Last May, federal investigators and law enforcement personnel arrived at the Detroit-based headquarters of Financial Education Services (F.E.S.) to investigate alleged fraudulent credit repair schemes. The Federal Trade Commission (F.T.C.) accused the company of defrauding its customers by promising to boost their credit scores through the permanent removal of negative financial information from their credit reports. F.E.S. had amassed almost $500 million in gross revenue, according to federal prosecutors, which the F.T.C. claimed was all spent on “worthless credit-repair services.” F.E.S. denied the accusation.
The company had enrolled over 400,000 sales agents nationwide to expand the credit-repair sales business by leveraging social media and telemarketing. The agents used tactics like offering to legally remove negative information such as repos, foreclosures, and late payments that could harm customers’ credit scores. The average weekly income for most of the agents was a meager $2.25, totaling around $117.36 annually, according to F.T.C.’s assessment. F.E.S.’s customer base rose to nearly 900,000 in 2020 due to stimulus payments, and revenues increased to $134 million from $73 million.
I was surprised by the scale of the operation when I first read the F.T.C.’s detailed claim, even though I had previously reported on F.E.S. and its business model at length. A few months ago, I interviewed recruits at a F.E.S. office storefront, situated between a healthcare clinic and a used-car lot on the Near West Side of Chicago, independently run by two agents. The office had colorful banners with “GROWTH” and “WEALTH” in bold letters arranged sideways. A couple of recruits hoped to earn enough money to buy a house but stopped working as F.E.S. agents when the F.T.C. investigation emerged. At F.E.S.’s annual convention held in Orlando in February, the theme was “Rise,” and attendees received $100 bills for a “Money Ball” drawing. At least 95% of the 500 people in attendance were either Black or Latino.
