Progrexion Marketing, Inc.; PGX Holdings, Inc.; Progrexion Teleservices, Inc.; eFolks, LLC; CreditRepair.com, Inc.; John C. Heath, Attorney at Law, PLLC, d/b/a/ Lexington Law

Agency: Consumer Financial Protection Bureau
Date: May 2, 2019
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/pgx-holdings-inc/
Pages: 162
PDFs: 4 documents (links below)

Documents in this case

Complaint · May 2019 · 48 p.
Amended complaint · Aug. 2022 · 50 p.
Order · Mar. 2023 · 13 p.
Stipulation · Aug. 2023 · 50 p.

Case summary

On May 2, 2019, the Bureau filed suit against PGX Holdings, Inc. and its subsidiaries, Progrexion Marketing, Inc., Progrexion Teleservices, Inc., CreditRepair.com, Inc., and eFolks, LLC (collectively, Progrexion) and against John C. Heath, Attorney at Law PC (Lexington Law), which does business as Lexington Law. Progrexion and Lexington Law offer and provide credit repair services through the brands Lexington Law and CreditRepair.com, which are two of the largest credit repair companies in the country. The Telemarketing Sales Rule (TSR) requires that fees for telemarketed credit repair services may only be sought and received after the credit repair company provides the consumer with documentation reflecting that the promised results were achieved more than six months after such results were achieved. As alleged in the amended complaint filed on August 17, 2022, Progrexion and Lexington Law violated the TSR by requesting and receiving prohibited upfront fees for their credit repair services. The Bureau also alleged that Progrexion and its subsidiaries violated the TSR and the Consumer Financial Protection Act of 2010 by making deceptive representations in its marketing, or by substantially assisting others in doing so, to entice consumers into purchasing credit repair services. On March 10, 2023, the district court ruled that defendants violated the TSR’s prohibition on upfront fees and granted the Bureau partial summary judgment against the defendants. On August 28, 2023, the Bureau filed a proposed stipulated final judgment and order, which the court entered on August 30, 2023. The order imposes a judgment of $2,660,926,481 for consumer redress against all defendants, a civil money penalty of $45,817,452 against Progrexion, and a civil money penalty of $18,408,726 against Lexington Law. The order also imposes a 10-year ban on defendants’ telemarketing credit repair services and requires them to send notices to remaining customers who were enrolled through telemarketing of the lawsuit and their right to cancel their credit repair services, among other injunctive relief.

Complaint (May 2019)

PDF of this document (48 pages)

Page 2

KRISTEN DONOGHUE DAVID RUBENSTEIN CYNTHIA GOOEN LESSER MAUREEN MCOWEN JONATHAN REISCHL (202) 435-9553 [email protected] [email protected] 1700 G Street, NW Washington, DC 20552 Attorneys for Plaintiff Bureau of Consumer Financial Protection IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH Case No. 2:19-cv-00298-DBP COMPLAINT

BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff, v.

PROGREXION MARKETING, INC.; PGX HOLDINGS, INC.; PROGREXION TELESERVICES, INC.; EFOLKS, LLC; CREDITREPAIR.COM, INC.; JOHN C. HEATH, ATTORNEY AT LAW, PLLC, D/B/A LEXINGTON LAW

Defendants.

Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 1 of 48

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The Bureau of Consumer Financial Protection (Bureau) brings this action against PGX Holdings, Inc. (PGX Holdings), and its subsidiaries Progrexion Marketing, Inc. (Progrexion Marketing), Progrexion Teleservices, Inc. (Progrexion Teleservices), eFolks, LLC (eFolks), and CreditRepair.com, Inc. (CreditRepair.com), and John C. Heath, Attorney at Law, PLLC (Heath PLLC), d/b/a Lexington Law Firm or Lexington Law, and alleges the following: INTRODUCTION 1.

The Bureau brings this action against Defendants alleging deceptive acts and practices in violation of sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531 and 5536, and deceptive and abusive telemarketing acts or practices in violation of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule (TSR), 16 C.F.R. §§ 310.3 and 310.4.

Defendants operate two of the largest credit repair companies in the country, Lexington Law and CreditRepair.com. They market their services through various media, including online and over the telephone, offering to help consumers remove negative information from their credit reports and improve their credit scores. Consumers sign up for Defendants’ credit repair services and pay hundreds of Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 2 of 48

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dollars in fees seeking to improve their credit scores and get better access to credit products, on better terms.

To generate credit repair sales, Defendants rely on a network of marketing affiliates who advertise a variety of products and services, often related to consumer credit products. As alleged below, Progrexion’s marketing affiliates have used deceptive, bait advertising to generate referrals to Lexington Law’s credit repair service. For example, one of Progrexion’s most productive marketing affiliates falsely advertised that it “guarantee[d] ANYONE a 0-3.5% Down Home Loan no matter how bad their Credit is when we start!” In reality, the affiliate did not provide any loans at all. Interested consumers were told that, to participate in the (non-existent) loan program, they had to sign up with Lexington Law. The Progrexion Defendants paid this marketing affiliate for each credit repair sale that resulted from its efforts, despite knowing that it engaged in deceptive practices. 4.

Defendants also violated the law in another way. Federal law forbids requesting or receiving payment upfront for certain telemarketed credit repair services; if a company offers services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating, fees can only be collected after a certain time period has elapsed and it has been demonstrated that the promised results have been achieved. As alleged below, Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 3 of 48

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Defendants charged consumers when they signed up for the service and on a monthly basis thereafter, without waiting the prescribed period of time and demonstrating that the promised results were achieved, in violation of the federal ban on this type of upfront fee.

The Bureau brings this action to stop Defendants from engaging in ongoing, unlawful practices that harm consumers nationwide by charging consumers unlawful advance fees in connection with credit repair services and by marketing and telemarketing those services through deceptive representations, and to obtain relief for consumers who were harmed by these practices. JURISDICTION AND VENUE 6.

This Court has subject matter jurisdiction over this action because it concerns federal consumer financial law, 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.

Venue is proper in this district because all Defendants reside in or do business in this district. 12 U.S.C. § 5564(f). PARTIES 8.

The Bureau is an independent agency of the United States. 12 U.S.C. § 5491. The Bureau is charged with enforcing Federal consumer financial laws. 12 Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 4 of 48

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U.S.C. §§ 5563 and 5564. The Bureau has independent litigating authority, 12 U.S.C. § 5564(a) and (b), including the authority to enforce the TSR with respect to the offering or provision of a consumer financial product or service subject to the CFPA, 15 U.S.C. § 6105(d).

PGX Holdings is a Delaware corporation with its principal place of business in Salt Lake City, Utah. It is the holding company that wholly owns and controls Defendants Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com (referred to collectively, with PGX Holdings, as Progrexion or the Progrexion Defendants). A subsidiary of PGX Holdings owns and licenses proprietary software that serves as the platform for most of the credit repair services provided by Heath PLLC and CreditRepair.com, including initiating challenges related to tradelines appearing on consumers’ credit reports. Other subsidiaries of PGX Holdings perform telemarketing and telesales for Lexington Law and CreditRepair.com services. Through its subsidiaries and the Progrexion common enterprise, PGX Holdings offers and provides financial advisory services and services relating to consumer report information and engages in telemarketing and telesales.

10.

Progrexion Marketing is a Delaware corporation with its principal place of business in Salt Lake City, Utah. It provides advertising and marketing services, Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 5 of 48

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including identifying consumer leads through telemarketing, to Heath PLLC and CreditRepair.com. It also provides key parts of the credit repair services marketed and sold to consumers under the brand names Lexington Law and CreditRepair.com. For example, Progrexion Marketing contracted with one or more major consumer reporting agencies to obtain copies of Defendants’ customers’ credit reports and to allow Progrexion to challenge its customers’ credit report information directly through electronic portals between Progrexion and the consumer reporting agency. Directly, through its affiliates, and through the Progrexion common enterprise, Progrexion Marketing offers and provides financial advisory services and services relating to consumer report information and engages in telemarketing and telesales.

11.

Progrexion Teleservices is a Delaware corporation with its principal place of business in Salt Lake City, Utah. It telemarkets and sells Lexington Law credit repair services on behalf of Progrexion and Heath PLLC. Progrexion Teleservices employs approximately 1,200 people, most of whom are “telephone service representatives.” Directly and through the Progrexion common enterprise, Progrexion Teleservices offers and provides financial advisory services and services relating to consumer report information and engages in telemarketing and telesales.

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12.

eFolks is a Delaware limited liability company with its principal place of business in Salt Lake City, Utah. It generates leads for and telemarkets Lexington Law and CreditRepair.com credit repair services on behalf of Progrexion. eFolks also owns the trademarks for the CreditRepair.com name and logo and licenses them to CreditRepair.com. Directly and through the Progrexion common enterprise, eFolks offers and provides financial advisory services and services relating to consumer report information and engages in telemarketing and telesales. 13.

CreditRepair.com is a Florida corporation with its principal place of business in Salt Lake City, Utah. PGX Holdings created CreditRepair.com in January 2012 as PGX Holdings’ direct-to-consumer brand of credit repair services. CreditRepair.com engages in its own telesales to enroll consumers, handling inbound, outbound, and live-transfer calls. It generates leads directly through its website and through Progrexion Marketing and eFolks. Directly and through the Progrexion common enterprise, CreditRepair.com offers and provides financial advisory services and services relating to consumer report information and engages in telemarketing and telesales.

14.

Heath PLLC is a law firm based in North Salt Lake, Utah that does business under the trade names Lexington Law Firm and Lexington Law. Heath PLLC has been associated with Progrexion, or its predecessors, and has licensed Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 7 of 48

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the trademark “Lexington Law” since at least 2004. Progrexion conducts most of Lexington Law’s core business operations, but Heath PLLC, operating as Lexington Law Firm, serves as the face of Lexington Law. For example, Heath PLLC is the entity that formally registers as Lexington Law for purposes of the applicable state credit services or credit repair registrations and bonds. Heath PLLC also fields consumers’ complaints about the credit repair services, and consumers’ contracts are with Heath PLLC. Heath PLLC contracts with PGX Holdings’ subsidiaries, including Defendants Progrexion Marketing and Progrexion Teleservices, to: (1) have Progrexion market, telemarket, and sell over the telephone the credit repair services that Heath PLLC provides; (2) use Progrexion’s proprietary credit repair products, the tradename Lexington Law, and the domain name www.LexingtonLaw.com; and (3) obtain other business services, such as payment processing and payroll services. Because Heath PLLC is a law firm, Progrexion markets Lexington Law’s credit repair services as legal services. 15.

Heath PLLC offers or provides financial advisory services and services relating to consumer report information that are for use by consumers primarily for personal, family, or household purposes, or that are delivered, offered, or provided in connection with such a consumer financial product or service; Heath PLLC thereby offers or provides a consumer financial product or service as that term is Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 8 of 48

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defined by 12 U.S.C. § 5481(5). See also 12 U.S.C. § 5481(15)(A)(viii), (ix). 16.

The Progrexion Defendants are, and have been at all times relevant to this Complaint, “covered persons,” as that term is defined by 12 U.S.C. § 5481(6)(A), because they offer or provide a financial product or service for use by consumers primarily for personal, family, or household purposes; or that is delivered, offered, or provided in connection with such a product or service. The products or services they offer or provide consist of financial advisory services, including credit counseling, and the service of “collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers, used or expected to be used in connection with any decision regarding the offering or provision of a consumer financial product or service.” 12 U.S.C. § 5481(15)(A)(viii), (ix). 17.

Progrexion Marketing, Progrexion Teleservices, and eFolks are, and have been at all times relevant to this Complaint, “service providers” to a covered person as that term is defined by 12 U.S.C. § 5481(26), because they have provided material services to covered persons, including the persons offering or providing Lexington Law and CreditRepair.com credit repair services. 18.

PGX Holdings is, and has been at all times relevant to this Complaint, a “related person,” as that term is defined by 12 U.S.C. § 5481(25), because it has Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 9 of 48

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been, directly or indirectly, the controlling owner of Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com, and because it has been a shareholder, consultant, joint venture partner, or other person who materially participated in the conduct of the affairs of those entities. By virtue of its status as a “related person” under the CFPA, PGX Holdings is also a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B).

19.

The Progrexion Defendants operate as a common enterprise. They have conducted the business practices described below through interconnected companies that operate under common control, have common business functions, officers, employees, and office locations, and share advertising and marketing. Accordingly, an act by one entity constitutes an act by each entity comprising the common enterprise, and PGX Holdings, Progrexion Marketing, Progrexion Teleservices, CreditRepair.com, and eFolks are each jointly and severally liable for the acts and practices of the Progrexion Defendants, or the acts and practices for which the Progrexion Defendants are responsible, as alleged below. 20.

The Progrexion Defendants and Heath PLLC are, and have been at all times relevant to this Complaint, “sellers,” as that term is defined by 16 C.F.R. § 310.2(dd), because, in connection with telemarketing transactions, they provide, offer to provide, or arrange for others to provide goods or services to customers in Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 10 of 48

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exchange for consideration.

21.

The Progrexion Defendants are, and have been at all times relevant to this Complaint, “telemarketers,” as that term is defined by 16 C.F.R. § 310.2(ff), because, in connection with telemarketing, they initiate or receive telephone calls to or from customers.

22.

Progrexion Marketing has directed and controlled the telemarketing and telesales activities of Progrexion Teleservices and eFolks, and authorized Progrexion Teleservices and eFolks to market Lexington Law and CreditRepair.com credit repair services. Progrexion Marketing has knowledge of and controls or has the ability to control the activities of Progrexion Teleservices and eFolks discussed herein.

23.

Progrexion Marketing, as the principal of Progrexion Teleservices and eFolks, is liable for the actions of its agents. 24.

Progrexion Marketing has directed and controlled the marketing and telemarketing activities of its marketing affiliates acting on its behalf, and authorized them to market Lexington Law and CreditRepair.com credit repair services. Progrexion Marketing has knowledge of and controls or has the ability to control the activities of its marketing affiliates discussed herein. 25.

Progrexion Marketing, as the principal of its marketing affiliates, is liable for Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 11 of 48

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the actions of its agents.

26.

PGX Holdings has directed and controlled the activities of Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com, and authorized those entities to offer and provide credit repair services and to market Lexington Law and CreditRepair.com credit repair services. PGX Holdings has knowledge of and controls or has the ability to control the activities of Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com discussed herein. 27.

PGX Holdings, as the principal of Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com, is liable for the actions of its agents. FACTUAL ALLEGATIONS Progrexion’s “Hotswap Program”

28.

Lexington Law and CreditRepair.com are among the largest credit repair brands in the United States.

29.

Progrexion, or its predecessors, has been in the business of providing credit repair services to consumers under the trade names “Lexington Law Firm” and “Lexington Law” since approximately 1994, and through CreditRepair.com since at least 2012.

30.

Progrexion receives the majority of the revenue generated from the sale of Lexington Law credit repair services.

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31.

To market Lexington Law’s and CreditRepair.com’s services, Progrexion employs affiliate marketing programs. As Progrexion says on its website, “One of the primary ways Progrexion generates massive quantities of leads for our clients is through our strong working relationships with numerous affiliates.” 32.

One of the affiliate marketing programs Progrexion uses to generate such “massive quantities of leads” is its “Hotswap Program.” 33.

The marketing affiliates that participate in this program — “Hotswap Partners” — are companies that offer certain products such as rent-to-own housing contracts, mortgages, auto loans, or personal loans. 34.

Hotswap Partners use telemarketing campaigns consisting of inbound and outbound telephone calls to consumers across the country to market these products and services to consumers.

35.

During these telemarketing calls, the Hotswap Partner identifies potential credit repair customers to refer to Progrexion, and live-transfers them to Progrexion’s telemarketing sales operations. 36.

Progrexion refers to these live telephone transfers as “hotswaps.” 37.

In some instances, however, the Hotswap Partner does not actually offer the products or services it purports to provide, and is instead functioning purely as a source of consumer leads for Progrexion.

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38.

Progrexion cultivates and manages its relationships with Hotswap Partners through Progrexion Marketing.

39.

A significant amount of Progrexion’s credit repair business is generated by its Hotswap Partners.

40.

The Hotswap Program is intended to convince consumers to purchase credit repair services when they have been denied a product or service they wanted. According to Progrexion’s website, “This call-based program is so effective because it connects people to credit repair at the moment they’ve been denied credit.”

41.

Hotswap Partners typically offer their products and services through their websites. They drive consumer traffic to their websites through a variety of methods, including: Search Engine Optimization methods that make their websites more likely to appear in an internet search for a product or service; advertisements on third-party websites such as Facebook and Craigslist; and the use of affiliate marketing networks where the Hotswap Partners pay commissions to other companies for providing leads or directing consumers to their websites. 42.

If consumers are interested in the products or services advertised by the Hotswap Partner, they are directed to either call the Hotswap Partner or provide their personal contact information and authorize the Hotswap Partner to contact Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 14 of 48

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them via telephone.

43.

Consumers who provide their information are either contacted via telephone by the Hotswap Partner, or their contact information — a “lead” — is sent to a third-party company that calls the consumer.

44.

Some leads generated by Hotswap Partners are sent to eFolks for it to conduct outbound telemarketing for Lexington Law or CreditRepair.com. 45.

When a Hotswap Partner contacts a consumer by phone, it provides the consumer with further information about the products and services advertised by the Hotswap Partner.

46.

The Hotswap Partners also pitch Lexington Law’s and CreditRepair.com’s credit repair services, typically after telling the consumer that he or she has been denied a particular credit product or service, offering the consumer unfavorable terms on a loan, or telling the consumer that he or she will be eligible for the product or service, or for better terms on the product, if they first enroll in the credit repair service.

47.

For example, a telemarketing script used by one or more of Progrexion’s marketing affiliates, which Progrexion reviewed and distributed to at least one marketing affiliate as a model script, says:

They are credit analysts and have the legal ability to remove questionable negative items on your credit report such as: (LIST Negatives Client Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 15 of 48

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mentioned). By removing these negative items, it should allow us to come back and look to refinance you with a conventional lender offering better rates and terms in the future.

48.

Progrexion instructs Hotswap Partners to pre-qualify a consumer as suitable for Lexington Law or CreditRepair.com credit repair services prior to the hotswap transfer.

49.

