The Federal Trade Commission (FTC) has acted against credit repair company Financial Education Services, accusing it of running a $213 million pyramid scheme, according to an agency press release.
Financial Education Services has been shut down temporarily by a federal court in response to the FTC’s allegations that the company preys on people with low credit scores, the release stated.
The company, which is based in Michigan and also does business as United Wealth Services, has operated its scheme since at least 2015, telling customers it can remove negative information from credit reports and raise credit scores by hundreds of points, charging as much as $89 per month for its services, according to the release.
The company was not immediately available for comment Wednesday (June 1).
The FTC said in the release the company’s methods rarely work and, in many cases, have actually lowered consumers’ credit scores. Financial Education Services is also accused of encouraging customers to become “agents” for the company, with promises that they can earn more than $1,000 a week and bonuses in the tens of thousands.
“The compensation structure for the scheme has hallmarks of a pyramid scheme, with increasing levels of compensation and titles based on the number of members recruited, and an emphasis on the importance of recruiting new members,” the FTC said in the release. “Few, if any, consumers make the income promised, and many consumers lose money as agents.”
Last month, the FTC reported that Americans lost more than $5.8 billion to fraud in 2021, a 70% year-over-year increase in fraud compared to the year before, and likely just a fraction of the total fraud cases, as many go unreported.
About half of these fraud cases — 1.4 million — came from identity theft incidents, while other popular scams included fraudulent savings and checking accounts, which increased 64% between 2020 and 2021.