The Consumer Financial Protection Bureau said Tuesday that three executives who operated former credit repair companies agreed to pay roughly $2 million in penalties for charging consumers millions in illegal advance fees.

Blake Johnson, the former owner of Commercial Credit Consultants, Prime Credit and IMC Capital, and Eric Schlegel, a former president, agreed to pay $1.5 million for charging illegal fees and falsely claiming they could fix consumers' credit reports, the CFPB said.

Arthur Barens, the owner of a one-man law firm, Park View Law, agreed to pay $500,000 to the Treasury Department. Prime Credit marketed and sold credit repair services to consumers using Park View Law's name.

CFPB Director Richard Cordray
“We will remain vigilant about protecting consumers from companies that mislead them to turn a dishonest profit," said CFPB Director Richard Cordray. Bloomberg News

“Today the bureau is taking action against companies that charged illegal fees and misled consumers about their ability to fix their credit,” CFPB Director Richard Cordray said in a press release. “We will remain vigilant about protecting consumers from companies that mislead them to turn a dishonest profit.”

Federal law bars telemarketers and certain companies from requesting or collecting fees for credit repair services before demonstrating that "promised results had been achieved as required by law," the bureau said.

All three former executives denied the allegations, saying they agreed to settle to end the litigation.

"We decided with great reluctance to settle this investigation in order to avoid the further time and expense of a legal battled over an enterprise that we sold several years ago," Johnson and Schlegel said in a joint press release. "The investigation already has dragged on for more than two years."

Johnson sold the Los Angeles-based Prime Marketing in 2014 to Tregaron Capital, a Palo Alto, Calif., private equity firm. Last year, the CFPB filed a lawsuit against Prime Marketing alleging similar violations of federal law.

Barens said in an interview Tuesday that litigating would have cost him twice as much as the settlement.

"There was no proof that any consumer was ever harmed or that there was wrongdoing," he said.

The CFPB alleged that the credit repair firms charged consumers fees for an initial consultation to review a credit report, and also charged setup fees totaling "hundreds of dollars" and monthly fees of roughly $89.99.

The companies offered a money-back guarantee for certain services but failed to disclose that consumers had to pay for at least six months to be eligible, the bureau said.

The three executives are barred for five years from working in the credit repair industry. The complaints and proposed final judgments were filed Tuesday in the U.S. District Court for the Central District of California.

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