Prequalification involves Hotswap Partners ascertaining the following, prior to transferring a consumer to Progrexion: (1) the consumer has derogatory tradelines on his or her credit reports; (2) the consumer is not already a customer of Lexington Law or CreditRepair.com; and (3) the consumer has a valid credit or debit card that they could use to pay for credit repair services. 50.

Progrexion instructs the Hotswap Partners to disguise these qualifications for Lexington Law and CreditRepair.com as purported qualifications for the Hotswap Partners’ products and services.

51.

Once pre-qualified, consumers are offered the opportunity to be connected with Lexington Law or CreditRepair.com for a “free credit repair consultation.” 52.

Progrexion instructs Hotswap Partners to tie the credit repair consultation to obtaining the consumer’s desired product or service. 53.

Hotswap Partners follow this instruction. For example, one Hotswap Partner script told consumers, “in order for you to qualify, you need to work on improving Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 16 of 48

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your credit score and the first step in the Rent to Own program is a credit consultation with Lexington Law.”

54.

Once the Hotswap Partner completes its pitch, it transfers the consumer to a Progrexion call center through a dedicated telephone line assigned to the particular Hotswap Partner.

55.

Once connected, the Hotswap Partner indicates to the Progrexion representative that he or she is calling on behalf of the Hotswap Partner, introduces the consumer, and states the consumer’s credit goal or the reason why they are seeking credit repair.

56.

Progrexion then proceeds to offer the consumer its free credit repair consultation and pitch its credit repair services, all the while repeatedly referencing the consumer’s credit goal, as provided by the Hotswap Partner during the live transfer.

57.

Progrexion tells consumers that during the credit repair consultation, “[w]e will … go over your credit score, review the reasons for your score and then provide you solutions to improve your credit score and report.” 58.

After reviewing a consumer’s summary credit report, Progrexion Teleservice’s telemarketing script instructs its employees to tell consumers, “based on what we have discussed about your credit situation, it sounds like you may be a Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 17 of 48

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good candidate for our services.” Thereafter, consumers are offered the opportunity to enroll in Lexington Law’s or CreditRepair.com’s credit repair services.

59.

Progrexion pays a fee or a commission to its Hotswap Partners for each consumer transferred to Progrexion who signs up for Lexington Law or CreditRepair.com.

60.

At times, Progrexion has trained its teleservices employees on the purported products and services of particular Hotswap Partners so that they could better connect credit repair to the initial offering by those Hotswap Partners. 61.

For example, one Progrexion call center held training sessions with its telemarketing staff on the particular services of major Hotswap Partners, the demographics of the consumers the Hotswap Partners transferred to Progrexion, and key points that the Hotswap Partners wanted emphasized about their services and the importance of credit repair.

62.

At other times, Progrexion provided written guidance to its telemarketing staff about the Hotswap Partners’ purported products and services, including whether the Hotswap Partner required consumers to sign up for Progrexion credit repair services as a condition of accessing the Hotswap Partner’s purported products or services.

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63.

Progrexion provided other assistance to Hotswap Partners, such as: a. Providing telemarketing scripts, editing Hotswap Partners’ telemarketing scripts, and providing model telemarketing calls for training and scripting purposes;

b. Providing prizes and incentives to Hotswap Partner employees for increased credit repair sales;

c. Assisting with website design and the creation of new marketing campaigns to replace or supplement the Hotswap Partner’s current lead generation activities;

d. Creating email templates for direct-to-consumer marketing; and e. Providing Hotswap Partners with demographic information on Lexington Law clients so that the Hotswap Partners could target particular lead sources and optimize their scripting.

64.

Progrexion provides this assistance to its Hotswap Partners because creating a clear connection between the products and services offered to consumers and credit repair is a key part of its marketing strategy. 65.

Describing the Hotswap Program, Progrexion’s website says, “This program provides a way for companies to monetize their non-qualified customers by live transferring them to our call centers for a free consultation with the hopes of Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 19 of 48

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retaining them in one of our credit repair programs.” 66.

This approach gives consumers the impression that they will be able to obtain the product they sought from the Hotswap Partner after their credit is fixed through Progrexion’s credit repair service.

67.

Progrexion’s marketing to consumers includes representations that directly tie Lexington Law’s and CreditRepair.com’s services to particular products — what Progrexion calls, in its marketing and telemarketer training materials, a consumer’s aspirational credit “dreams.”

68.

For example, in a general guidance document that appears to have been distributed widely to Hotswap Partners, Progrexion provided Hotswap Partners with a sample telemarketing script that references “key components” Hotswap Partners are required to say to generate credit repair leads. The script includes language telling consumers that credit repair services will get them one step closer to obtaining the Hotswap Partner’s purported products:  Credit repair “can just make the whole process of getting this loan funded easier”; and  “[Y]ou just need to get a few things taken care of with your credit in order to get qualified for a loan, that is exactly what Lexington specializes in.”

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69.

By creating a connection between the consumer’s desired credit product and credit repair, through the representations of its Hotswap Partners, Progrexion sought to increase Lexington Law’s and CreditRepair.com’s sales. 70.

As one Progrexion Marketing Affiliate Manager explained to a Hotswap Partner in an email dated December 9, 2015, the “biggest/main point to make (in order for this lead to convert on our end) is that the client has to feel that credit repair is a necessary and easy step in the RTO [rent-to-own]->Mortgage process.” Deceptive Hotswap Marketing 71.

At least one, if not more, of Progrexion’s Hotswap Partners have made misrepresentations to consumers to generate consumer leads and induce consumers to sign up for Lexington Law or CreditRepair.com. 72.

Hotswap Partners have used advertisements that included fake real estate ads, fake rent-to-own housing opportunities, fake relationships with lenders, false credit guarantees, and false and unsubstantiated statements about past consumer outcomes. The ads have also included false and unsubstantiated statements about consumers’ likelihood of success in obtaining products and services such as rentto-own housing contracts, mortgages, or personal loans. 73.

Additionally, although Progrexion’s website portrays the Hotswap Partner program as an opportunity for partners to sell consumer leads as a source of Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 21 of 48

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revenue when consumers do not qualify for the products or services the partner is providing, one or more Hotswap Partners did not actually offer or provide any such products or services. Instead, they offered illusory products or services to lure in consumers and market credit repair services. 74.

From at least 2012 through 2017, one of Progrexion’s most productive Hotswap Partners, referred to in this Complaint as “HSP1,” used misrepresentations to induce consumers to sign up for Lexington Law. 75.

From at least 2012 through 2017, HSP1 contacted consumers across the country through campaigns and programs of inbound and outbound phone calls, and transferred to Progrexion over 100,000 consumers who signed up for Lexington Law credit repair services.

76.

HSP1 purported to offer consumers low-interest mortgages, access to rentto-own housing, and other products or services, but in reality did not provide any such products or services.

77.

HSP1, in its own words, acted “merely as an affiliate call center that transfers potential clients to Lexington Law.” 78.

Despite merely serving as an affiliate call center, HSP1 advertised extensively on Craigslist and Facebook, and through a network of paid affiliates, claiming to be able to help consumers with poor credit scores obtain favorable Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 22 of 48

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mortgages and rent-to-own housing contracts. 79.

At various times from 2012 through 2017, HSP1 employed numerous falsehoods to induce consumers to contact, or agree to be contacted by, its telemarketing operation, including:

a. One of HSP1’s websites stated that enrolling in its service guaranteed any consumer “a 0-3.5% down” mortgage “no matter how bad their Credit is when we start”;

b. Another HSP1 website represented that the company had helped “over 15,000 people buy a home that started with under a 500 Credit Score when they came to [HSP1]”;

c. HSP1’s ads offered housing that was not actually available and instead routed interested consumers to HSP1 or, at times, directly to Progrexion;

d. HSP1’s Facebook advertisements often referenced a “90-day Blitz” program offering home financing in a very short timeframe with express promises such as: “BUY A HOME IN THE NEXT 30-90 DAYS NO MATTER WHERE YOUR CREDIT IS NOW”; and e. Other HSP1 advertisements said: “Are you tired of dead ends? Games? Gimmicks? Bad Houses and Fake Ads? Would You like to END all Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 23 of 48

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that? We know you would…. We … have helped over 12,000 people get homes who NEVER thought they could.”

80.

Once consumers were on the phone with HSP1, HSP1 made additional misrepresentations. For example, some consumers were told that HSP1’s program for achieving home ownership “works every time.” 81.

In some instances, consumers were told that if they achieved a 640 credit score they would “qualify with one of our lenders.” HSP1, which merely acted as a call center, had no associated lenders.

82.

HSP1’s marketing also included specific claims about Progrexion’s credit repair services. For example, one of HSP1’s telemarketing scripts stated about Lexington Law: “They will review everything with you and put a plan together to eliminate any negative items to boost your score.” 83.

At times, HSP1 told consumers that they had to sign up with Lexington Law in order to enroll in HSP1’s services and ultimately obtain the products or services advertised by HSP1.

84.

HSP1 told consumers, without any review of their credit history or other eligibility factors, that their credit score was the only thing keeping them from their desired product.

85.

For example, one HSP1 telemarketing script told consumers “you’d be the Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 24 of 48

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perfect candidate for rent-to-own, but your credit is the only thing holding you back – this makes you a great match for credit repair.” Progrexion’s Knowledge of Deceptive Practices in its Hotswap Program

86.

Progrexion had knowledge that HSP1 engaged in the deceptive practices described in Paragraphs 74-85, above.

87.

Progrexion claims that it prescreens and monitors Hotswap Partner websites prior to and during its marketing relationship with the Hotswap Partners. 88.

Despite purportedly monitoring Hotswap Partner websites, Progrexion allowed the misrepresentations described in Paragraph 79(a) and (b) to remain on HSP1’s websites while HSP1 generated leads for Progrexion. 89.

Progrexion also had knowledge that HSP1 used the fake ads described in Paragraph 79(c). For example, a Progrexion employee who reviewed one of HSP1’s ads posted on Craiglist noted: “Seeing the ad firsthand, I understand why so many of these clients feel misled when they call in.” 90.

Consumer complaints to the Better Business Bureau and law enforcement agencies describe other Progrexion Hotswap Partners using Craigslist ads with fake housing opportunities to draw in customers. 91.

Progrexion had a company policy in place in 2016 that restricted Hotswap Partners’ use of Craigslist to generate traffic for Progrexion. Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 25 of 48

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92.

Despite this policy, Progrexion knew that certain Hotswap Partners were using Craigslist ads in their marketing and continued to do business with them for years.

93.

At least one other rent-to-own housing Hotswap Partner continued to use Craigslist rent-to-own housing ads in its marketing activities through at least 2018. 94.

Progrexion was also aware of HSP1’s 90-Day Blitz advertising on Facebook described in Paragraph 79(d), in which it told consumers that they could get into a home in 90 days regardless of their credit situation. At one point a Progrexion employee emailed the owner of HSP1 and stated that the company was aware of the 90-Day Blitz program and was concerned that the program was setting “unreal expectations for clients” and creating confusion. She noted that “[m]ost of these clients need more than 3 months of credit repair….” 95.

Despite Progrexion’s acknowledgement that most consumers would not be able to obtain a mortgage in the promised timeframe, Progrexion continued its marketing relationship with HSP1 even as HSP1 continued to advertise the 90-Day Blitz on Facebook.

96.

Progrexion also provided model scripts to HSP1 and its other Hotswap Partners, and even created entire scripts for some affiliates, including HSP1, that set consumer expectations about the likely results of the credit repair services. Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 26 of 48

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97.

For example, Progrexion authored a telemarketing script for HSP1 that included statements asking if consumers were interested in “repairing [their] credit to get approved for a [mortgage, refinance, rent-to-own, or car]” and telling consumers that their credit was “the only thing holding you back” from the products they desired.

98.

Progrexion also routinely reviewed, and provided edits and suggestions for, the telemarketing scripts used by HSP1 and other Hotswap Partners. 99.

For example, Progrexion reviewed the telemarketing script from which HSP1 made representations regarding the ability of consumers to qualify with one of its purported lenders as well as Lexington Law’s capability to “eliminate any negative items to boost your score.”

100. Progrexion also had knowledge that HSP1 did not offer or provide the products and services it advertised, such as low-down-payment mortgages and rent-to-own housing contracts.

101. For example, Progrexion learned that HSP1 did not collect location information from consumers inquiring about its rent-to-own housing and mortgage offers when eFolks entered into an agreement with HSP1 to receive leads generated by its marketing activities.

102. The failure to collect location information was unusual among Progrexion’s Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 27 of 48

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rent-to-own housing Hotswap Partners.

103. One eFolks employee noted that such information was necessary to “know the area [consumers are] looking to buy.” In fact, eFolks’ system required such information in order for the leads to upload into its automatic dialer. 104. Despite such warnings, Progrexion continued its marketing relationship with HSP1 and suggested that the company simply make up zip codes for the consumer leads so that eFolks could upload them into its automatic dialer for the purpose of contacting the consumers directly to market Progrexion and Heath PLLC’s credit repair services.

105. Progrexion was aware that other Hotswap Partners marketing rent-to-own housing engaged in questionable marketing activities. 106. For example, in a July 2016 email, a Progrexion employee reported concerns to another Progrexion employee that certain Hotswap Partners offering rent-to-own housing were making implicit guarantees that credit repair would result in consumers obtaining the rent-to-own housing advertised. The Progrexion employee suggested that this situation be handled by changing the scripting used by Hotswap Partners in order to “avoid our agents hearing those expectations. The logic being that it is easier to plead ignorance if you’re truly ignorant.” 107. In another example, in a December 2014 email, Progrexion’s Senior Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 28 of 48

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Director of Compliance reported that “[m]any [clients] have claimed that [a marketing affiliate] is guaranteeing loan approval as long as they sign up for Lexington’s services.” In response, one of Progexion’s marketing directors noted that the affiliate “is one of our largest Hotswap Partners” and that the company had previously heard the same complaint before.

108. In August 2016, a consumer filed a complaint with the Bureau claiming that the same marketing affiliate discussed in Paragraph 107 represented that “after enrollment with Lexington Law I was guaranteed a loan.” The Bureau forwarded the complaint to Heath PLLC, who replied to the Bureau and the consumer that it had “no knowledge” of the affiliate. Despite it being one of the “largest Hotswap Partners” sending consumers to Lexington Law, and despite Progrexion’s prior knowledge of similar guarantee claims, Heath PLLC claimed that the consumer “appears to have constructed a relationship between us and [the marketing affiliate]…that we are unaware of.” Heath PLLC further stated that it could not “take responsibility for the alleged representations that may or may not have been made to this person” by the marketing affiliate. Defendants’ Marketing and Sale of Services to Fix Consumers’ Credit

109. The Telemarketing Sales Rule prohibits telemarketers and sellers from “[r]equesting or receiving payment” upfront for “goods or services represented to Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 29 of 48

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remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating.”

110. On behalf of consumers, Lexington Law and CreditRepair.com initiate disputes with furnishers and consumer reporting agencies related to tradelines appearing on consumers’ credit reports.

111. Progrexion markets Lexington Law and CreditRepair.com as providing services that will assist consumers in removing derogatory information from, or improving, the consumers’ credit history, credit record, or credit rating. 112. For example, at various times since July 21, 2011, the Lexington Law website included the following representations: a. “If questionable negative items are hurting your credit, removing them can improve your score. Here’s how we do it: 1. ANALYZE We work with you to identify any questionable negative items hurting your score.

2. ADDRESS We challenge those negative items with the bureaus and your creditors.

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c. “Lexington Law’s lawyers have the knowledge and tools to start fixing your credit score by working to remove inaccurate items on your report”; d. “Our results prove it can be done. From late payments to charge-offs to bankruptcies, our firms [sic] clients have improved their credit, by removing practically every type of questionable negative item” (bolded language in larger font type on the website); e. “Ask for professional help: If you want to dramatically improve your credit standing — ultimately leading to approval for bigger loans with better terms — consider asking a professional. You can considerably improve your financial standing with the right help”; and f. “Lexington Law has developed tools and strategies that have proven to be effective at removing unfair, inaccurate, and unsubstantiated negative items.”

113. Other examples are found in Lexington Law’s advertisements published online at various times since July 21, 2011, such as: a. “Need Credit Repair Help? Lexington Law can help you remove negative items on your credit reports. . . . Lexington Law | Trusted Leaders in Credit Repair.”

b. “Credit not where you need it to be? . . . Fix Your Bad Credit. Lexington Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 31 of 48

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Law® has assisted over 500,000 clients with their credit profile.” c. “40 POINTS ON YOUR CREDIT COULD COST YOU $40,000 ON A 30-YEAR MORTGAGE. Challenge questionable items with bureaus . . . TRUSTED LEADERS IN CREDIT REPAIR FOR A REASON.” 114. Another Lexington Law advertisement published online in at least January 2019 stated:

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115. Another Lexington Law advertisement published online in at least January 2019 stated:

116. Another Lexington Law advertisement published online in at least January 2019 stated:

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117. At various times since July 21, 2011, CreditRepair.com’s services were marketed as follows:

a. “We work with the credit bureaus and your creditors to challenge the unfair or inaccurate negative report items that affect your credit score . . . . This can all help to fix your credit”; b. “CreditRepair.com will help you challenge the negative items on credit reports with the intention of getting them removed”; c. “Our credit repair services help to fix your credit report”; d. “Previous members have seen an average 40 point TransUnion credit score gain during four months of membership”; e. “CreditRepair.com Averages 11.6 removals in 4 months”; f. “TURN A HIGH CREDIT SCORE INTO A LOW MORTGAGE RATE. IMPROVE YOUR CREDIT SCORE AND QUALIFY FOR A LOW INTEREST MORTGAGE THAT FITS YOUR NEEDS”; and g. “Not Sure What to Do About Bad Credit? Let us help guide the way. You don’t have to live with bad credit and high interest rates. Take advantage of our knowledge, experience, and advanced technology, and we’ll help you create a personal game plan to help you repair your credit. Call 1- 844-372-1974 to get started. Sign Up Today! Our System is Proven and It Works.”

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118. One CreditRepair.com advertisement published online in at least August 2018 stated:

119. During telemarketing calls, Progrexion and its marketing affiliates make additional representations that their credit repair services will result in the removal of derogatory tradelines from credit reports or improvements to the consumer’s credit rating.

