CFPB Files Proposed Order Against Credit Repair Company

The CFPB recently filed a proposed Stipulated Final Judgment and Order to resolve its ongoing suit against a Los Angeles-based software company and its CEO for assisting credit repair companies that allegedly charged consumers advanced fees in violation of the Telemarketing Sales Rule. 

The underlying suit instituted by the CFPB in September 2021 and later amended in January 2022 alleged the violations date back to 2013.  The Company marketed credit repair services software which removes derogatory information from an individual’s credit history, thereby improving their credit score.  According to the Amended Complaint, the Company encouraged credit repair businesses using its products to utilize telemarketing to contact potential customers in addition to charging advanced fees. Further, it’s alleged the company and its CEO, “knew or consciously avoided knowing that these credit repair businesses were telemarketing their services and charging consumers”.  The CFPB went on to assert that these violations of the Telemarketing Sales Rule also constitute violations of the Consumer Financial protection Act of 2010.  Although the Company filed a motion to dismiss, this was denied in April 2022.

The CFPB’s proposed Stipulated Final Judgment and Order would require the Company to institute a comprehensive compliance program that would allow the Company to determine whether credit repair companies utilizing the Company’s products are engaging in telemarketing or charging consumers advanced fees in violation of the Telemarketing Sales Rule or Consumer Financial Protection Act.  The Order, if entered, also requires the Company and the CEO pay $3 million in total civil penalties.