On August 28, the CFPB announced a proposed settlement with Utah-based credit repair telemarketing company and its affiliates for allegedly committing deceptive acts and practices in violation of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA) by collecting illegal "advance fees." The CFPB alleged the defendants charged consumers a fee for telemarketed credit repair services when they signed up for the services, and then monthly thereafter, without (i) waiting for the timeframe in which they represented their services would be provided to expire; and (ii) demonstrating that the promised results have been achieved, in the form of a consumer report issued more than six months after those results were achieved, as required by the TSR.
While the proposed settlement is subject to final approval by the court, the parties agreed to a settlement that, among other things, (i) bans the defendants from telemarketing for 10 years; (ii) requires defendants to send notices to consumers of the CFPB settlement, law suit, the court's summary judgment holding, the consumer's right to cancel their credit repair services, and the process for canceling the service; (iii) imposes a $2.7 billion judgment for redress; and (iv) imposes more than $64 million in civil penalties.
Putting It Into Practice: The CFPB, along with the FTC, have been aggressive in bringing enforcement actions against debt relief companies that violate the TSR, and in the FTC's case, Section 5 of the FTC Act. With this latest action, the credit repair industry has effectively been put on notice to stop charging a fee before they actually settle or reduce a consumer's debt and keep from making misrepresentations about key pieces of information that consumers need in evaluating these credit repair services.
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