According to the CFPB, more than 4 million people share $1.8 billion in refunds. Here’s what you should know.

More than four million Americans exploited by credit repair firms like Lexington Law and CreditRepair.com will soon collectively receive refund checks worth $1.8 billion, the Consumer Financial Protection Bureau announced Thursday.

The payments represent the largest distribution ever from the CFPB’s Victim Assistance Fund, which is funded by civil penalties paid by companies that violate consumer protection laws, the agency said.

According to the federal agency, checks will be mailed in the coming weeks to 4.3 million consumers who were charged illegal upfront fees or were allegedly exposed to misleading scam advertising by Lexington Law, CreditRepair.com and their parent companies.

The CFPB obtained a judgment against the credit repair companies in August 2023. A district court ruled that the companies had violated a law that prohibits these companies from collecting fees until at least six months after promised results.

After the court ruling, the companies filed for Chapter 11 bankruptcy protection and closed about 80% of their operations, including telemarketing call centers.

“Disadvantaged consumers exploited”

“Lexington Law and CreditRepair.com took advantage of vulnerable consumers trying to rebuild their credit by charging them illegal junk fees for results they failed to provide,” CFPB Director Rohit Chopra said in a press release. “This historic payout of $1.8 billion demonstrates the CFPB’s commitment to the health of consumers, even as the companies that harm them close or file for bankruptcy.”

Since its founding in 2011, the CFPB has paid out more than $3.3 billion to consumers harmed by a range of illegal practices, such as student loan and mortgage relief fraud and predatory lending. The Victim Assistance Fund allows the CFPB to provide financial assistance in cases where direct compensation from the violating company is not possible.

Created after the 2008 financial crisis, the CFPB is the brainchild of Sen. Elizabeth Warren, D-Massachusetts. The Federal Reserve-funded agency has weathered several legal challenges from opponents. The Supreme Court confirmed in May its financing structure, which had been challenged by the short-term lending industry.

Still, the agency’s efforts could prove short-lived, with some Republicans calling for the agency to be weakened or eliminated entirely. On Wednesday, billionaire Elon Musk was among those named by President-elect Donald Trump an effort at the front to cut government bureaucracy, slash regulations and slash government spending — called for eliminating the CFPB and argued in one post Social media said there were “too many regulators duplicating themselves.”

When will refund checks be sent?

Payments will be sent between December and January to eligible consumers harmed by the companies, and those eligible will not be required to take any action to receive a check.

Anyone who believes they are eligible but has not received payment by mid-January can then contact the JND Legal Administration at www.cfpb-lexlaw.org. Details on distribution can be found here.

How much will the payments be?

The CFPB said the payments are based on a prorated share of the fees consumers paid to CreditRepair.com and Lexington Law, but that the payments may not cover all of the fees they incurred.

If the payments were split evenly, each person would receive about $419.

“If funds remain after distribution is complete, additional checks may be sent to consumers who have cashed their first check. You do not need to take any additional measures,” the agency said.

Can I file a lawsuit?

No, according to the agency. “There will be no opportunity to pursue claims in this redress case,” it said.

Is the refund check taxable?

This is unlikely because the checks are refunds for payments consumers made to the credit repair companies and not taxable income, the CFPB said. “However, if you have any questions regarding tax law, please contact a tax advisor,” it continues.