120. For example, one Progrexion telemarketing script from 2012 says: “. . . our service includes an array of letters with your creditors . . . designed to persuade your creditors to remove items;” and “[we] will analyze your credit reports … and show specific ways you can improve your credit . . . .” The script tells consumers: You can see that your credit score can have dramatic effects on your life. Your credit score is comprised solely from the information found in your credit report. In other words, if you want to improve your score, you have to improve your credit report.

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The script also asks the consumer: “[h]ow would your life be different in a year from now with good credit?”

121. In an audio recording of a telemarketing call from May 2016, a Progrexion agent told a consumer “we assist our clients with cleaning up their credit reports completely by working on getting every single negative item, amount, and remark completely deleted off their reports altogether. It is what we do best. In other words, credit repair.”

Illegal Upfront Fees for Telemarketed Credit Repair Services 122. The Telemarketing Sales Rule states that fees for telemarketed “goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating” cannot be charged until the time frame in which the seller has represented all of the goods or services will be provided to that person has expired and the seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 123. At the time of enrollment with Lexington Law or CreditRepair.com, Progrexion charges consumers a fee, which has been between $9.99 and $14.99 since July 2011, for a complete copy of their TransUnion credit report. Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 36 of 48

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124. Consumers are told that paying this fee is necessary to begin the credit repair process.

125. After enrolling with Lexington Law or CreditRepair.com, consumers are then charged their first credit repair service work fee, typically $99.95, five to fifteen days after enrollment.

126. Consumers are then charged ongoing monthly fees by Progrexion and Heath PLLC for their credit repair services of $79.95 to $129.95, depending on the service level the consumer chooses.

127. Heath PLLC and Progrexion request and receive these fees from consumers prior to providing consumers with documentation, in the form of a consumer report from a consumer reporting agency, demonstrating that the promised credit repair results have been achieved, such report having been issued more than six months after the results were achieved.

128. Heath PLLC and Progrexion continue to charge monthly fees until consumers affirmatively cancel their Lexington Law or CreditRepair.com contracts.

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COUNT I The Progrexion Defendants and Heath PLLC Charged Advance Fees for Credit Repair Services in Violation of the TSR

129. The Bureau re-alleges and incorporates by reference Paragraphs 1-128. 130. It is an abusive telemarketing act or practice and a violation of the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating, until: a. The time frame in which the seller has represented all of the goods or services will be provided to that person has expired; and b. The seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 16 C.F.R. § 310.4(a)(2).

131. The Progrexion Defendants and Heath PLLC are sellers and the Progrexion Defendants are telemarketers under the TSR. 16 C.F.R. § 310.2(dd), (ff). 132. The Progrexion Defendants’ and Heath PLLC’s credit repair services are represented to consumers as services to remove derogatory information from, or improve, the consumers’ credit histories, credit reports, or credit ratings. Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 38 of 48

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133. Progrexion Defendants and Heath PLLC routinely requested and received payment of a fee or consideration for their credit repair services before: a. The time frame in which they represented all of their goods or services would be provided to the consumer expired; or b. They provided the consumer with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results were achieved, such report having been issued more than six months after the results were achieved. 134. Therefore, the Progrexion Defendants’ and Heath PLLC’s conduct constitutes abusive telemarketing acts or practices in violation of 16 C.F.R. § 310.4(a)(2).

COUNT II The Progrexion Defendants Engaged in Deceptive Acts or Practices in Violation of the CFPA

135. The Bureau re-alleges and incorporates by reference Paragraphs 1-128. 136. It is unlawful for any covered person or service provider to engage in a deceptive act or practice in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 12 U.S.C. §§ 5531 and 5536(a)(1)(B). 137. The Progrexion Defendants are covered persons, service providers, or both, Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 39 of 48

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under the CFPA. 12 U.S.C. § 5481(6), (26).

138. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of Lexington Law and CreditRepair.com credit repair services, the Progrexion Defendants, directly or through at least one affiliate, acting on Progrexion’s behalf and for its benefit, have represented, expressly or by implication, that:

a. The advertised product or service, such as a loan or rent-to-own housing contract, was available through the affiliate, or that it would be available after signing up for credit repair services with Lexington Law or CreditRepair.com; or b. Consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service, such as a loan or rent-to-own housing contract.

139. In truth and in fact:

a. The advertised product or service was not available through the affiliate; or b. Neither Progrexion nor the affiliate had a reasonable basis for representing that consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service, such as a loan Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 40 of 48

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or rent-to-own housing contract.

140. These representations have been material and likely to mislead consumers acting reasonably under the circumstances.

141. The Progrexion Defendants had actual knowledge of the misrepresentations, reckless indifference to the misrepresentations, or an awareness of the high probability of the misrepresentations along with an intentional avoidance of the truth, with respect to the deceptive representations made by at least one affiliate. 142. Despite this knowledge, the Progrexion Defendants continued to sign up consumers through the affiliate or participated in the affiliate’s deceptive conduct. 143. Therefore, the representations as set forth in Paragraph 138 of this Complaint are false and misleading, and constitute deceptive acts or practices in violation of 12 U.S.C. §§ 5531 and 5536(a)(1)(B). COUNT III The Progrexion Defendants Made False or Misleading Statements to Induce Another Person to Pay for Goods or Services in Violation of the TSR

144. The Bureau re-alleges and incorporates by reference Paragraphs 1-128. 145. It is a deceptive telemarketing act or practice and a violation of the TSR for a seller or telemarketer to make a false or misleading statement to induce another person to pay for goods or services. 16 C.F.R. § 310.3(a)(4). 146. The Progrexion Defendants are telemarketers, sellers, or both, under the Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 41 of 48

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TSR. 16 C.F.R. § 310.2(dd), (ff).

147. In connection with the telemarketing of Lexington Law and CreditRepair.com credit repair services, the Progrexion Defendants, directly or through at least one affiliate, acting on Progrexion’s behalf and for its benefit, have represented, expressly or by implication, that: a. The advertised product or service, such as a loan or rent-to-own housing contract, was available through the affiliate, or that it would be available after signing up for credit repair services with Lexington Law or CreditRepair.com; or b. Consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service, such as a loan or rent-to-own housing contract.

148. In truth and in fact:

Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 42 of 48

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149. These representations have been material and likely to mislead consumers acting reasonably under the circumstances.

150. The Progrexion Defendants had actual knowledge of the misrepresentations, reckless indifference to the misrepresentations, or an awareness of the high probability of the misrepresentations along with an intentional avoidance of the truth, with respect to the deceptive representations made by at least one affiliate. 151. Despite this knowledge, the Progrexion Defendants continued to sign up consumers through the affiliate or participated in the affiliate’s deceptive conduct. 152. Therefore, the representations as set forth in Paragraph 147 of this Complaint are false and misleading, and constitute deceptive telemarketing acts or practices in violation of 16 C.F.R. § 310.3(a)(4). COUNT IV The Progrexion Defendants Violated the CFPA by Substantially Assisting a Covered Person Engaged in Deceptive Acts or Practices 153. The Bureau re-alleges and incorporates by reference Paragraphs 1-128. 154. It is unlawful for any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of 12 U.S.C. § 5531. 12 U.S.C. § 5536(a)(3).

155. At least one of the Progrexion Defendants’ affiliates, HSP1, was, at all times relevant to this Complaint, a “covered person,” as that term is defined by 12 U.S.C. Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 43 of 48

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§ 5481(6)(A), because it offered or provided financial products or services for use by consumers primarily for personal, family, or household purposes, or that were delivered, offered, or provided in connection with such a product or service. The products or services HSP1 offered or provided included consumer credit, including mortgages; financial advisory services, including credit counseling; and services relating to consumer report information, including credit repair services. 12 U.S.C. § 5481(15)(A)(i), (viii), (ix).

156. At least one of the Progrexion Defendants’ affiliates, HSP1, was also, at all times relevant to this Complaint, a “service provider” to a covered person as that term is defined by 12 U.S.C. § 5481(26), because it provided material services to one or more covered persons, including Progrexion.

157. At all times relevant to this Complaint, at least one affiliate, HSP1, engaged in deceptive acts or practices in violation of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), by misrepresenting, expressly or by implication, the availability of an advertised product or service, such as a loan, or that consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service. These misrepresentations have been material and likely to mislead consumers acting reasonably under the circumstances.

158. The Progrexion Defendants provided substantial assistance to at least one Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 44 of 48

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affiliate, HSP1, including by providing advice and content for the affiliate’s telemarketing scripts, advice regarding its websites and other marketing vehicles, the means and mechanisms for live-transferring consumers between the affiliate and Progrexion, and payment for each lead that resulted in a Lexington Law or CreditRepair.com sale.

159. The Progrexion Defendants had the requisite knowledge of or reckless disregard for the deceptive conduct described in Paragraph 157. 160. Therefore, the Progrexion Defendants violated 12 U.S.C. § 5536(a)(3). COUNT V The Progrexion Defendants Assisted and Facilitated Violations of the TSR

161. The Bureau re-alleges and incorporates by reference Paragraphs 1-128. 162. It is a deceptive telemarketing act or practice and a violation of the TSR for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates 16 C.F.R. §§ 310.3(a), (c), (d), or 310.4. 16 C.F.R. § 310.3(b).

163. At least one of the Progrexion Defendants’ affiliates, HSP1, was, at all times relevant to this Complaint, a “telemarketer,” as that term is defined by 16 C.F.R. § 310.2(ff), that was offering or providing consumer financial products or services, including consumer credit, financial advisory services, or services relating to Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 45 of 48

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consumer report information. 12 U.S.C. § 5481(15)(A)(i), (viii), (ix). 164. At all times relevant to this Complaint, at least one affiliate, HSP1, made false or misleading statements to induce another person to pay for goods or services in violation of the TSR, 16 C.F.R. § 310.3(a)(4), by misrepresenting, expressly or by implication, the availability of an advertised product or service, such as a loan, or that consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service.

165. The Progrexion Defendants provided substantial assistance or support to at least one affiliate, HSP1, including by providing advice and content for the affiliate’s telemarketing scripts, advice regarding its websites and other marketing vehicles, the means and mechanisms for live-transferring consumers between the affiliate and Progrexion, and payment for each lead that resulted in a Lexington Law or CreditRepair.com sale.

166. The Progrexion Defendants provided substantial assistance or support to at least one affiliate telemarketer, HSP1, when the Progrexion Defendants knew or consciously avoided knowing that the affiliate made false or misleading statements to induce consumers to pay for goods and services, in violation of the TSR, 16 C.F.R. § 310.3(a)(4).

167. Therefore, the Progrexion Defendants violated 16 C.F.R. § 310.3(b). Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 46 of 48

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THIS COURT’S POWER TO GRANT RELIEF 168. The CFPA empowers this Court to grant any appropriate legal or equitable relief including, without limitation, a permanent or temporary injunction, rescission or reformation of contracts, the refund of monies paid, restitution, disgorgement or compensation for unjust enrichment, damages, and monetary relief, including but not limited to civil money penalties, to prevent and remedy any violation of any provision of law enforced by the Bureau. 12 U.S.C. §§ 5564(a), 5565.

PRAYER FOR RELIEF 169. The Bureau requests that the Court, as permitted by 12 U.S.C. § 5565: a. Impose appropriate injunctive relief against the Progrexion Defendants for their violations of the CFPA and the TSR and other provisions of Federal consumer financial law as defined by 12 U.S.C. § 5481(14); b. Impose appropriate injunctive relief against Heath PLLC for its violations of the TSR;

c. Grant additional injunctive relief as the Court may deem to be just and proper;

d. Award monetary relief, including, but not limited to, rescission or reformation of contracts; the refund of monies paid; restitution; Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 47 of 48

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disgorgement or compensation for unjust enrichment; and payment of damages;

e. Award Plaintiff civil money penalties; f. Award Plaintiff the costs of bringing this action; and g. Award such other and additional relief as the Court may determine to be just and proper.

Dated: May 2, 2019

Respectfully submitted, KRISTEN DONOGHUE Enforcement Director

DAVID RUBENSTEIN Deputy Enforcement Director

CYNTHIA GOOEN LESSER Assistant Deputy Enforcement Director

/s/ Maureen McOwen MAUREEN MCOWEN JONATHAN REISCHL Senior Litigation Counsel Bureau of Consumer Financial Protection 1700 G Street, NW Washington, DC 20552 Telephone: (202) 435-9553 [email protected] [email protected]

Attorneys for Plaintiff Bureau of Consumer Financial Protection Case 2:19-cv-00298-DBP Document 2 Filed 05/02/19 Page 48 of 48

Amended complaint (Aug. 2022)

PDF of this document (50 pages)

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MAUREEN MCOWEN JONATHAN REISCHL TRACY L. HILMER ALICIA FERRARA J. TAYLOR MCCONKIE (202) 435-9553 [email protected] [email protected] [email protected] [email protected] [email protected] 1700 G Street, NW Washington, DC 20552 Attorneys for Plaintiff Bureau of Consumer Financial Protection

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH

Case No. 2:19-CV-00298-BSJ AMENDED COMPLAINT

BUREAU OF CONSUMER FINANCIAL PROTECTION,

Plaintiff, v.

PROGREXION MARKETING, INC.; PGX HOLDINGS, INC.; PROGREXION TELESERVICES, INC.; EFOLKS, LLC; CREDITREPAIR.COM, INC.; JOHN C. HEATH, ATTORNEY AT LAW, PLLC, D/B/A LEXINGTON LAW

Defendants.

Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24366 Page 1 of 50

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Defendants operate two of the largest credit repair companies in the country, Lexington Law and CreditRepair.com. They market their services through various media, including online and over the telephone, offering to help consumers remove negative information from their credit reports and improve their credit scores. Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24367 Page 2 of 50

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Consumers sign up for Defendants’ credit repair services and pay hundreds of dollars in fees seeking to improve their credit scores and get better access to credit products, on better terms.

Defendants also violated the law in another way. Federal law forbids requesting or receiving payment upfront for certain telemarketed credit repair services; if a company offers services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating, fees can only be collected after a certain time period has elapsed and it has Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24368 Page 3 of 50

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been demonstrated that the promised results have been achieved. As alleged below, Defendants charged consumers when they signed up for the service and on a monthly basis thereafter, without waiting the prescribed period of time and demonstrating that the promised results were achieved, in violation of the federal ban on this type of upfront fee.

Venue is proper in this district because all Defendants reside in or do business in this district. 12 U.S.C. § 5564(f). PARTIES 8.

The Bureau is an independent agency of the United States. 12 U.S.C. § Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24369 Page 4 of 50

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5491. The Bureau is charged with enforcing Federal consumer financial laws. 12 U.S.C. §§ 5563 and 5564. The Bureau has independent litigating authority, 12 U.S.C. § 5564(a) and (b), including the authority to enforce the TSR with respect to the offering or provision of a consumer financial product or service subject to the CFPA, 15 U.S.C. § 6105(d).

10.

Progrexion Marketing is a Delaware corporation with its principal place of Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24370 Page 5 of 50

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business in Salt Lake City, Utah. It provides advertising and marketing services, including identifying consumer leads through telemarketing, to Heath PLLC and CreditRepair.com. It also provides key parts of the credit repair services marketed and sold to consumers under the brand names Lexington Law and CreditRepair.com. For example, Progrexion Marketing contracted with one or more major consumer reporting agencies to obtain copies of Defendants’ customers’ credit reports and to allow Progrexion to challenge its customers’ credit report information directly through electronic portals between Progrexion and the consumer reporting agency. Directly, through its affiliates, and through the Progrexion common enterprise, Progrexion Marketing offers and provides financial advisory services and services relating to consumer report information and engages in telemarketing and telesales.

11.

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telesales.

12.

14.

Heath PLLC is a law firm based in North Salt Lake, Utah that does business under the trade names Lexington Law Firm and Lexington Law. Heath Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24372 Page 7 of 50

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PLLC has been associated with Progrexion, or its predecessors, and has licensed the trademark “Lexington Law” since at least 2004. Progrexion conducts most of Lexington Law’s core business operations, but Heath PLLC, operating as Lexington Law Firm, serves as the face of Lexington Law. For example, Heath PLLC is the entity that formally registers as Lexington Law for purposes of the applicable state credit services or credit repair registrations and bonds. Heath PLLC also fields consumers’ complaints about the credit repair services, and consumers’ contracts are with Heath PLLC. Heath PLLC contracts with PGX Holdings’ subsidiaries, including Defendants Progrexion Marketing and Progrexion Teleservices, to: (1) have Progrexion market, telemarket, and sell over the telephone the credit repair services that Heath PLLC provides; (2) use Progrexion’s proprietary credit repair products, the tradename Lexington Law, and the domain name www.LexingtonLaw.com; and (3) obtain other business services, such as payment processing and payroll services. Because Heath PLLC is a law firm, Progrexion markets Lexington Law’s credit repair services as legal services. 15.

Heath PLLC offers or provides financial advisory services and services relating to consumer report information that are for use by consumers primarily for personal, family, or household purposes, or that are delivered, offered, or provided in connection with such a consumer financial product or service; Heath PLLC Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24373 Page 8 of 50

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thereby offers or provides a consumer financial product or service as that term is defined by 12 U.S.C. § 5481(5). See also 12 U.S.C. § 5481(15)(A)(viii), (ix). 16.

PGX Holdings is, and has been at all times relevant to this Complaint, a Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24374 Page 9 of 50

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“related person,” as that term is defined by 12 U.S.C. § 5481(25), because it has been, directly or indirectly, the controlling owner of Progrexion Marketing, Progrexion Teleservices, eFolks, and CreditRepair.com, and because it has been a shareholder, consultant, joint venture partner, or other person who materially participated in the conduct of the affairs of those entities. By virtue of its status as a “related person” under the CFPA, PGX Holdings is also a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(B).

19.

The Progrexion Defendants and Heath PLLC are, and have been at all times relevant to this Complaint, “sellers,” as that term is defined by 16 C.F.R. § 310.2(dd), because, in connection with telemarketing transactions, they provide, Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24375 Page 10 of 50

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offer to provide, or arrange for others to provide goods or services to customers in exchange for consideration.

21.

22.

23.

Progrexion Marketing, as the principal of Progrexion Teleservices and eFolks, is liable for the actions of its agents. 24.

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25.

Progrexion Marketing, as the principal of its marketing affiliates, is liable for the actions of its agents.

