Last May, the Federal Trade Commission (FTC) raided the headquarters of Financial Education Services, a credit repair company based in Farmington Hills, a suburb of Detroit. The FTC accused the company of running a fake credit repair scheme that made lofty promises about improving customers’ credit scores by permanently deleting negative information from their credit reports. According to federal prosecutors, the company generated nearly $500 million in gross revenues, but none of the money was spent on useful credit-repair services. FES has denied the allegations.
FES had created a network of over 400,000 sales agents for credit repair services throughout the country. They recruited new agents and clients through social media and telemarketing, with posts like “David can LEGALLY erase negative items… repos, foreclosures, late payments” and “My credit score went up 140 points, from a 530 to a 670, in my first 30 days, allowing me to purchase a new home!” Most agents made very little money, with the average weekly income around $2.25, or $117.36 per year. FES’s revenues rose to $134 million in 2020 from $73 million the previous year as demand for credit repair increased due to the pandemic-era stimulus payments to low-income households.
When the scale of the FES’s operation was revealed through the FTC’s complaint, it came as a shock to many, despite lengthy reporting on the firm and its business model. A storefront office run by two FES agents in Chicago was visited earlier, where colorful upright banners reading “GROWTH” and “WEALTH” were displayed. Agents were interviewed, some of whom had joined to earn enough money to buy a house, but stopped working after the FTC investigation emerged. During their annual convention in Orlando in February, which had a theme of “Rise,” FES founder Parimal Naik presented $100 bills to winners of a “Money Ball” drawing. The court-appointed monitor noted that 95 percent of the attendees were either Black or Latino among the 500 people present. Naik declined to comment on this article.
