CFPB Sued Credit Repair Company for Illegal Advance Fees
10/12/17 – In August, the Consumer Financial Protection Bureau (CFPB) proposed a final judgment in court that would resolve a lawsuit against a credit repair company for illegal credit repair practices.
The CFPB’s lawsuit alleged that the company charged illegal advance fees and misled consumers about the cost and effectiveness of its services and the nature of its money-back guarantee.
The credit repair company is incorporated in Delaware with an office in Van Nuys, Calif. In the CFPB’s lawsuit filed in September 2016, the CFPB alleged that the company made misleading and unsubstantiated statements about its ability to improve consumers’ credit scores by removing negative information from their credit reports. The company also, according to the CFPB, misrepresented and failed to disclose the limitations of its money-back guarantee. The Bureau alleged that these practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule. Specifically, the CFPB alleged that the company:
- Charged illegal advance fees: Federal law bars telemarketers and certain companies from requesting or collecting fees for credit repair services until certain conditions are met around the delivery of services. According to the CFPB, the company violated the law by charging consumers improper initial fees, set-up fees, and monthly fees.
- Misled consumers about the benefits of its credit repair services: The CFPB also alleged that the company misrepresented its ability to remove negative entries on consumers’ credit reports and misrepresented to customers that its credit repair services would result in a substantial increase to consumers’ credit scores, generally by an average of 100 points.
- Misrepresented the costs of its services: The CFPB alleged that the company failed to disclose to consumers during sales calls that they would be charged a monthly fee.
- Failed to disclose limits on “money-back guarantee”: According to the CFPB, the company offered a money-back guarantee if consumers were unhappy with the results of the company’s services. However, the company misled consumers by failing to clearly and conspicuously disclose that the guarantee had significant limitations, including that the consumer had to pay for at least six months of services to be eligible for the guarantee.
The proposed order would permanently ban the company from doing business within the credit repair industry and require a $150,000 civil money penalty.