26.

28.

Lexington Law and CreditRepair.com are among the largest credit repair brands in the United States.

29.

30.

Progrexion receives the majority of the revenue generated from the sale of Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24377 Page 12 of 50

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Lexington Law credit repair services.

31.

One of the affiliate marketing programs Progrexion uses to generate such “massive quantities of leads” is its “Hotswap Program.” 33.

Hotswap Partners use telemarketing campaigns consisting of inbound and outbound telephone calls to consumers across the country to market these products and services to consumers.

35.

During these telemarketing calls, the Hotswap Partner identifies potential credit repair customers to refer to Progrexion, and live-transfers them to Progrexion’s telemarketing sales operations.

36.

Progrexion refers to these live telephone transfers as “hotswaps.” 37.

In some instances, however, the Hotswap Partner does not actually offer the products or services it purports to provide, and is instead functioning purely as a Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24378 Page 13 of 50

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source of consumer leads for Progrexion.

38.

Progrexion cultivates and manages its relationships with Hotswap Partners through Progrexion Marketing.

39.

A significant amount of Progrexion’s credit repair business is generated by its Hotswap Partners.

40.

41.

If consumers are interested in the products or services advertised by the Hotswap Partner, they are directed to either call the Hotswap Partner or provide Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24379 Page 14 of 50

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their personal contact information and authorize the Hotswap Partner to contact them via telephone.

43.

44.

Some leads generated by Hotswap Partners are sent to eFolks for it to conduct outbound telemarketing for Lexington Law or CreditRepair.com. 45.

When a Hotswap Partner contacts a consumer by phone, it provides the consumer with further information about the products and services advertised by the Hotswap Partner.

46.

47.

For example, a telemarketing script used by one or more of Progrexion’s marketing affiliates, which Progrexion reviewed and distributed to at least one marketing affiliate as a model script, says:

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They are credit analysts and have the legal ability to remove questionable negative items on your credit report such as: (LIST Negatives Client mentioned). By removing these negative items, it should allow us to come back and look to refinance you with a conventional lender offering better rates and terms in the future.

48.

Progrexion instructs Hotswap Partners to pre-qualify a consumer as suitable for Lexington Law or CreditRepair.com credit repair services prior to the hotswap transfer.

49.

Progrexion instructs the Hotswap Partners to disguise these qualifications for Lexington Law and CreditRepair.com as purported qualifications for the Hotswap Partners’ products and services.

51.

Once pre-qualified, consumers are offered the opportunity to be connected with Lexington Law or CreditRepair.com for a “free credit repair consultation.” 52.

Progrexion instructs Hotswap Partners to tie the credit repair consultation to obtaining the consumer’s desired product or service. 53.

Hotswap Partners follow this instruction. For example, one Hotswap Partner Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24381 Page 16 of 50

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script told consumers, “in order for you to qualify, you need to work on improving your credit score and the first step in the Rent to Own program is a credit consultation with Lexington Law.”

54.

Once the Hotswap Partner completes its pitch, it transfers the consumer to a Progrexion call center through a dedicated telephone line assigned to the particular Hotswap Partner.

55.

56.

57.

After reviewing a consumer’s summary credit report, Progrexion Teleservice’s telemarketing script instructs its employees to tell consumers, “based Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24382 Page 17 of 50

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on what we have discussed about your credit situation, it sounds like you may be a good candidate for our services.” Thereafter, consumers are offered the opportunity to enroll in Lexington Law’s or CreditRepair.com’s credit repair services.

59.

Progrexion pays a fee or a commission to its Hotswap Partners for each consumer transferred to Progrexion who signs up for Lexington Law or CreditRepair.com.

60.

62.

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products or services.

63.

b. Providing prizes and incentives to Hotswap Partner employees for increased credit repair sales;

c. Assisting with website design and the creation of new marketing campaigns to replace or supplement the Hotswap Partner’s current lead generation activities;

64.

Describing the Hotswap Program, Progrexion’s website says, “This program provides a way for companies to monetize their non-qualified customers by live Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24384 Page 19 of 50

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transferring them to our call centers for a free consultation with the hopes of retaining them in one of our credit repair programs.” 66.

67.

68.

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specializes in.”

69.

Certain of Progrexion’s Hotswap Partners have made misrepresentations to consumers to generate consumer leads and induce consumers to sign up for Lexington Law or CreditRepair.com.

72.

Additionally, although Progrexion’s website portrays the Hotswap Partner Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24386 Page 21 of 50

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program as an opportunity for partners to sell consumer leads as a source of revenue when consumers do not qualify for the products or services the partner is providing, certain Hotswap Partners did not actually offer or provide any such products or services. Instead, they offered illusory products or services to lure in consumers and market credit repair services. 74.

For example, from at least 2012 through 2017, one of Progrexion’s most productive Hotswap Partners, The H.O.P.E. Program (“HOPE”), used misrepresentations to induce consumers to sign up for Lexington Law. 75.

From at least 2012 through 2017, HOPE contacted consumers across the country through campaigns and programs of inbound and outbound phone calls, and transferred to Progrexion over 100,000 consumers who signed up for Lexington Law credit repair services.

76.

HOPE purported to offer consumers low-interest mortgages, access to rentto-own housing, and other products or services, but in reality did not provide any such products or services.

77.

HOPE, in its own words, acted “merely as an affiliate call center that transfers potential clients to Lexington Law.” 78.

Despite merely serving as an affiliate call center, HOPE advertised extensively on Craigslist and Facebook, and through a network of paid affiliates, Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24387 Page 22 of 50

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claiming to be able to help consumers with poor credit scores obtain favorable mortgages and rent-to-own housing contracts. 79.

At various times from 2012 through 2017, HOPE employed numerous falsehoods to induce consumers to contact, or agree to be contacted by, its telemarketing operation, including:

a. One of HOPE’s websites stated that enrolling in its service guaranteed any consumer “a 0-3.5% down” mortgage “no matter how bad their Credit is when we start”;

b. Another HOPE website represented that the company had helped “over 15,000 people buy a home that started with under a 500 Credit Score when they came to [HOPE]”;

c. HOPE’s ads offered housing that was not actually available and instead routed interested consumers to HOPE or, at times, directly to Progrexion;

d. HOPE’s Facebook advertisements often referenced a “90-day Blitz” program offering home financing in a very short timeframe with express promises such as: “BUY A HOME IN THE NEXT 30-90 DAYS NO MATTER WHERE YOUR CREDIT IS NOW”; and e. Other HOPE advertisements said: “Are you tired of dead ends? Games? Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24388 Page 23 of 50

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Gimmicks? Bad Houses and Fake Ads? Would You like to END all that? We know you would…. We … have helped over 12,000 people get homes who NEVER thought they could.”

80.

Once consumers were on the phone with HOPE, HOPE made additional misrepresentations. For example, some consumers were told that HOPE’s program for achieving home ownership “works every time.” 81.

In some instances, consumers were told that if they achieved a 640 credit score they would “qualify with one of our lenders.” HOPE, which merely acted as a call center, had no associated lenders.

82.

HOPE’s marketing also included specific claims about Progrexion’s credit repair services. For example, one of HOPE’s telemarketing scripts stated about Lexington Law: “They will review everything with you and put a plan together to eliminate any negative items to boost your score.” 83.

At times, HOPE told consumers that they had to sign up with Lexington Law in order to enroll in HOPE’s services and ultimately obtain the products or services advertised by HOPE.

84.

HOPE told consumers, without any review of their credit history or other eligibility factors, that their credit score was the only thing keeping them from their desired product.

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85.

For example, one HOPE telemarketing script told consumers “you’d be the perfect candidate for rent-to-own, but your credit is the only thing holding you back – this makes you a great match for credit repair.” Progrexion’s Knowledge of Deceptive Practices in its Hotswap Program

86.

Progrexion had knowledge that HOPE engaged in the deceptive practices described in Paragraphs 74-85, above.

87.

Progrexion claims that it prescreens and monitors Hotswap Partner websites prior to and during its marketing relationship with the Hotswap Partners. 88.

Despite purportedly monitoring Hotswap Partner websites, Progrexion allowed the misrepresentations described in Paragraph 79(a) and (b) to remain on HOPE’s websites while HOPE generated leads for Progrexion. 89.

Progrexion also had knowledge that HOPE used the fake ads described in Paragraph 79(c). For example, a Progrexion employee who reviewed one of HOPE’s ads posted on Craiglist noted: “Seeing the ad firsthand, I understand why so many of these clients feel misled when they call in.” 90.

Progrexion had a company policy in place in 2016 that restricted Hotswap Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24390 Page 25 of 50

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Partners’ use of Craigslist to generate traffic for Progrexion. 92.

Despite this policy, Progrexion knew that certain Hotswap Partners were using Craigslist ads in their marketing and continued to do business with them for years.

93.

At least one other rent-to-own housing Hotswap Partner continued to use Craigslist rent-to-own housing ads in its marketing activities through at least 2018. 94.

Progrexion was also aware of HOPE’s 90-Day Blitz advertising on Facebook described in Paragraph 79(d), in which it told consumers that they could get into a home in 90 days regardless of their credit situation. At one point a Progrexion employee emailed the owner of HOPE and stated that the company was aware of the 90-Day Blitz program and was concerned that the program was setting “unreal expectations for clients” and creating confusion. She noted that “[m]ost of these clients need more than 3 months of credit repair….” 95.

Despite Progrexion’s acknowledgement that most consumers would not be able to obtain a mortgage in the promised timeframe, Progrexion continued its marketing relationship with HOPE even as HOPE continued to advertise the 90- Day Blitz on Facebook.

96.

Progrexion also provided model scripts to HOPE and its other Hotswap Partners, and even created entire scripts for some affiliates, including HOPE, that Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24391 Page 26 of 50

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set consumer expectations about the likely results of the credit repair services. 97.

For example, Progrexion authored a telemarketing script for HOPE that included statements asking if consumers were interested in “repairing [their] credit to get approved for a [mortgage, refinance, rent-to-own, or car]” and telling consumers that their credit was “the only thing holding you back” from the products they desired.

98.

Progrexion also routinely reviewed, and provided edits and suggestions for, the telemarketing scripts used by HOPE and other Hotswap Partners. 99.

For example, Progrexion reviewed the telemarketing script from which HOPE made representations regarding the ability of consumers to qualify with one of its purported lenders as well as Lexington Law’s capability to “eliminate any negative items to boost your score.”

100. Progrexion also had knowledge that HOPE did not offer or provide the products and services it advertised, such as low-down-payment mortgages and rent-to-own housing contracts.

101. For example, Progrexion learned that HOPE did not collect location information from consumers inquiring about its rent-to-own housing and mortgage offers when eFolks entered into an agreement with HOPE to receive leads generated by its marketing activities.

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102. The failure to collect location information was unusual among Progrexion’s rent-to-own housing Hotswap Partners.

103. One eFolks employee noted that such information was necessary to “know the area [consumers are] looking to buy.” In fact, eFolks’ system required such information in order for the leads to upload into its automatic dialer. 104. Despite such warnings, Progrexion continued its marketing relationship with HOPE and suggested that the company simply make up zip codes for the consumer leads so that eFolks could upload them into its automatic dialer for the purpose of contacting the consumers directly to market Progrexion and Heath PLLC’s credit repair services.

105. Progrexion was aware that other Hotswap Partners marketing rent-to-own housing engaged in questionable marketing activities. 106. For example, in a July 2016 email, a Progrexion employee reported concerns to another Progrexion employee that certain Hotswap Partners offering rent-to-own housing were making implicit guarantees that credit repair would result in consumers obtaining the rent-to-own housing advertised. The Progrexion employee suggested that this situation be handled by changing the scripting used by Hotswap Partners in order to “avoid our agents hearing those expectations. The logic being that it is easier to plead ignorance if you’re truly ignorant.” Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24393 Page 28 of 50

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107. In another example, in a December 2014 email, Progrexion’s Senior Director of Compliance reported that “[m]any [clients] have claimed that [a marketing affiliate] is guaranteeing loan approval as long as they sign up for Lexington’s services.” In response, one of Progexion’s marketing directors noted that the affiliate “is one of our largest Hotswap Partners” and that the company had previously heard the same complaint before.

The Relevant Hotswap Partners 109. Although Progrexion uses many Hotswap Partners, for purposes of seeking Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24394 Page 29 of 50

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relief for deceptive practices in this lawsuit, the following five affiliates comprise the “Relevant Hotswap Partners”:

a. HOPE, which did business as The HOPE Program, Help Renters, Homes with HOPE, and Hope to Own;

b. OLP.com, Inc., which did business as One Loan Place and Rocket Daddy;

c. Ascent Mortgage Resource Group, which did business as Lead Virtue, First Access Rent-to-Own, First Access Mortgage, United Rent-to-Own, Ascent Rent-to-Own, Fileforgrants.net, American Rent-to-Own, Rent to Own Homes, and Hope Resources;

d. Easyhomeownership.net, which did business as Easy Home Ownership and Renttoownassistance.com; and e. YHTBA Corp., which did business as Rent-2-own.house, Rent Then Own Homes, and Renttoown.house.

Defendants’ Marketing and Sale of Services to Fix Consumers’ Credit

110. The Telemarketing Sales Rule prohibits telemarketers and sellers from “[r]equesting or receiving payment” upfront for “goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating.”

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111. On behalf of consumers, Lexington Law and CreditRepair.com initiate disputes with furnishers and consumer reporting agencies related to tradelines appearing on consumers’ credit reports.

112. Progrexion markets Lexington Law and CreditRepair.com as providing services that will assist consumers in removing derogatory information from, or improving, the consumers’ credit history, credit record, or credit rating. 113. For example, at various times since July 21, 2011, the Lexington Law website included the following representations: a. “If questionable negative items are hurting your credit, removing them can improve your score. Here’s how we do it:

1. ANALYZE We work with you to identify any questionable negative items hurting your score.

2. ADDRESS We challenge those negative items with the bureaus and your creditors.

3. ACCELERATE We keep the process going, helping you reach your credit goals.” b. “Lexington Law is here to help you meet your credit score goals. No matter your credit history and financial standing, our credit repair services are designed to help you improve your credit score”; c. “Lexington Law’s lawyers have the knowledge and tools to start fixing your credit score by working to remove inaccurate items on your report”; Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24396 Page 31 of 50

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d. “Our results prove it can be done. From late payments to charge-offs to bankruptcies, our firms [sic] clients have improved their credit, by removing practically every type of questionable negative item” (bolded language in larger font type on the website); e. “Ask for professional help: If you want to dramatically improve your credit standing — ultimately leading to approval for bigger loans with better terms — consider asking a professional. You can considerably improve your financial standing with the right help”; and f. “Lexington Law has developed tools and strategies that have proven to be effective at removing unfair, inaccurate, and unsubstantiated negative items.”

114. Other examples are found in Lexington Law’s advertisements published online at various times since July 21, 2011, such as: a. “Need Credit Repair Help? Lexington Law can help you remove negative items on your credit reports. . . . Lexington Law | Trusted Leaders in Credit Repair.”

b. “Credit not where you need it to be? . . . Fix Your Bad Credit. Lexington Law® has assisted over 500,000 clients with their credit profile.” c. “40 POINTS ON YOUR CREDIT COULD COST YOU $40,000 ON A Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24397 Page 32 of 50

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30-YEAR MORTGAGE. Challenge questionable items with bureaus . . . TRUSTED LEADERS IN CREDIT REPAIR FOR A REASON.” 115. Another Lexington Law advertisement published online in at least January 2019 stated:

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116. Another Lexington Law advertisement published online in at least January 2019 stated:

117. Another Lexington Law advertisement published online in at least January 2019 stated:

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118. At various times since July 21, 2011, CreditRepair.com’s services were marketed as follows:

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119. One CreditRepair.com advertisement published online in at least August 2018 stated:

120. During telemarketing calls, Progrexion and its marketing affiliates make additional representations that their credit repair services will result in the removal of derogatory tradelines from credit reports or improvements to the consumer’s credit rating.

121. For example, one Progrexion telemarketing script from 2012 says: “. . . our service includes an array of letters with your creditors . . . designed to persuade your creditors to remove items;” and “[we] will analyze your credit reports … and show specific ways you can improve your credit . . . .” The script tells consumers: You can see that your credit score can have dramatic effects on your life. Your credit score is comprised solely from the information found in your credit report. In other words, if you want to improve your score, you have to improve your credit report.

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The script also asks the consumer: “[h]ow would your life be different in a year from now with good credit?”

122. In an audio recording of a telemarketing call from May 2016, a Progrexion agent told a consumer “we assist our clients with cleaning up their credit reports completely by working on getting every single negative item, amount, and remark completely deleted off their reports altogether. It is what we do best. In other words, credit repair.”

Illegal Upfront Fees for Telemarketed Credit Repair Services 123. The Telemarketing Sales Rule states that fees for telemarketed “goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating” cannot be charged until the time frame in which the seller has represented all of the goods or services will be provided to that person has expired and the seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 124. At the time of enrollment with Lexington Law or CreditRepair.com, Progrexion charges consumers a fee, which has been between $9.99 and $14.99 since July 2011, for a complete copy of their TransUnion credit report. Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24402 Page 37 of 50

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125. Consumers are told that paying this fee is necessary to begin the credit repair process.

126. After enrolling with Lexington Law or CreditRepair.com, consumers are then charged their first credit repair service work fee, typically $99.95, five to fifteen days after enrollment.

127. Consumers are then charged ongoing monthly fees by Progrexion and Heath PLLC for their credit repair services of $79.95 to $129.95, depending on the service level the consumer chooses.

128. Heath PLLC and Progrexion request and receive these fees from consumers prior to providing consumers with documentation, in the form of a consumer report from a consumer reporting agency, demonstrating that the promised credit repair results have been achieved, such report having been issued more than six months after the results were achieved.

129. Heath PLLC and Progrexion continue to charge monthly fees until consumers affirmatively cancel their Lexington Law or CreditRepair.com contracts.

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COUNT I The Progrexion Defendants and Heath PLLC Charged Advance Fees for Credit Repair Services in Violation of the TSR

130. The Bureau re-alleges and incorporates by reference Paragraphs 1-129. 131. It is an abusive telemarketing act or practice and a violation of the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating, until: a. The time frame in which the seller has represented all of the goods or services will be provided to that person has expired; and b. The seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 16 C.F.R. § 310.4(a)(2).

