The appeal of credit repair as a profession, and its susceptibility to questionable practices, became evident last May when FTC lawyers, detectives and data specialists, accompanied by local law enforcement officers, showed up at Financial Education Services headquarters in the posh suburb of Farmington Hills of Detroit. The FTC alleged that FES was running a “vast, bogus credit repair program” that promised to significantly improve customer credit scores by permanently removing negative information from their credit reports. The company had racked up nearly half a billion dollars in gross revenue, according to federal prosecutors, all spent on “worthless credit repair services,” as the FTC put it. (FES has denied the allegations.)
FES had built a network of over 400,000 credit repair sales agents across the country. The agents recruited new agents and clients through social media and telemarketing. “If you have a credit score of 400-675 and want a credit score of 700-800, David can LEGALLY clear negative items… repos, foreclosures, late payments,” one post declared in typical fashion. Another: “My credit score went up 140 points in my first 30 days, from 530 to 670, which helped me buy a new home!” Few agents earned a large income, according to an FTC analysis: The average weekly income was just over $2.25, or $117.36 a year. (In a recent year, less than 1 percent of agents earned more than $300,000 on average.)
In 2020, as stimulus payments during the pandemic to booming low-income households fueled credit recovery, FES’s customer base soared to nearly 900,000. Revenues rose from $73 million the year before to $134 million, according to court filings. Following the FTC’s unannounced visit to its Farmington Hills office, Samuel Levine, the director of the agency’s Bureau of Consumer Protection, vowed in a press release to “keep chasing companies that prey on families’ economic pain.”
When I first read the FTC’s extensive complaint, the size of the operation came as a complete surprise, even though I had reported extensively on the company and its business model. A few months earlier, I visited an office supply store independently run by two FES agents and located between a public health clinic and a used car parking lot on Chicago’s Near West Side. A vinyl banner for the adjacent used car lot read, “NO CREDIT BAD CREDIT, WE FINANCE.” Inside were colorful upright banners, with GROWTH and WEALTH arranged sideways in block letters. I interviewed a handful of their recruits, including a couple who joined in hopes of making enough money to buy a house. After the FTC investigation came forward, they stopped working as FES agents and declined to be mentioned in this article – “We’d rather not put ourselves out there like that,” one of them told me.
In February this year, the theme of the annual FES convention in Orlando was “Rise,” according to a report by a court-appointed observer, and an FES founder, Parimal Naik, presented $100 bills to the winners of a ” Money Ball’ draw. . (Naik declined to comment on this article.) The observer also noted that of the 500 attendees, at least 95 percent of those in attendance were black or Hispanic.