WASHINGTON— The Consumer Financial Protection Bureau (CFPB) has filed a proposed order to resolve its lawsuit against Credit Repair Cloud and CEO Daniel A. Rosen for providing what is said has been “substantial assistance or support to credit repair businesses that charge illegal advance fees to consumers.”
According to the Bureau, the proposed order, if entered by the court, would impose a $2 million civil penalty against Rosen and a $1 million civil penalty against Credit Repair Cloud. The order would also require the company and Rosen to take steps to ensure credit repair companies using Credit Repair Cloud stop charging consumers illegal advance fees, the CFPB said..
In issuing its order, the CFPB said Credit Repair Cloud is a California-based corporation founded by Rosen that since 2013 has sold software and other tools to help others start and operate credit repair businesses.
“Credit repair companies that use telemarketing are covered by the Telemarketing Sale Rule, which prohibits charging fees until the company has provided that consumer with a credit report that shows the promised results and that was issued more than six months after such results were achieved,” the CFPB said.
The Allegations
The CFPB has alleged:
- Credit Repair Cloud and Rosen provided substantial assistance to credit repair companies that use telemarketing to reach consumers and charge illegal advance fees by providing users with a system that, among other things, generated and tracked disputes and integrated a billing system, and provided training, marketing tools, and model websites
- That Rosen was individually liable for Credit Repair Cloud’s violations because he controlled Credit Repair Cloud, he participated in its acts of substantial assistance, and he knew or recklessly disregarded that they were taking place. Rosen’s acts of substantial assistance included, among other things, training credit repair companies on the Credit Repair Cloud’s system, providing sample scripts, and offering advice on how and when to collect fees from consumers.
Enforcement Action
In addition to the financial penalties, the CFPB has also ordered the company to:
- Stop assisting companies with illegally charging advance fees. The order would permanently bar Credit Repair Cloud and Rosen from providing substantial assistance to any companies that use telemarketing to sell credit repair services and that charge advance fees. Credit Repair Cloud and Rosen would also be required to delete from their tools and services any language related to telemarketing and charging monthly fees for credit repair services.
- Notify companies using its tools and services that they cannot charge illegal upfront fees, and monitor whether companies are complying. Credit Repair Cloud and Rosen would be required to send a notice to all companies that use Credit Repair Cloud that provides specific examples of telemarketing and advance fees that are unlawful. They also would be required to monitor whether Credit Repair Cloud’s users are telemarketing and charging advance fees.