132. The Progrexion Defendants and Heath PLLC are sellers and the Progrexion Defendants are telemarketers under the TSR. 16 C.F.R. § 310.2(dd), (ff). 133. The Progrexion Defendants’ and Heath PLLC’s credit repair services are represented to consumers as services to remove derogatory information from, or improve, the consumers’ credit histories, credit reports, or credit ratings. Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24404 Page 39 of 50

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134. Progrexion Defendants and Heath PLLC routinely requested and received payment of a fee or consideration for their credit repair services before: a. The time frame in which they represented all of their goods or services would be provided to the consumer expired; or b. They provided the consumer with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results were achieved, such report having been issued more than six months after the results were achieved. 135. Therefore, the Progrexion Defendants’ and Heath PLLC’s conduct constitutes abusive telemarketing acts or practices in violation of 16 C.F.R. § 310.4(a)(2).

COUNT II The Progrexion Defendants Engaged in Deceptive Acts or Practices in Violation of the CFPA

136. The Bureau re-alleges and incorporates by reference Paragraphs 1-129. 137. It is unlawful for any covered person or service provider to engage in a deceptive act or practice in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 12 U.S.C. §§ 5531 and 5536(a)(1)(B). 138. The Progrexion Defendants are covered persons, service providers, or both, Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24405 Page 40 of 50

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under the CFPA. 12 U.S.C. § 5481(6), (26).

139. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of Lexington Law and CreditRepair.com credit repair services, the Progrexion Defendants, directly or through a Relevant Hotswap Partner, acting on Progrexion’s behalf and for its benefit, have represented, expressly or by implication, that:

a. The advertised product or service, such as a loan or rent-to-own housing contract, was available through the Relevant Hotswap Partner, or that it would be available after signing up for credit repair services with Lexington Law or CreditRepair.com; or b. Consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service, such as a loan or rent-to-own housing contract.

140. In truth and in fact:

a. The advertised product or service was not available through the Relevant Hotswap Partner; or b. Neither Progrexion nor the Relevant Hotswap Partner had a reasonable basis for representing that consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service, such as a Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24406 Page 41 of 50

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loan or rent-to-own housing contract.

141. These representations have been material and likely to mislead consumers acting reasonably under the circumstances.

142. The Progrexion Defendants had actual knowledge of the misrepresentations, reckless indifference to the misrepresentations, or an awareness of the high probability of the misrepresentations along with an intentional avoidance of the truth, with respect to the deceptive representations made by the Relevant Hotswap Partners.

143. Despite this knowledge, the Progrexion Defendants continued to sign up consumers through the Relevant Hotswap Partners or participated in the Relevant Hotswap Partners’ deceptive conduct.

144. Therefore, the representations as set forth in Paragraph 139 of this Complaint are false and misleading, and constitute deceptive acts or practices in violation of 12 U.S.C. §§ 5531 and 5536(a)(1)(B). COUNT III The Progrexion Defendants Made False or Misleading Statements to Induce Another Person to Pay for Goods or Services in Violation of the TSR

145. The Bureau re-alleges and incorporates by reference Paragraphs 1-129. 146. It is a deceptive telemarketing act or practice and a violation of the TSR for a seller or telemarketer to make a false or misleading statement to induce another Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24407 Page 42 of 50

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person to pay for goods or services. 16 C.F.R. § 310.3(a)(4). 147. The Progrexion Defendants are telemarketers, sellers, or both, under the TSR. 16 C.F.R. § 310.2(dd), (ff).

148. In connection with the telemarketing of Lexington Law and CreditRepair.com credit repair services, the Progrexion Defendants, directly or through a Relevant Hotswap Partner, acting on Progrexion’s behalf and for its benefit, have represented, expressly or by implication, that: a. The advertised product or service, such as a loan or rent-to-own housing contract, was available through the Relevant Hotswap Partner, or that it would be available after signing up for credit repair services with Lexington Law or CreditRepair.com; or b. Consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service, such as a loan or rent-to-own housing contract.

149. In truth and in fact:

a. The advertised product or service was not available through the Relevant Hotswap Partner; or b. Neither Progrexion nor the Relevant Hotswap Partner had a reasonable basis for representing that consumers were either guaranteed or had a Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24408 Page 43 of 50

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high likelihood of obtaining the advertised product or service, such as a loan or rent-to-own housing contract.

150. These representations have been material and likely to mislead consumers acting reasonably under the circumstances.

151. The Progrexion Defendants had actual knowledge of the misrepresentations, reckless indifference to the misrepresentations, or an awareness of the high probability of the misrepresentations along with an intentional avoidance of the truth, with respect to the deceptive representations made by the Relevant Hotswap Partners.

152. Despite this knowledge, the Progrexion Defendants continued to sign up consumers through the Relevant Hotswap Partners or participated in the Relevant Hotswap Partners’ deceptive conduct.

153. Therefore, the representations as set forth in Paragraph 148 of this Complaint are false and misleading, and constitute deceptive telemarketing acts or practices in violation of 16 C.F.R. § 310.3(a)(4). COUNT IV The Progrexion Defendants Violated the CFPA by Substantially Assisting a Covered Person Engaged in Deceptive Acts or Practices 154. The Bureau re-alleges and incorporates by reference Paragraphs 1-129. 155. It is unlawful for any person to knowingly or recklessly provide substantial Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24409 Page 44 of 50

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assistance to a covered person or service provider in violation of the provisions of 12 U.S.C. § 5531. 12 U.S.C. § 5536(a)(3).

156. Each Relevant Hotswap Partner was, at all times relevant to this Complaint, a “covered person,” as that term is defined by 12 U.S.C. § 5481(6)(A), because it offered or provided financial products or services for use by consumers primarily for personal, family, or household purposes, or that were delivered, offered, or provided in connection with such a product or service. The products or services the Relevant Hotswap Partners offered or provided included consumer credit, including mortgages; financial advisory services, including credit counseling; and services relating to consumer report information, including credit repair services. 12 U.S.C. § 5481(15)(A)(i), (viii), (ix).

157. Each Relevant Hotswap Partner was also, at all times relevant to this Complaint, a “service provider” to a covered person as that term is defined by 12 U.S.C. § 5481(26), because it provided material services to one or more covered persons, including Progrexion.

158. At all times relevant to this Complaint, the Relevant Hotswap Partners engaged in deceptive acts or practices in violation of the CFPA, 12 U.S.C. §§ 5531 and 5536(a)(1)(B), by misrepresenting, expressly or by implication, the availability of an advertised product or service, such as a loan, or that consumers were either Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24410 Page 45 of 50

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guaranteed or had a high likelihood of obtaining the advertised product or service. These misrepresentations have been material and likely to mislead consumers acting reasonably under the circumstances.

159. The Progrexion Defendants provided substantial assistance to the Relevant Hotswap Partners, including by providing advice and content for the Relevant Hotswap Partners’ telemarketing scripts, advice regarding its websites and other marketing vehicles, the means and mechanisms for live-transferring consumers between the Relevant Hotswap Partners and Progrexion, and payment for each lead that resulted in a Lexington Law or CreditRepair.com sale. 160. The Progrexion Defendants had the requisite knowledge of or reckless disregard for the deceptive conduct described in Paragraph 158. 161. Therefore, the Progrexion Defendants violated 12 U.S.C. § 5536(a)(3). COUNT V The Progrexion Defendants Assisted and Facilitated Violations of the TSR

162. The Bureau re-alleges and incorporates by reference Paragraphs 1-129. 163. It is a deceptive telemarketing act or practice and a violation of the TSR for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates 16 C.F.R. §§ 310.3(a), (c), (d), or 310.4. 16 C.F.R. § 310.3(b).

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164. Each Relevant Hotswap Partner was, at all times relevant to this Complaint, a “telemarketer,” as that term is defined by 16 C.F.R. § 310.2(ff), that was offering or providing consumer financial products or services, including consumer credit, financial advisory services, or services relating to consumer report information. 12 U.S.C. § 5481(15)(A)(i), (viii), (ix).

165. At all times relevant to this Complaint, the Relevant Hotswap Partners made false or misleading statements to induce another person to pay for goods or services in violation of the TSR, 16 C.F.R. § 310.3(a)(4), by misrepresenting, expressly or by implication, the availability of an advertised product or service, such as a loan, or that consumers were either guaranteed or had a high likelihood of obtaining the advertised product or service.

166. The Progrexion Defendants provided substantial assistance or support to the Relevant Hotswap Partners, including by providing advice and content for the Relevant Hotswap Partners’ telemarketing scripts, advice regarding its websites and other marketing vehicles, the means and mechanisms for live-transferring consumers between the Relevant Hotswap Partners and Progrexion, and payment for each lead that resulted in a Lexington Law or CreditRepair.com sale. 167. The Progrexion Defendants provided substantial assistance or support to the Relevant Hotswap Partners when the Progrexion Defendants knew or consciously Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24412 Page 47 of 50

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avoided knowing that the Relevant Hotswap Partner made false or misleading statements to induce consumers to pay for goods and services, in violation of the TSR, 16 C.F.R. § 310.3(a)(4).

168. Therefore, the Progrexion Defendants violated 16 C.F.R. § 310.3(b).

THIS COURT’S POWER TO GRANT RELIEF 169. The CFPA empowers this Court to grant any appropriate legal or equitable relief including, without limitation, a permanent or temporary injunction, rescission or reformation of contracts, the refund of monies paid, restitution, disgorgement or compensation for unjust enrichment, damages, and monetary relief, including but not limited to civil money penalties, to prevent and remedy any violation of any provision of law enforced by the Bureau. 12 U.S.C. §§ 5564(a), 5565.

PRAYER FOR RELIEF 170. The Bureau requests that the Court, as permitted by 12 U.S.C. § 5565: a. Impose appropriate injunctive relief against the Progrexion Defendants for their violations of the CFPA and the TSR and other provisions of Federal consumer financial law as defined by 12 U.S.C. § 5481(14); b. Impose appropriate injunctive relief against Heath PLLC for its violations of the TSR;

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c. Grant additional injunctive relief as the Court may deem to be just and proper;

d. Award monetary relief, including, but not limited to, rescission or reformation of contracts; the refund of monies paid; restitution; disgorgement or compensation for unjust enrichment; and payment of damages;

e. Award Plaintiff civil money penalties; f. Award Plaintiff the costs of bringing this action; and g. Award such other and additional relief as the Court may determine to be just and proper.

Dated: August 17, 2022

Respectfully submitted, ERIC HALPERIN Enforcement Director

DAVID RUBENSTEIN Deputy Enforcement Director

/s/ Maureen McOwen MAUREEN MCOWEN JONATHAN REISCHL TRACY L. HILMER ALICIA FERRARA J. TAYLOR McCONKIE Bureau of Consumer Financial Protection Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24414 Page 49 of 50

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1700 G Street, NW Washington, DC 20552 Telephone: (202) 435-9553 [email protected] [email protected] [email protected] [email protected] [email protected]

Attorneys for Plaintiff Bureau of Consumer Financial Protection Case 2:19-cv-00298-BSJ Document 457 Filed 08/17/22 PageID.24415 Page 50 of 50

Order (Mar. 2023)

PDF of this document (13 pages)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION BUREAU OF CONSUMER FINANCIAL PROTECTION, Plaintiff, V.

PROGREXION MARKETING, INC., et al., Defendants.

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT Case No. 2:19-CV-00298-BSJ District Judge Bruce S. Jenkins INTRODUCTION This matter is presently before the court on a Motion for Partial Summary Judgment filed by Plaintiff, the Bureau of Consumer Financial Protection. 1 The court also considered the factual record set forth in the Motion for Partial Summary Judgment filed by Defendant John C. Heath, P.C. d/b/a/ Lexington Law (hereinafter "Heath" or "Lexington Law"),2 and the Motion for Summary Judgment filed by Defendants Progrexion Marketing, Inc., PGX Holdings, Inc., Progrexion Teleservices, Inc., EFolks, LLC, and Creditrepair.com, Inc (hereinafter, collectively "Progrexion").3 The court previously denied both of Defendants' motions without prejudice.4 FACTUAL BACKGROUND According to Progrexion's September 2014 memorandum seeking a $280,000,000 loan, Progrexion, "through its Lexington Law and CreditRepair.com brands, is the dominant provider 1 ECF No. 257.

2 ECF No. 171.

3 ECF No. 288.

4 See ECF No. 287; ECF No. 403.

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of credit repair services to consumers in the United States."5 Progrexion and Heath market and sell Lexington Law and CreditRepair.com services over the telephone through inbound and outbound interstate telephone calls. 6 While the exact path a customer follows to find Progrexion and Lexington Law varies, the "vast majority" initially contact a Progrexion agent by calling a telephone number listed on the internet or some other form of advertisement. 7 At various times during the relevant period, Progrexion's website has touted its past results for clients in various ways. In a July 2021 entry, the website claimed: "89% of Past Lexington Law clients who saw a credit score increase had an average of 40 points in six months. "8 Some portion of customers are transferred to Progrexion via outside marketing contractors, referred to as "hotswap" partners. 9 These hotswap partners, who market via inbound and outbound telephone calls, claim to help people obtain loans or rent-to-own homes. 10 The hotswap partners then tell prospective customers that they need to work with Lexington Law to improve their credit to obtain better rent-to-own or loan opportunities. 11 Progrexion has instructed these hotswap partners to advertise Lexington Law as:

the number one credit repair company in the nation with 25 years of experience helping their clients with their credit. Their clients see an average of 10 negative items removed within the first few months. They can help remove negative items like late payments, charge-offs, bankruptcies, and more. Our clients have seen really great results with their services and we have been able to move forward 5 Conf. Info. Mem. at 16 (ECF No. 321, Ex. 5).

6 Pl.'s Mot. Partial Summ. J. at 9 (ECF No. 257); see Def.'s Opp. at 7. 7 Mots. Hr'g 76:4-23 (Aug. 9, 2022).

8 Exhibit 24 at DelPonti 0000365 (ECF No. 257, Ex. 9 at 10). 9 Id at 74:21-75:13.

10 See Progrexion Mot. Summ. J., Exs. 18-21 (ECF No. 292, Ex. 16-19). 11 See id Case 2:19-cv-00298-BSJ Document 508 Filed 03/10/23 PageID.25778 Page 2 of 13

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with home ownership with those clients once they reach the credit scores needed. 12 Once the customer agrees to work with Lexington Law, the hotswap partner then patches an agent of Progrexion/Lexington Law into the customer call before the hotswap agent disconnects. Regardless of the path followed, customers are eventually connected, by direct dial or transfer to Lexington Law or CreditRepair.com. During the initial phone call to CreditRepair.com, the customer speaks to a Progrexion agent about their free credit report summary and whether any of the information should be challenged as potentially incorrect. 13 Even if the customer calls the number for Lexington Law or is transferred via hotswap to Lexington Law, a Progrexion agent answers the telephone and completes this same process. 14 Once connected to the Progrexion agent, the customer is offered, for a fee, a full credit report from TransUnion. 15 The customer and the Progrexion agent then discuss the customer's full credit report and the various items on it. 16 Based on that conversation, the Progrexion agent offers Lexington Law or CreditRepair.com's services to the customer, and provides the customer a contract that spans over twenty pages. 17 A portion of that contract states: Lexington [or Creditrepair.com] cannot guarantee and you are not paying for a particular credit report outcome or result; you are paying only for Lexington's [or Creditrepair.com's] efforts on your behalf."18 12 Progrexion Mot. Summ. J., Ex. 20 (ECF No. 292, Ex. 18). 13 Mots. Hr'g 77:23-78:12 (Aug. 9, 2022).

14 Final Pretrial 56:16-23, 59:14-23 (June 29, 2022).

15 Id at 57:8-23.

16 Id at 59:14-23.

17 Id at 33:8-25; see, e.g., CreditRepair.com Engagement Agreement (stating terms of engagement with CreditRepair.com).

18 Lexington Law Engagement Agreement at 5 (ECF No. 278, Ex. 5); CreditRepair.com Engagement Agreement at 4 (ECF No. 278, Ex. 20).

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If the customer agrees to the contract terms, the Progrexion agent inputs the customer's information. After a written credit report is obtained, and a written contract with all of its exceptions and exclusions executed, a conversation is held with the client and the telephone operator. Based on answers obtained by the Progrexion telephone operator, a letter to a creditor, or an electronic communication to a credit bureau, is automatically written from a reservoir of examples. 19 The letters are signed in the name of the client, not in the name of Lexington Law or its agents.20 At this point, no lawyer has reviewed the client's case file, nor the client-specific letter before it is sent out.21 The software program that creates the letters is owned by Progrexion, not the law firm, Heath. 22 Lexington Law customers only speak to an attorney if the customer expressly requests it.23 In the absence of a specific request, letters are sent out on the client's behalf without the customer ever speaking to an attorney ( and only a "very small percentage" specifically request to speak to an attorney).24 The vast majority of Lexington Law customers only ever speak to a Progrexion telephone operator.25 Nonetheless, Defendants suggest that these automated letters constitute legal services only for Lexington Law but not for CreditRepair.com.26 19 Mots. Hr'g 165:15-167:2 (Aug. 9, 2022); Mot. Hr'g 49:11-53:7 (Mar. 11, 2022); Final Pretrial 85:14-25, 87:11-88:18 (June 29, 2022).

20 Mot. Hr'g 48:12-49:3 (Mar. 11, 2022).

21 Final Pretrial 88:14-90:1 (June 29, 2022).

22 Final Pretrial 41 :7-42:8, 50:21-51 :5, 83:3-16, 96:13-23 (June 29, 2022). 23 Id. at 34:16-24.

24 Id. at 35:10-36:11; Mots. Hr'g 167:7 (Aug. 9, 2022).

25 Final Pretrial 40:19-41 :6, 56:16-23 (June 29, 2022); Final Pretrial 156:6-19 (June 30, 2022); Mot. Hr'g 36:8-38:17 (Mar. 11, 2022).

