Progrexion’s case should be converted to Chapter 7, CFPB says

By Sarah Lizee

Olympia, Wash., July 25 – PGX Holdings, Inc., which does business as Progrexion, should have its Chapter 11 bankruptcy case converted to Chapter 7 because it has no intention of reorganizing as a going concern, the Consumer Financial Protection Bureau (CFPB) said in a motion filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

On March 10, the U.S. District Court for the District of Utah granted partial summary judgment in favor of the CFPB, which was the sole cause for the debtors’ filing bankruptcy, the CFPB said.

In the Utah district court, the CFPB seeks over $2.6 billion in consumer redress, over $52 million in civil money penalties, and injunctive relief to remedy the debtors’ violations of the telemarketing sales rule (TSR), as well as further monetary and injunctive relief for deceptive practices that violate various consumer protection laws.

In granting summary judgment, the Utah district court found that most of the debtors’ revenues come from activities that violate the TSR.

The CFPB said that in response to the summary judgment decision, the debtors scaled back their business, and the debtors’ representatives have suggested in the CFPB litigation that that business is unviable.

Now, the debtors want to sell substantially all of the remaining business in two credit bid transactions: a sale of the PGX Holdings assets to their prepetition first-lien lenders, and a sale of the Lexington Law Firm assets to the firm’s principal.

The CFPB said the debtors seek transfer their assets free and clear of the CFPB’s remaining claims to preserve any business value for only the debtors’ insiders and prepetition lenders.

“These cases were filed to gain a tactical litigation advantage to avoid the CFPB-sought injunctive and monetary relief,” the CFPB said in the motion.

“Thus, this court should convert these Chapter 11 cases to cases under Chapter 7 of the bankruptcy code.”

Progrexion is a provider of consumer credit repair services based in Salt Lake City. The company filed bankruptcy on June 4 under Chapter 11 case number 23-10718.

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