief fund allows the CFPB to provide financial relief in cases where direction compensation from the violating company is not possible. 

The brainchild of Sen. Elizabeth Warren, D-Massachusetts, the CFPB was established after the 2008 financial crisis. Funded by the Federal Reserve, the agency has weathered several legal challenges from opponents. The Supreme Court in May upheld its funding structure, which had been challenged by the payday lending industry. 

Still, the agency’s efforts could prove short-lived amid calls from some Republicans to weaken the agency or get rid of it entirely. On Wednesday, billionaire Elon Musk — among those designated by President-elect Donald Trump to front an effort to dismantle government bureaucracy, slash regulations and cut government spending — called for deleting the CFPB, arguing in a post on social media that there are “too many duplicative regulatory agencies.” 

When will the refund checks be sent?

Payments will be sent between December and January to eligible consumers harmed by the companies, and those eligible do not need to take any action to receive a check. 

Those who think they are eligible but have not received a payment by mid-January can then contact JND Legal Administration at www.cfpb-lexlaw.org. Details about the distribution can be found here.

How big will the payments be?

The CFPB said the payments are based on a pro-rata share of fees paid by consumers to CreditRepair.com and Lexington Law, but that the payments might not cover all the fees they incurred. 

If the payments were divided evenly, each person would receive about $419.

“If funds remain after the distribution is complete, additional checks may be sent to consumers who cashed their initial check. You don’t need to take any additional action,” the agency said.

Can I file a claim?

No, according to the agency. “There won’t be opportunities to file claims for this redress case,” it said. 

Is the refund check taxable? 

It’s unlikely, because the checks are considered refunds for payments that consumers made to the credit repair companies, rather than taxable income, the CFPB said. “If you have tax-related questions, however, please contact a tax advisor,” it added.