26 Mots. Hr'g 86:24-88:3 (Aug. 9, 2022).

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The software program continues to send letters each month, automatically, at a rate determined by the price a customer pays for their plan.27 While Defendants initially suggested their experience suggested sending a small number of challenges per month to be a superior strategy, they ultimately conceded the volume of letters is dictated by the price a customer pays.28 Generally, more letters are sent for customers who pay a higher price.29 While Defendants bill at the end of each month, the service contracts are indefinite, having no set termination date, persisting until a customer affirmatively terminates the agreement ( except in jurisdictions that limit contract lengths to some maximum term, such as six months). 30 Progrexion bills Lexington Law's clients by charging their credit card each month; no invoice is ever sent.31 The money is then deposited into an account in the name of Lexington Law, but the account is ultimately controlled by Progrexion ASG employee, Jared Hartley.32 Progrexion owns the trademark for Lexington Law, which attorney John Heath licenses from Progrexion.33 In 2021 Lexington Law paid $135,242,433 to Progrexion Marketing for marketing services, paid $85,166,822 to Progrexion Teleservices for telemarketing services, paid $128,076,546 to Progrexion IP to license software, and $41,051,665 to Progrexion ASG for billing and "back office" services.34 As a result of these payments, Lexington Law paid 82.7% 27 ld. at 164:24-166:3; see Service Feature Matrix (ECF No. 258, Ex. 2). 28 Mots. Hr'g 83:3-9 (Aug. 9, 2022) ("THE COURT: Well, I'm interested in your use of the word more effective. If I've got 12 possibilities, why shouldn't I have 12 sent the first letter with the algorithm demonstrating that I've got 12 good shots? MR. BENNETT: So you haven't paid to send 12 is the most likely answer to that.") 29 See Service Feature Matrix (ECF No. 258, Ex. 2).

3° Final Pretrial 20:2-14 (Sept. 21, 2022).

31 Mot. Hr'g 23:21-24:67 (Jan. 13, 2022); Final Pretrial 46:5-25 (June 29, 2022). 32 Final Pretrial 49:4-22, 79: 1-8 81: 14-23 (June 29, 2022). 33 Mot. Hr'g 28:6-18, 45:21-25 (Jan. 13, 2022).

34 Final Pretrial 115:3-116:17 (June 29, 2022); Mot. Summ. J. at 9; see Opp. at 7. Case 2:19-cv-00298-BSJ Document 508 Filed 03/10/23 PageID.25781 Page 5 of 13

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of its total revenue to Progrexion entities.35 Through May of 2022, Lexington Law paid 84.5% of its total revenue to Progrexion Entities.36 ANALYSIS Plaintiff seeks partial summary judgment, asking the court to find that Defendants have violated the advance-fee provision of the Telemarketing Sales Rule ("TSR"), found at 16 C.F.R. § 310.4(a)(2), beginning on March 8, 2016, and continuing through the present date. Plaintiff leaves the question of damages for this asserted violation for another day.37 The court will first discuss application of the cited provision to Defendants' business before examining whether Defendants have violated the provision.

Heath and Progrexion are subject to the Telemarketing Sales Rule because they provide services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating Defendants are subject to the advance-fee provision of the Telemarketing Sales Rule ("TSR"), which states: It is an abusive telemarketing act ... to ... "[r]equest[] or receiv[e] payment of any fee or consideration for ... services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating until [two conditions, discussed below, are met]." 16 C.F.R. § 310.4(a)(2). The parties agree Defendants are telemarketers within the meaning of the TSR. 38 When making a related argument addressed below,39 Defendants' counsel made comments that appear to deny that Defendants offer services "represented to remove derogatory information from, or improve, a person's credit history, credit 35 Final Pretrial 146:1-10 (June 29, 2022).

36 Id. at 146:4-10.

37 ECF No. 257 at 1-2.

38 Final Pretrial 15: 13-17 (Sept. 21, 2022).

39 See infra Part II.b.

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record, or credit rating."40 Any such argument is contrary to the undisputed facts, including express statements on Lexington Law's website and statements Progrexion made when it solicited investor funds.

First, the undisputed facts set forth by Plaintiff, which Defendants did not contest, indicate that "Heath offers credit repair services for a fee." 41 Also, according to Lexington Law's website: "Credit repair is the process of improving a poor score by addressing or removing negative items that could be listed on your reports inaccurately."42 "To remove a negative item, credit reporting agencies require you to work through their complicated online systems and send a series of formal dispute letters. To make the disputing process easier, Lexington Law can identify and challenge questionable negative items on your behalf using our patented credit repair process."43 "Our credit repair service[] levels range from $89.85 to $129.95 and each option offers you a unique coverage to fix errors on your credit report."44 "Our credit repair services are designed to help those who are most in need of negative item removals from their reports."45 Similarly, "Progrexion markets Lexington Law as 'the industry leaders in credit repair"'46 and instructed at least one hotswap partner to describe Lexington Law as "the number one credit repair company in the nation ... [whose] clients see an average of 10 negative items removed within the first few months ... [including] negative items like late 40 See, e.g., Mot. Hr'g 68:2-5 (March 11, 2022).

41 PL 's Mot. Summ. J. at 11 (ECF No. 258); see Def. 's Opp. at 7 (ECF No. 277); Final Pretrial 119:16-121:4 (June 29, 2022); Mot. Partial Summ. J., Ex. F5 (ECF No. 171, Ex. 12). 42 Pl.'s Mot. Summ. J. at 11; see Def.'s Opp. at 7-8; see Mot. Partial Summ. J., Ex. F5 (ECF No. 171, Ex. 12).

43 Mot. Partial Summ. J., Ex. F5 (ECF No. 171, Ex. 12).

44 Jd 45 Jd 46 Pl.'s Mot. Summ. J. at 11; see Def.'s Opp. at 8.

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payments, charge-offs, bankruptcies, and more."47 Thus, based on the undisputed facts and Defendants' .own statements, they offer services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating. Additionally, Progrexion represented to investors that Progrexion, though Lexington Law and otherwise, provides a "service ... to improve a customer's credit history and ultimately his or her credit score." 48 Specifically, PGX Holdings, Inc. represented it: through its Lexington Law and CreditRepair.com brands, is the dominant provider of credit repair services to consumers in the United States. The company's technology-enabled, highly scalable service offerings provide a comprehensive approach to improving a customer's credit history and ultimately his or her credit score. The services facilitate a consumer's ability to remove unfair, inaccurate and unsubstantiated items from his or her credit report and off er customized guidance and information on the ways in which credit scores can be improved. Over its 15+ year history, the Company has proven that its services provide a compelling customer value proposition by improving the accuracy of its customers' credit histories and ultimately enhancing their access to loans, employment, insurance and housing.49 Accordingly, the undisputed factual record demonstrates Progrexion and Heath offer services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating. II.

Defendants do not comply with the advance-fee provision of the TSR The court will first discuss the advance-fee provision of the TSR, as the parties appeared to disagree about its meaning in their briefing. The court will then discuss Defendants' failure to comply with the provision.

47 Progrexion Mot. Summ. J., Ex. 20 (ECF No. 292, Ex. 18). 48 Conf. Info. Mem. at 16 (ECF No. 321, Ex. 5).

49 Id.

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a. The express language of the advance-fee provision of the TSR provides two prerequisites for payment imposed upon telemarketers selling credit improvement services At the outset, it is helpful to review the language and structure of advance-fee provision of the TSR, which states:

(a) Abusive conduct generally. It is an abusive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in the following conduct:

(2) Requesting or receiving payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating until: (i) The time frame in which the seller has represented all of the goods or services will be provided to that person has expired; and (ii) The seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. Nothing in this Rule should be construed to affect the requirement in the Fair Credit Reporting Act, 15 U.S.C. 1681, that a consumer report may only be obtained for a specified permissible purpose.

16 C.F.R. § 310.4(1)(2). The language and structure of the rule demonstrate that it defines, by examples, conduct of telemarketers considered abusive. Subsection ( a) expressly states that conduct described in the numbered subsections to follow constitutes "an abusive telemarketing act or practice." The rule then provides an example of such conduct, beginning at subsection (2), which states a telemarketer engages in abusive conduct by "[r]equesting or receiving payment" before certain conditions are met. Finally, the rule lists the payment preconditions in subsections numbered romanettes (i) and (ii).

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Moreover, even to the extent the plain language is ambiguous, the Discussion of the Rule provided in the Federal Register at the time the Telemarketing Sales Rule was implemented on August 23, 1995, clarifies the intended meaning of the advance-fee provision. The Discussion of the Rule states:

This section of the Final Rule states that, in selling any goods or services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating, a seller or telemarketer is prohibited from requesting or receiving payment of any fee or consideration until two events occur. First, the time frame within which the seller has represented that all of the goods or services will be provided to the purchaser must have expired. Second, the promised results must have been achieved. In order to ensure the achievement of the promised results, the Final Rule requires the seller to provide the purchaser with a consumer report from a consumer reporting agency that was issued more than six months after the results were achieved.

Telemarketing Sales Rule, 60 FR 43842-01 (footnotes omitted). Accordingly, the advance-fee provision of the TSR prohibits requesting or receiving payment until the prerequisites listed in romanettes (i) and (ii) are met.

While one may think the rule may have need for improvement, it says what it says, and the agency or the Congress are in a position to exercise the power to improve. The court is not. b. The undisputed facts show Defendants violate the TSR because they make no attempt to comply with the express payment preconditions Turning to romanette (ii), it is an abusive telemarking act or practice to request or receive any fee or consideration until: "The seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved." 16 C.F.R. § 310.4(a)(2)(ii). Case 2:19-cv-00298-BSJ Document 508 Filed 03/10/23 PageID.25786 Page 10 of 13

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Here, it is undisputed that Heath (doing business as Lexington Law) charges fees to clients on a monthly basis, without waiting six months and without providing a consumer report at the six-month mark showing results have been achieved. Heath's Second Supplemental Response to Plaintiffs Requests for Admission states: "Heath PC admits that it has had a routine practice of charging Customers for credit repair services on a monthly basis for services already provided since March 8, 2016."50 Similarly, Creditrepair.com's Second Supplemental Response to Plaintiffs Requests for Admission states: CreditRepair.com admits that it has had a routine practice of charging members for credit repair services on a monthly basis for services already provided since March 8, 2016."51 During a pretrial conference, Defendants confirmed that they do not wait six months after providing results before billing clients.52 Rather, Defendants bill at the end of each month, indefinitely, until a customer affirmatively terminates the agreement ( or the agreement expires, in those states prohibiting indefinite contracts).53 These month bills violate the express language of the advance-free provision. Defendants advance a creative argument, insisting that they are excused from compliance with the advance-fee provision because they offer no promised results, or "any result whatsoever" to their customers. 54 While creative, the court finds the argument unpersuasive, even assuming Defendants do not promise any results (this assumption is, of course, contradicted 50 ECF No. 258, Ex 25 at 6.

51 ECF No. 258, Ex. 26 at 3.

52 Final Pretrial 43:23-44:4 (Sept. 21, 2022).

53 Final Pretrial 20:2-14 (Sept. 21, 2022).

54 Final Pretrial 9:17-10:2 (Sept. 21, 2022); see Mot. Hr'g 82:11-20 (Jan. 13, 2022); Mot. Hr'g 34:6-35:1 (Mar. 11, 2022); Final Pretrial 21:21-22:6 (June 30, 2022). Case 2:19-cv-00298-BSJ Document 508 Filed 03/10/23 PageID.25787 Page 11 of 13

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by Defendants' advertising online and through hotswap partners, as detailed above55). The rule text does not offer any exception to the six-month waiting period for telemarketers who do not offer "promised results." Rather, romanette (ii) of the advance-fee provision assumes that a telemarketer promises a result of some sort. This seems a reasonable assumption on the part of its drafters. It is reasonable to presume a practice is abusive if that practice consists of charging a customer money and then offering them no result of any kind in return. Close examination reveals the advance-fee provision requires a particular result: one measurable in "a consumer report from a consumer reporting agency." Defendants deny that they provide, or are even able to provide, any such result. Rather than finding the lack of promised results somehow absolves Defendants from compliance with the advance-fee provision, the comi finds it evidences Defendants' failure to comply with the advance-fee provision of the TSR. Finally, Defendants attempt to create a factual dispute that is immaterial. Defendants contend that those customers who remain clients for seven months or more might be billed six months after they have seen results ( which Defendants deny they promise) or a report. 56 While perhaps facially appealing, this suggestion does not save Defendants. 57 Romanette (ii) prohibits Defendants from requesting or receiving payment until they provide a consumer report created 55 See supra rm. 8, 12, 42-48. Nonetheless, the court makes the assumption here, given Defendants are opposing summary judgment.

56 Defs.' Opp. Pl.'s Mot. Partial Summ. J. at 10 (ECF No. 277). 57 Defendants' suggestion also implicates romanette (i) of the advance-free provision of the TSR, which prohibits billing until "[t]he time frame in which the seller has represented all of the goods or services will be provided to that person has expired." 16 C.F.R. § 310.4(a)(2)(i). Further, the Discussion of the Rule published in the Federal Register states: "If any discrepancy exists between various representations by a credit repair seller, the longest time frame represented will determine when payment may be requested or received." Telemarketing Sales Rule, 60 FR 43842-01 n.117. Thus, the first month's bill runs afoul of the TSR when customers receive multiple months of service, even without reference to romanette (ii). Case 2:19-cv-00298-BSJ Document 508 Filed 03/10/23 PageID.25788 Page 12 of 13

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six months after "the promised results have been achieved, such report having been issued more than six months after the results were achieved." 16 C.F.R. § 310.4(a)(2)(ii). Providing a customer a consumer report during month seven of their service, indicating some result from month one, does not cure the violation for receiving payment at the end of month one. The consumer has already been billed for month one at the end of month one, without having received the credit report required by the advance-fee provision and without Defendants observing the six-month waiting period. Similarly, customers billed in month seven are being charged for the services rendered in month seven, without Defendants providing any consumer report created six-months after achieving the results of month seven. Moreover, Defendants deny that they promise or achieve results at any time.

ORDER Based on the foregoing, the court GRANTS Plaintiffs Partial Motion for Summary Judgment (ECF No. 257). Defendants have violated 16 C.F.R. § 310.4(a)(2) from March 8, 2016, through the present. Consistent with the request in Plaintiffs Motion, the court makes no determination regarding damages.

~,,._ DATED this./_()__ day of March 2023.

~ United States Senior Case 2:19-cv-00298-BSJ Document 508 Filed 03/10/23 PageID.25789 Page 13 of 13

Stipulation (Aug. 2023)

PDF of this document (50 pages)

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Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PagelD.28485 Page 1 of 50

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH FILED US District Court -UT

BUREAU OF CONSUMER FINANCIAL PROTECTION,

Plaintiff, V.

PROGREXION MARKETING, INC., et al.,

Defendants.

ar}.

AUG 30°23 6M11:05 —

Case No. 2:19-cv-00298-BSJ

PROPOSED] STIPULATED FINAL JUDGMENT AND ORDER

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PARTIES' STATEMENT Plaintiff Bureau of Consumer Financial Protection ("Bureau") commenced this civil action on May 2, 2019, to obtain injunctive and monetary relief and civil penalties. The suit alleges, among other things, that the Defendants violated the credit repair advance fee provision of the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310.4(a)(2), by billing clients for credit repair services before the timeframes required by the advance fee provision had expired. On March 10, 2023, this Court issued an order agreeing with the Bureau's position. Credit repair organizations that market or sell their services over the phone, irrespective of whether they promise a specific result to consumers, must follow the TSR, including the advance fee provision. That is, credit repair organizations that market or sell services over the phone may not request or receive payment of any fee for credit repair services until (i) the time frame in which they have represented all of the goods or services will be provided to that person has expired; and (ii) they have provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. And no business may substantially assist a credit repair organization that it knows or consciously avoids knowing is engaged Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28486 Page 2 of 50

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in an act or practice that violates the TSR, including by doing such things as providing back office support, technical know-how, lead generation, or data that supports their non-complaint credit repair practices or billing. The Defendants and the Bureau have now agreed to settle the litigation. As part of the settlement, Lexington Law, CreditRepair.com, and Progrexion-the largest credit repair organizations in the United States-have agreed that, among other things, they will not violate the advance fee provision of the TSR, nor will they knowingly assist or support any company that is violating that provision. Consumers considering using a credit repair company should be aware that it is illegal for a company to charge them for telemarketed credit repair unless it has been six months since the company achieved the promised results. Their consumer report has to show that the promised results were achieved six months earlier than they can be billed. Credit repair organizations accepting clients via inbound or outbound telemarketing must conform their billing practices to the full requirements of the TSR, including the advance fee provision of the TSR. BACKGROUND The Amended Complaint, filed on August 17, 2022, names as Defendants PGX Holdings, Inc., Progrexion Marketing, Inc., Progrexion Teleservices, Inc., CreditRepair.com, Inc., and eFolks, LLC (collectively, the "Progrexion Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28487 Page 3 of 50

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Defendants") and John C. Heath, Attorney-at-Law, PC ("Heath PC") (collectively with the Progrexion Defendants, "Defendants"). The Bureau and Defendants are collectively referred to herein as "the Parties" to the above-captioned civil action (" Action").

Count I of the Amended Complaint alleges that Heath PC and the Progrexion Defendants engaged in abusive telemarketing practices in violation of the credit repair advance-fee provision of the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310.4(a)(2). On March 10, 2023, this Court granted partial summary judgment in favor of the Bureau on liability under that claim (the "March 10, 2023 Order"), holding that all Defendants had violated 16 C.F.R. § 310.4(a)(2) since March 8, 2016. The Court did not reach the question of what relief, if any, is appropriate under Count I. Defendants disputed the Court's findings in support of the March 10, 2023 Order and preserved their rights to appeal that order. Defendants' time for appealing the March 10, 2023 Order has not begun to run. As part of this settlement and compromise, Defendants neither admit nor deny the allegations in Count I and waive their rights to appeal the March 10, 2023 Order. Counts II-V of the Amended Complaint allege that the Progrexion Defendants engaged in deceptive acts and practices in violation of Sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28488 Page 4 of 50

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5531 and 5536, and deceptive telemarketing acts or practices in violation of the TSR, 16 C.F .R. § 310.3 .1 Specifically, the Amended Complaint alleges that the Progrexion Defendants, in order to generate credit repair sales for Lexington Law and CreditRepair.com, relied on a network of marketing affiliates who advertised a variety of products and services, often related to consumer credit products. The Amended Complaint further alleges that certain of those marketing affiliates, referred to herein as the "Hotswap Companies," used deceptive, bait advertising to generate referrals to Defendants' Credit Repair Services. As alleged in the Amended Complaint, during a "hotswap" telephone call, the Hotswap Company's telephone agent would pitch Defendants' Credit Repair Services to the consumer, and then live-transfer ( or "hotswap") the consumer to Defendants' telemarketing agent to attempt to close the credit repair sale. The Amended Complaint alleges that the Progrexion Defendants paid the Hotswap Companies for each credit repair sale that resulted from their efforts, despite knowing that they engaged in deceptive practices. As part of this settlement and compromise, Defendants neither admit nor deny the allegations in Counts II-V.

