As a result of a Federal Trade Commission lawsuit, the owners and operators of Financial Education Services (FES) will cease practices that the FTC alleged created a pyramid scheme and violated the Credit Repair Organizations Act. The proposed court orders include substantial monetary penalties.
The FTC first filed suit against FES in May 2022, alleging that the company preyed on consumers with low credit scores by luring them with false promises of an easy fix and then recruiting them into a pyramid scheme selling credit repair services to others, costing them millions of dollars.
“These companies promised to clean up people’s credit but failed to deliver. Meanwhile, honest businesses make money selling products and services, not by recruiting, and the drive to recruit, especially when coupled with inflated income claims, is the hallmark of an illegal pyramid,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to stopping deceptive credit repair tactics and shutting down illegal pyramid schemes that prey on struggling consumers.”
The FTC’s complaint charged that FES and its owners, operators, and associated companies deceived consumers about their credit repair products and charged them upfront for the service. In addition, the pyramid scheme made overinflated income claims that consumers could make tens of thousands of dollars recruiting others into FES.
The proposed settlements in the case will lead to more than $12 million being turned over to the FTC for use in providing refunds to affected consumers, as well as conduct prohibitions against the defendants as follows:
Defendant Parimal Naik, along with Financial Education Services, Inc., United Wealth Services, Inc., VR-Tech LLC, Youth Financial Literacy Foundation, and LK Commercial Lending LLC will be permanently prohibited from numerous forms of unlawful activities related to credit repair services and pyramid schemes. They will also be required to implement a compliance monitoring system to ensure employees and contractors do not violate settlement terms. Additionally, they will turn over $5.5 million in cash.
Defendant Michael Toloff, along with VR-Tech Mgt LLC and Statewide Commercial Lending LLC will be permanently banned from providing any credit repair services or involvement in multi-level marketing. They (along with relief defendant Gayle Toloff) will also turn over cash and assets including cars, a boat, and multiple real estate properties totaling millions of dollars.
Defendant Christopher Toloff, along with CM Rent Inc., will be permanently banned from providing any credit repair services or involvement in multi-level marketing. They will turn over $1.7 million.
Defendant Gerald Thompson will be permanently banned from providing any credit repair services or involvement in multi-level marketing. He will turn over $215,000.
The Commission vote approving the stipulated final orders was 5-0. The FTC filed the proposed orders in the U.S. District Court for the Eastern District of Michigan.
NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.
The Federal Trade Commission works to promote competition and protect and educate consumers. The FTC will never demand money, make threats, tell you to transfer money or promise you a prize. Learn more about consumer topics at consumer.ftc.gov or report fraud at ReportFraud.ftc.gov.