On June 4, 2023, Defendants filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532, in the 1 Plaintiff did not allege Counts II-V against Defendant Heath PC. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28489 Page 5 of 50

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United States Bankruptcy Court for the District of Delaware. Defendants' Chapter 11 cases are being jointly administered under the lead case In re PGX Holdings, Inc. Case No. 23-10718 (CTG) (collectively, the "Chapter 11 Cases"). Plaintiff and all Defendants, by and through their respective counsel, now jointly request that the Court enter this Stipulated Final Judgment and Order ("Final Order").

ORDER FINDINGS 1.

This Court has jurisdiction over the subject matter of this Action and has jurisdiction over all the parties thereto, and venue in this district is proper. 2.

In the March 10, 2023 Order, the Court granted partial summary judgment to the Bureau on liability on its claim that Defendants violated the advance-fee provision, § 310 .4( a )(2) of the TSR.

The Parties now agree to entry of this Final Order, without adjudication of any appeal of the March 10, 2023 Order or of the remaining issues of fact or law pleaded in the Amended Complaint, to settle and resolve all matters in dispute Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28490 Page 6 of 50

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arising from the conduct alleged in the Amended Complaint through the Effective Date of this Order.

Defendants neither admit nor deny any allegations in the Amended Complaint, except as stated in this Final Order. For purposes of this Final Order, Defendants admit the facts necessary to establish the Court's jurisdiction over them and the subject matter of this Action.

The Parties waive all rights to seek judicial review of, or otherwise challenge or contest, the validity of this Final Order. Defendants waive their right to seek judicial review of the March 10, 2023 Order, and Defendants also waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this Action to the date of this Final Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys' fees.

Entry of this Final Order is in the public interest. DEFINITIONS The following definitions apply to this Final Order: 7.

"Affected Consumers" includes:

a. any consumer who, after being subject to telemarketing regarding Defendants' Credit Repair Services, made a Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28491 Page 7 of 50

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payment to Defendants for Credit Repair Services purchased via a telemarketing transaction from March 8, 2016 through the Effective Date; and b. any consumer who made a payment to Lexington Law or CreditRepair.com from July 21, 2011 through the Effective Date, after being live-transferred to Lexington Law or CreditRepair.com by one of the Hotswap Companies.

"Bankruptcy Code" means title 11 of the United States Code. 9.

"Bankruptcy Court" means the United States Bankruptcy Court for the District of Delaware and any other bankruptcy court having jurisdiction over the Chapter 11 Cases or any proceeding therein from time to time. 10.

"Board" means the duly-elected and then-acting Boards of Directors of PGX Holdings, Inc. or Heath PC.

11.

"Chapter 11 Cases" has the meaning specified therefor in the preamble hereto.

12.

"Consumer" means any individual or an agent, trustee, or representative acting on behalf of an individual. 12 U.S.C. § 5481(4). Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28492 Page 8 of 50

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13.

"Consumer Financial Product or Service" means any Financial Product or Service that is described in one or more categories undera. Paragraph 20 and is offered or provided for use by consumers primarily for personal, family, or household purposes; or b. clause (i), (iii), (ix), or (x) of Paragraph 20, and is delivered, offered, or provided in connection with a Consumer Financial Product or Service referred to in subparagraph (a) of this Paragraph.

14.

"Consumer Information" means information from or about an individual consumer, including, but not limited to (a) first and last name; (b) a home or other physical address, including street name and name of city or town; ( c) an email address or other online contact information, such as an instant messaging user identifier or a screen name; ( d) a telephone number; ( e) a Social Security number; (f) a driver's license or other government-issued identification number; (g) a financial institution account number; (h) credit or debit card information; (i) precise geolocation data of an individual or mobile device, including but not limited to GPS-based, WiFi-based, or cell-based location information; or G) an authentication credential, such as a usemame and password. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28493 Page 9 of 50

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15.

"Credit Repair Service" means any good or service represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating. For clarity, Credit Repair Services do not include legitimate credit monitoring services purchased and billed separately from any credit repair component, feature, or offer.

16.

"Defendants" means Heath PC and the Progrexion Defendants. 17.

"Effective Date" means the date on which this Final Order is entered on the docket.

18.

"Enforcement Director" means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or their delegate. 19.

"Enrolled Telemarketed Credit Repair Customer" means a consumer who, as of April 3, 2023, was enrolled in Defendants' Credit Repair Services pursuant to a transaction that occurred in connection with telemarketing, and re-enrolled in, resubscribed to, or re-signed up for a Credit Repair Service offered or provided by Defendants between April 4, 2023 and July 4, 2023, and who remains so enrolled as of the Effective Date.

20.

"Financial Product or Service" means (i) extending credit and servicing loans, including acquiring, purchasing, selling, brokering, or other extensions of credit ( other than solely Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28494 Page 10 of 50

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extending commercial credit to a Person who originates consumer credit transactions);

(ii) extending or brokering leases of personal or real property that are the functional equivalent of purchase finance arrangements, if- (I) the lease is on a non-operating basis;

(II) the initial term of the lease is at least 90 days; and (III) in the case of a lease involving real property, at the inception of the initial lease, the transaction is intended to result in ownership of the leased property to be transferred to the lessee, subject to standards prescribed by the Bureau; (iii) providing real estate settlement services, except the business of insurance or electronic conduit services as defined by 12 U.S.C. § 5481, or performing appraisals of real estate or personal property; (iv) engaging in deposit-taking activities, transmitting or exchanging funds, or otherwise acting as a custodian of funds or any financial instrument for use by or on behalf of a consumer; ( v) selling, providing, or issuing stored value or payment instruments, except that, in the case of a sale of, or transaction to reload, stored value, only if the seller exercises substantial control over the terms or Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28495 Page 11 of 50

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conditions of the stored value provided to the consumer where, for purposes of this clause- (!) a seller shall not be found to exercise substantial control over the terms or conditions of the stored value if the seller is not a party to the contract with the consumer for the stored value product, and another Person is principally responsible for establishing the terms or conditions of the stored value; and (II) advertising the nonfinancial goods or services of the seller on the stored value card or device is not in itself an exercise of substantial control over the terms or conditions; (vi) providing check cashing, check collection, or check guaranty services; (vii) providing payments or other financial data processing products or services to a consumer by any technological means, including processing or storing financial or banking data for any payment instrument, or through any payments systems or network used for processing payments data, including payments made through an online banking system or mobile telecommunications network, except that a Person shall not be deemed to be a covered Person with respect to financial data processing solely because the Person- Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28496 Page 12 of 50

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(I) is a merchant, retailer, or seller of any nonfinancial good or service who engages in financial data processing by transmitting or storing payments data about a consumer exclusively for purpose of initiating payments instructions by the consumer to pay such Person for the purchase of, or to complete a commercial transaction for, such nonfinancial good or service sold directly by such Person to the consumer; or (II) provides access to a host server to a Person for purposes of enabling that Person to establish and maintain a website; (viii) providing financial advisory services ( other than services relating to securities provided by a Person regulated by the Securities and Exchange Commission or a Person regulated by a State securities commission, but only to the extent that such Person acts in a regulated capacity) to consumers on individual financial matters or relating to proprietary financial products or services ( other than by publishing any bona fide newspaper, news magazine, or business or financial publication of general and regular circulation, including publishing market data, news, or data analytics or investment information or Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28497 Page 13 of 50

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recommendations that are not tailored to the individual needs of a particular consumer), including- (!) providing credit counseling to any consumer; and (II) providing services to assist a consumer with debt management or debt settlement, modifying the terms of any extension of credit, or avoiding foreclosure;

(ix) collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers, used or expected to be used in connection with any decision regarding the offering or provision of a consumer financial product or service, except to the extent that- (I) a Person- ( aa) collects, analyzes, or maintains information that relates solely to the transactions between a consumer and such Person;

(bb) provides the information described in item (aa) to an affiliate of such Person; or (cc) provides information that is used or expected to be used solely in any decision regarding the offering or provision Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28498 Page 14 of 50

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of a product or service that is not a consumer financial product or service, including a decision for employment, government licensing, or a residential lease or tenancy involving a consumer; and (II) the information described in subclause (I)( aa) is not used by such Person or affiliate in connection with any decision regarding the offering or provision of a consumer financial product or service to the consumer, other than credit described in 12 U.S.C. § 55 l 7(a)(2)(A);

(x) collecting debt related to any consumer financial product or service; and (xi) such other financial product or service as may be defined by the Bureau, by regulation, if the Bureau finds that such financial product or service 1s- (I) entered into or conducted as a subterfuge or with a purpose to evade any Federal consumer financial law; or (II) permissible for a bank or for a financial holding company to offer or to provide under any provision of a Federal law or Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28499 Page 15 of 50

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regulation applicable to a bank or a financial holding company, and has, or likely will have, a material impact on consumers. 21.

"Heath PC" means John C. Heath, PC, Attorney at law, d/b/a Lexington Law, and its successors, transferees, and assigns. 22.

"Heath PC's Executives" means the then-serving Board, Members, shareholders, Directing Attorney(s), and Managing Attorney(s) of Heath PC. 23.

"Hotswap" means the live-transfer of a consumer, by telephone, from a Marketing Affiliate' s telemarketing agent to Defendants' telemarketing agent. 24.

"Hotswap Companies" means The H.O.P.E. Program LLC (a/k/a The HOPE Program, Help Renters, Homes with HOPE, and Hope to Own); OLP.com, Inc. (a/k/a One Loan Place and Rocket Daddy); Ascent Mortgage Resource Group (a/k/a Lead Virtue, First Access Rent-to-Own, First Access Mortgage, United Rent-to-Own, Ascent Rent-to-Own, Fileforgrants.net, American Rent-to-Own, Rent to Own Homes, and HOPE Resources); Easyhomeownership.net (a/k/a Easy Home Ownership and Renttoownassistance.com); and YHTBA Corp. (a/k/a Rent2own.house, Rent-2-own.house, Rent Then Own Homes, and Renttoown.house ), and each of their successors, transferees, and assigns. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28500 Page 16 of 50

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25.

"Live-transfer" means transferring a consumer, by telephone, from one telephone agent to another telephone agent, without terminating the telephone call before the transfer.

26.

"Lead generation" means (a) using marketing techniques-other than passive advertising-to identify or attract prospective customers' interest in a third party's product or service; (b) obtaining, or aiding others in obtaining, Consumer Information about prospective customers for a third party's product or service; or ( c) providing any Consumer Information of prospective customers to a third party. 2 7.

"Marketing Affiliate" means any third party to whom Defendants provide, or offer to provide, any form of consideration for lead generation for any Defendant or to otherwise market, advertise, or offer Credit Repair Services on behalf of any Defendant. For clarity, print, digital, online, social media, broadcast, electronic media, or out-of-home publishers of passive advertisements on behalf of Defendants shall not be considered Marketing Affiliates on that basis alone. 28.

"Person" means an individual, partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity.

29.

"Progrexion" means PGX Holdings, Inc., and all of its subsidiaries, and their successors, transferees, and assigns.

Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28501 Page 17 of 50

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30.

"Progrexion Defendants" means PGX Holdings, Inc., Progrexion Marketing, Inc., Progrexion Teleservices, Inc., eFolks, LLC, and CreditRepair.com, Inc., and their successors, transferees, and assigns.

31.

"Progrexion Defendants' Executives" means the then-serving Board and the Chief Executive Officer, President, and most senior executive officer in charge of the operations of each Progrexion Defendant.

32.

"Related Consumer Action" means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against any Defendant based on substantially the same facts as described in the Amended Complaint.

33.

"Substantially Assisting" means providing "substantial assistance or support" within the meaning of§ 310.3(b) of the TSR. Nothing in this definition shall be construed to limit any Defendant's liability after the Effective Date for conduct otherwise prohibited by the CFPA or TSR, including§ 310.3(b) of the TSR.

34.

"Telemarketing" means a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28502 Page 18 of 50

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CONDUCT RELIEF I Prohibited Conduct Ban on Telemarketing or Selling Telemarketed Credit Repair Services IT IS ORDERED that:

35.

Defendants, whether acting directly or indirectly, are restrained, enjoined, and prohibited for a period of ten years from the Effective Date from: a. Participating in telemarketing of Credit Repair Services, whether directly or through an intermediary; or b. Offering for sale, selling, or providing Credit Repair Services that are advertised, marketed, promoted, or sold through telemarketing, whether directly or through an intermediary.

Nothing in this Order shall be read as an exception to this Paragraph 35 or to excuse Defendants from complying with 16 C.F.R. § 310.4(a)(2) or other applicable laws or regulations after the expiration of ten years. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28503 Page 19 of 50

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IT IS ORDERED that:

II Additional Prohibited Conduct 36.

Defendants and their officers, agents, servants, employees, and attorneys, and all other Persons in active concert or participation with them, who receive actual notice of this Final Order, whether acting directly or indirectly, are permanently restrained, enjoined, and prohibited from Substantially Assisting other persons in the offering for sale, selling, or providing of Credit Repair Services that are advertised, marketed, promoted, or sold through telemarketing and for which Defendants know or consciously avoid knowing billing is conducted other than in compliance with the advance-fee provision, 16 C.F.R. § 310.4(a)(2). 3 7.

Defendants and their officers, agents, servants, employees, and attorneys, and all other Persons in active concert or participation with them, who receive actual notice of this Final Order, whether acting directly or indirectly, are permanently restrained, enjoined, and prohibited from hiring for services, contracting with, or paying the following Persons in connection with advertising, marketing, or lead generation activities for Lexington Law or CreditRepair.-com: Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28504 Page 20 of 50

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a. Any Marketing Affiliate who Defendants know or should know is engaged in advertising or offering rent-to-own homes in connection with generating Consumer leads for Defendants, unless that Marketing Affiliate is acting as a broker with respect to such homes and maintains any required licenses and registrations in each state where the Person acts as a broker for such homes; b. Any Marketing Affiliate who Defendants know or should know is engaged in advertising or offering home ownership education programs in connection with advertising, marketing, or lead generation for Lexington Law or CreditRepair.com, unless that Marketing Affiliate is acting as a potential creditor or broker with respect to homes or home loans and maintains any required licenses and registrations in each state where the Person acts as a potential creditors or broker for homes or home loans in connection with generating Consumer leads for Defendants;

Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28505 Page 21 of 50

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c. Any Marketing Affiliate who Defendants know or should know is engaged in advertising or offering loans in connection with advertising, marketing, or lead generation for Lexington Law or CreditRepair.com, unless that Marketing Affiliate is acting as a potential creditor or broker with respect to such loans and maintains any required licenses and registrations in each state where the person acts as a creditor or broker for loans advertised or offered in connection with generating Consumer leads for Defendants;

d. Any Marketing Affiliate who Defendants know or should know is engaged in advertising or offering real estate in connection with advertising, marketing, or lead generation for Lexington Law or CreditRepair.com, unless that person is the seller of such real estate or an authorized attorney, sales agent, or broker of such real estate and maintains any required licenses and registrations in each state where the person acts as a seller, attorney, sales agent, or broker of real estate in Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28506 Page 22 of 50

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connection with generating Consumer leads for Defendants;

e. Any of the Hotswap Companies;

f. Kurt Artecona, Joseph Delfgauw, Christopher Robinson, Brenda Kemp, and Rostislav Banin; and g. Any Marketing Affiliate of which Defendants know or should know Kurt Artecona, Joseph Delfgauw, Christopher Robinson, Brenda Kemp, or Rostislav Banin is an owner, executive, employee, or agent. 3 8.

Defendants and their officers, agents, servants, employees, and attorneys, and all other Persons in active concert or participation with them, who receive actual notice of this Final Order, whether acting directly or indirectly, are permanently restrained, enjoined, and prohibited from making any material misrepresentations, whether implicit or explicit, when marketing Credit Repair Services, including but not limited to material misrepresentations regarding: a. The availability of products or services being marketed by Defendants or their Marketing Affiliates; b. The relationship between Defendants, their Marketing Affiliates, and the originators, owners, sellers, or brokers Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28507 Page 23 of 50

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of any Consumer Financial Product or Service or real estate;

c. A consumer's likelihood of success in obtaining a thirdparty product or service;

d. The past success of Defendants' or their Marketing Affiliates' customers in acquiring any Consumer Financial Product or Service or real estate; e. The efficacy or any material aspect of Defendants' Credit Repair Services; or f. Any of the material terms or conditions of the products or services being marketed by Defendants or their Marketing Affiliates.

3 9.

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a. Defendants verify to the fullest extent practicable that the products and services offered or marketed by the Marketing Affiliate in connection with advertising, marketing, or lead generation for Lexington Law or CreditRepair.com are reasonably available from the Marketing Affiliate as described in the Marketing Affiliate' s marketing; and b. Defendants review the Marketing Affiliate's marketing materials used in connection with advertising, marketing, or generating leads for Lexington Law or CreditRepair.com, including but not limited to online advertisements, websites, landing pages, pop-ups, social media content, and classified advertisements, and verify to the fullest extent practicable that they do not contain any material misrepresentations or otherwise materially conflict with any of the provisions of this Order. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28509 Page 25 of 50

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III Affirmative Requirements IT IS ORDERED that:

40.

Defendants must conduct regular compliance reviews of their top 25 Marketing Affiliates ( or if Defendants have fewer than 25 Marketing Affiliates, the top Marketing Affiliates accounting for no less than 75% of total leads), which reviews must include, at a minimum, repeating each of the requirements in Paragraph 39 at least two times per year.

41.

Upon determining that any Marketing Affiliate has used material misrepresentations to induce a consumer to purchase or enroll in Defendants' products or services, Defendants must immediately: (i) halt the processing of any payments or charges generated by the Marketing Affiliate; (ii) refund or cause to be refunded within 45 days all monies paid by each consumer whose sale originated from the Marketing Affiliate on or after the date the Marketing Affiliate engaged in deceptive acts or practices or other acts or practices prohibited by this Order, except those who Defendants determine were not exposed to such deceptive or prohibited acts or practices; and (iii) immediately terminate the Marketing Affiliate unless (a) it is the first such misrepresentation by the Marketing Affiliate in an 18-month period and (b) the Marketing Affiliate cures the representation and Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28510 Page 26 of 50

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refunds all affected customers within 7 days.

42.

For at least three years from the Effective Date, Defendants must retain qualified, independent consultants or auditors with specialized experience in advertising compliance, and acceptable to the Enforcement Director, to conduct an annual independent audit of:

a. Defendants' compliance with this Final Order; and b. Defendants' use of Marketing Affiliates in connection with advertising, marketing, or generating leads for Credit Repair Services.

43.

Defendants must promptly and completely investigate any complaints that they receive through any source to determine whether any Marketing Affiliate is engaging in deceptive acts or practices or other acts or practices prohibited by this Final Order.

44.

Within 10 days of the Effective Date, Defendants must send a notice of this Final Order to all Enrolled Telemarketed Credit Repair Customers. The notice shall be substantially in the form attached as Appendix A, and in a clear and prominent manner, shall include the following: a. A description of the Bureau's lawsuit against the Defendants;

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b. A description of the March 10, 2023 Order and a hyperlink to the text of the order; c. A statement that the Parties have settled the lawsuit; d. A statement that the consumer has the right to cancel their credit repair services at any time and a hyperlink directly to a webpage through the which the consumer can immediately cancel their enrollment, as well as a phone number that enables the consumer to immediately cancel their enrollment, free from any retention effort or other marketing of Defendants' services; and e. A statement that if the consumer does nothing, their services will continue and they will continue to be billed according to their contract.

Defendants may include in the Notice a statement that they disputed the ruling in the March 10, 2023 Order and informed the Court that they intended to file an appeal, before reaching an agreement to instead settle the case. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28512 Page 28 of 50

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MONETARY PROVISIONS IV Order to Pay Redress IT IS FURTHER ORDERED that:

45.

A judgment for monetary redress in compromise of the Bureau's claims under Count I of the Bureau's Amended Complaint is entered in favor of the Bureau and against the Defendants, jointly and severally, in the amount of $2,641,926,481. A judgment for monetary redress in compromise of Counts 11-V of the Amended Complaint is entered in favor of the Bureau and against the Progrexion Defendants in the amount of $19,000,000. 46.

Any funds received by the Bureau in satisfaction of the monetary redress portion of this judgment will be deposited into a fund or funds administered by the Bureau or the Bureau's agent according to applicable statutes and regulations to be used for redress for Affected Consumers, including legal restitution or the refund of moneys, and for any attendant expenses for the administration of any such redress.

4 7.

Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28513 Page 29 of 50

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Defendants must provide such information in their or their agents' possession or control within 14 days of receiving a written request from the Bureau. 48.

If the Bureau determines, in its sole discretion, that providing redress to consumers is wholly or partially impracticable or if funds remain after the administration of redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury. Defendants will have no right to challenge the Bureau's choice of remedies under this Section and will have no right to contest the manner of distribution chosen by the Bureau.

49.

Payment of redress to any Affected Consumer under this Order may not be conditioned on that consumer waiving any right. V Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:

50.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), in consequence of the March 10, 2023 Order and the Parties' agreement to compromise and resolve the matters at issue in Counts 1-V of the Bureau's Amended Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), the Progrexion Defendants must pay a civil money penalty of $45,817,452 to the Bureau. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28514 Page 30 of 50

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51.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), in consequence of the March 10, 2023 Order and the Parties' agreement to compromise and resolve the matters at issue in Count I of the Bureau's Amended Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Heath PC must pay a civil money penalty of $18,408,726 to the Bureau.

52.

The civil money penalties paid under this Final Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 101 7 ( d) of the CFP A, 12 U.S.C. § 5497( d).

53.

Defendants must treat the civil money penalty paid under this Final Order as a penalty paid to the government. Regardless of how the Bureau ultimately uses those funds, Defendants may not:

a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. Seek or accept, directly or indirectly, reimbursement or indemnification from any source (other than any of PGX Holdings, Inc.' s parent companies, shareholders, or former shareholders), including but not limited to Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28515 Page 31 of 50

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payment made under any insurance policy, with regard to any civil money penalty paid under this Final Order. VI Additional Monetary Provisions IT IS FURTHER ORDERED that:

54.

In the event of default on any Defendant's obligations to make payment under this Final Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. 5 5.

Defendants relinquish all dominion, control, and title to any funds paid pursuant to this Final Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.

56.

Under 31 U.S.C. § 7701, each Defendant, unless it already has done so, must furnish to the Bureau its taxpayer identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Final Order.

57.

Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, order, or settlement in writing. That notification must indicate the Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28516 Page 32 of 50

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amount of redress, if any, that the Defendant paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalties in any Related Consumer Action, Defendants may not argue that they are entitled to, nor may any Defendant benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalties paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund ("Penalty Offset"). If the court in any Related Consumer Action grants such a Penalty Offset to any Defendant, the Defendant must, within 30 days after entry of a final order granting the Penalty Offset, notify the Bureau, and pay the amount of the Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalties imposed in this action. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28517 Page 33 of 50

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COMPLIANCE PROVISIONS VII Role of the Board and Executives IT IS FURTHER ORDERED that:

58.

The Progrexion Defendants' Executives will, pursuant to Section IX, below, acknowledge in writing their receipt of this Final Order and responsibility for ensuring that the Progrexion Defendants comply with this Order. 59.

Heath PC's Executives will, pursuant to Section IX, below, acknowledge in writing their receipt of this Final Order and responsibility for ensuring that Heath PC complies with this Order.

60.

The Progrexion Defendants' Executives and Heath PC's Executives must review all reports required by this Final Order, and any submissions to the Bureau prior to such submission.

61.

One year after the Effective Date, and on the same date each year thereafter for the next four years, the Progrexion Defendants must submit to the Enforcement Director an accurate written compliance progress report (Compliance Report), the accuracy of which is declared under penalty of perjury by the Progrexion Defendants' Executives and which, at a minimum: Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28518 Page 34 of 50

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a. Describes the steps that the Progrexion Defendants' Executives have taken to reasonably assess whether the Progrexion Defendants are complying with each applicable paragraph and subparagraph of the Final Order;

b. Describes in detail whether and how each Progrexion Defendant has complied with each applicable paragraph and subparagraph of the Final Order, including the manner of verification of such compliance and any corrective actions taken to remedy potential noncompliance with the applicable requirement, paragraph, or subparagraph;

c. Identifies any Marketing Affiliate with whom any Progrexion Defendant contracts to provide advertising, marketing, or lead generation services; and d. Attaches a copy of each Final Order Acknowledgment obtained under Section IX, unless previously submitted to the Bureau.

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62.

One year after the Effective Date, and on the same date each year thereafter for the next four years, Heath PC must submit to the Enforcement Director an accurate written compliance progress report (Compliance Report), the accuracy of which is declared under penalty of perjury by Heath PC's Executives and which, at amm1mum:

a. Describes the steps that Heath PC's Executives have taken to reasonably assess whether Heath PC is complying with each applicable paragraph and subparagraph of the Final Order;

b. Describes in detail whether and how Heath PC has complied with each applicable paragraph and subparagraph of the Final Order, including the manner of verification of such compliance and any corrective actions taken to remedy potential non-compliance with the applicable requirement, paragraph, or subparagraph; c. Identifies any Marketing Affiliate with whom Heath PC contracts to provide advertising, marketing, or lead generation services; and Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28520 Page 36 of 50

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d. Attaches a copy of each Final Order Acknowledgment obtained under Section IX, unless previously submitted to the Bureau.

63.

The Progrexion Defendants' Board must: a. Authorize whatever actions are necessary for the Progrexion Defendants to assess whether the Progrexion Defendants are complying with each applicable paragraph and subparagraph of the Final Order; b. Authorize whatever actions, including corrective actions, are necessary for the Progrexion Defendants to fully comply with each applicable paragraph and subparagraph of the Final Order; and c. Require timely reporting by management to the Progrexion Defendants' Executives on the status of compliance obligations.

64.

Heath PC's Board must:

a. Authorize whatever actions are necessary for Heath PC to assess whether Heath PC is complying with each Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28521 Page 37 of 50

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applicable paragraph and subparagraph of the Final Order;

b. Authorize whatever actions, including corrective actions, are necessary for Heath PC to fully comply with each applicable paragraph and subparagraph of the Final Order; and c. Require timely reporting by management to Heath PC's Executives on the status of compliance obligations. VIII Reporting Requirements IT IS FURTHER ORDERED that:

65.

Each Defendant must notify the Bureau of any development that may materially affect compliance obligations arising under this Final Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Final Order; the filing of any successor bankruptcy or insolvency proceeding by or against any Defendant; or a change in a Defendant's name or address. The Defendant must provide this notice, if practicable, at least 30 days before the Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28522 Page 38 of 50

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development, but in any case, no later than 14 days after the development. 66.

Within 30 days of the Effective Date, each Defendant must: a. Designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with that Defendant; b. Designate at least one telephone number and email, physical, and postal addresses as points of contact for consumers with inquiries related to consumer relief under this Final Order;

c. Identify all businesses for which a Defendant is the majority owner, that the Defendant directly or indirectly controls, by all of their names, telephone numbers, and electronic, physical, and postal addresses; and d. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.

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67.

Defendants must report any change in the information required to be submitted under Paragraph 66 at least 30 days before the change, or as soon as practicable after learning about the change, whichever is sooner. IX Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:

68.

Within 7 days of the Effective Date, each Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Final Order, declared under penalty of perjury.

69.

Within 30 days of the Effective Date, each Defendant must deliver a copy of this Final Order to each of its board members, executive officers, attorneys, and Marketing Affiliates, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Final Order.

70.

For five years from the Effective Date, each Defendant must deliver a copy of this Final Order to any business entity resulting from any change in structure referred to in Section VIII, any future board members, executive officers, attorneys, and Marketing Affiliates, before they assume their responsibilities, as well as to any managers, employees, service providers, or other agents and Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28524 Page 40 of 50

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representatives who will have responsibilities related to the subject matter of the Final Order before they assume their responsibilities. 71.

Each Defendant must secure and retain for five years a signed and dated statement acknowledging receipt of a copy of this Final Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001-7006, within 30 days of delivery, from all Persons receiving a copy of this Final Order under this Section.

72.

Ninety days after the Effective Date, each Defendant must submit to the Bureau a list of all Persons and their titles to whom this Final Order was delivered through that date under this Section and a copy of all signed and dated statements acknowledging receipt of this Final Order under Paragraph 71. X Record keeping IT IS FURTHER ORDERED that:

73.

For at least five years from the Effective Date, Defendants must create, or if already created, must retain the following business records: a. All documents and records necessary to demonstrate full compliance with each provision of this Final Order, including all submissions to the Bureau;

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b. All Marketing Affiliates' marketing materials obtained and reviewed by Defendants;

c. All scripts used by Defendants with consumers (including any scripts used for telephonic, chat, SMS/text, and artificial intelligence communications); d. Any telemarketing registrations and licenses and applications for such registrations and licenses; e. All contracts with Marketing Affiliates; f. Audited financial statements for all Defendants; g. All consumer complaints and refund requests ( whether received directly or indirectly, such as through a third party), any documentation concerning any investigation of those complaints or requests, and any responses to those complaints or requests;

h. All written compliance materials, instructions, and guidance supplied by Defendants to Marketing Affiliates; 1. Defendants' policies, procedures, training, and written guidance provided to Defendants' employees to monitor Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28526 Page 42 of 50

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and ensure Marketing Affiliates' compliance with federal consumer financial law; and J. Documents sufficient to demonstrate that all statements Defendants use in marketing Defendants' products and services, or that Defendants authorize others to use, are accurate and substantiated. Accurate statements must have a truthful basis for their claims. Specific claims must have an objective basis established prior to use. General statements regarding products or services must reflect the actual outcomes of prior consumers and must be verified beyond mere possibility or anecdote. All quantifiable claims, including, but not limited to, all claims about prior consumers' performance, or the likelihood that a consumer will receive a product or service, must be substantiated with empirical data. Defendants must make these materials available to the Bureau within 30 days of the Bureau's request. Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28527 Page 43 of 50

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XI Notices IT IS FURTHER ORDERED that:

7 4.

Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Final Order in writing, with the subject line, "CFPB v. Progrexion Marketing, Inc., et al., Case No. 2:19-cv-00298-BSJ," and send them by email to CFPB _ Enforcement_ [email protected], addressed as follows: Assistant Director for Enforcement Consumer Financial Protection Bureau XII Compliance Monitoring IT IS FURTHER ORDERED that:

7 5.

Within 14 days ofreceipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be declared under penalty of perjury; provide sworn testimony; or produce documents.

76.

Defendants must permit Bureau representatives to interview any employee or other Person affiliated with Defendants who has agreed to such an interview Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28528 Page 44 of 50

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regarding compliance with this Final Order. The Person interviewed may have counsel present.

77.

Nothing in this Final Order will limit the Bureau's lawful use of compulsory process, under 12 C.F.R. § 1080.

XIII Transfer or Assignment of Operations IT IS FURTHER ORDERED that:

78.

Should Defendants seek to transfer or assign all or part of their operations that are subject to this Final Order, Defendants must, as a condition of such a transfer or assignment, obtain the written agreement of the transferee or assignee to comply with all of the obligations of the transferor or assignor entity that are reflected in Sections I, II, III, VII, VIII, IX, X, XI, and XII, above, or if such transfer or assignment is subject to approval by a court of competent jurisdiction, any effectuating document submitted to such court for approval shall set forth or incorporate by reference all obligations of the transferor or assignor that are reflected in Sections I, II, III, VII, VIII, IX, X, XI, and XII of this Final Order, which shall be binding upon the transferee or assignee, as such obligations are applicable to any such transferee or assignee, provided, however, that, for the avoidance of doubt, (i) any such transferee or assignee shall not be liable, or Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28529 Page 45 of 50

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otherwise responsible, for any judgment for monetary redress, civil penalty or any other payment or monetary obligation of the Defendants pursuant to this Final Order, including those obligations set forth in Sections IV, V, and VI of this Final Order, and (ii) no such transferee or assignee shall have any direct liability or obligations under this Final Order except as otherwise provided in this Paragraph. XIV Bankruptcy IT IS FURTHER ORDERED that:

79.

Any monetary obligations under Sections IV, V, and VI of this Final Order shall be subject to Bankruptcy Court approval and be considered or entitled to treatment as an unsecured claim in accordance with the Bankruptcy Code and shall not be considered an administrative expense claim or other priority claim in the Chapter 11 Cases or any Successor Cases or be deemed to be assumed by, or be an obligation of, any purchaser, assignee or transferee of any of the Defendants' assets or operations in the Chapter 11 Cases or any Successor Cases. 80.

The Bankruptcy Court shall have exclusive jurisdiction over any and all matters arising from or related to the implementation, interpretation, or enforcement of any orders approving a chapter 11 plan or sale in the Chapter 11 Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28530 Page 46 of 50

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Cases or any Successor Cases including, without limitation, with respect to the allowance or treatment of such monetary obligations under Sections IV, V, and VI of this Order.

xv Closure of Case IT IS FURTHER ORDERED that:

81.

In accordance with the Parties' agreement to resolve the matters at issue in the Bureau's Amended Complaint, this case shall be and hereby is closed and final judgment is hereby entered.

XVI MISCELLANEOUS IT IS FURTHER ORDERED that:

82.

Notwithstanding the provisions of Section XVII hereof, any time limit for performance fixed by this Final Order may be extended by mutual written agreement of the Parties. Any other modification of this Final Order may be made only by approval of the Court, upon motion by either of the Parties, pursuant to Fed. R. Civ. P. 60.

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XVII Retention of Jurisdiction IT IS FURTHER ORDERED that:

83. The Court will retain jurisdiction of this matter for the purpose of

construction, modification, and enfo forcement of this Final Order. PursvanT to the setthenent Ans )O1KT Motiog oF the Carties,

IT IS SO ORDERED.

th DATED this 30 day of Av4ve T , 2043, ja)

BY THE COURT:

BRUCE S. or United States Senior District Judge

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Appendix A Notice for Enrolled Telemarketed Credit Repair Customers Case 2:19-cv-00298-BSJ Document 600 Filed 08/30/23 PageID.28533 Page 49 of 50

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The notice shall state as follows:

On May 2, 2019, the Consumer Financial Protection Bureau ("Bureau") sued Lexington Law, CreditRepair.com, Progrexion Marketing, and several other companies, alleging that they violated various consumer financial protection laws and regulations. The case was filed in Federal District Court in Salt Lake City, Utah, and is captioned CFPB v. Progrexion Marketing, et al., 19-cv-00298-BSJ. On March 10, 2023, the Federal District Court issued a ruling finding that Lexington Law's and CreditRepair.com's billing practices for telemarketed credit repair services violated the advance fee provision of the Telemarketing Sales Rule. Specifically, the Court found that Lexington Law and CreditRepair.com charged customers without waiting six months after demonstrating, via a consumer report, that the promised results of the credit repair service had been achieved. The Court's decision and other information about the case is on the Bureau's website here:

https://www.consumerfinance.gov/enforcement/actions/pgx-holdingsinc/ Lexington Law, CreditRepair .com, and the other defendants dispute the Court's partial summary judgment ruling and informed the Court and the Bureau that they intended to appeal, before reaching an agreement to settle the case.

The Bureau and the defendants have now agreed to settle the case. As part of that settlement, Lexington Law and CreditRepair.com are reaching out to you to remind you that-as stated in your attached engagement agreement-you have the right to terminate your credit repair services at any time and for any reason ( or no reason at all). If you wish to terminate your credit repair services, please click on the link below (or call XXX-XXX-XXXX between the hours of 1pm and 4pm Mountain if you lack access to a computer or other electronic device). If you would like to continue to receive credit repair services, no action is necessary and you will continue to be billed according to your contract.

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