A few years ago, the Office of Financial Consumer Protection decided that a good way to end harmful consumer market activity was to go after organizations that support bad guys rather than go after bad guys. to the wicked themselves. In this vein, the CFPB has successfully brought enforcement actions against companies processing credit card payments for wrongdoers.
Last month, in a lawsuit filed in federal court in California, the CFPB tackled another target of support for villains. This time around, the defendants are a company named Credit Report Cloud and its owner, David Rosen. According to the CFPB complaint, Credit Report Cloud provides products and services to people who want to get into credit repair.
According to the complaint, Credit Report Cloud’s marketing materials (which include a website, podcast, and a book written by Rosen) state that “all you need to start a credit repair business is a computer, a phone and software â. And, “credit repair is the cheapest, most profitable business you can start.” And, âit’s a very affordable startupâ, which costs âalmost nothingâ.
Credit Report Cloud does not itself sell credit repair services. Rather, he invites people to buy his (frankly, pretty impressive) business support tools in pursuit of the goal of becoming a âcredit repair millionaireâ. Credit Report Cloud customers receive comprehensive business management software; over 100 ready-made dispute letters for credit reporting agencies; teaching materials (including a âmaster classâ from a credit repair company); telemarketing sales scripts; website designs; and connections to social networks.
The CFPB lawsuit against Credit Report Cloud and Rosen is highly technical and is based on federal law known as the Telemarketing and Consumer Fraud and Abuse Act. Credit Report Cloud software and other business support products cause “at least some, and possibly many” Credit Report Cloud customers to violate this law by charging their credit repair customers, says CFPB. illegal advance charges. And under the law, anyone who provides substantial assistance to a telemarketer engaging in illegal conduct is also breaking the law.
As for Colorado’s regulation of credit repair businesses, that state has a statute called the Credit Services Organization Act and a related statute called the Uniform Debt-Management Services Act. These two laws attempt to put credit repair companies and debt management companies on a tight regulatory leash.
(Credit repair companies try to clean up someone’s credit rating by disputing allegedly inaccurate information in credit files. Debt management companies try to negotiate deferred and reduced payment agreements between creditors and debtors.)
Both laws require truthful disclosures; the use of written agreements specifying what work will be performed and what the costs will be for that work; prohibit upfront payments; and allow the cancellation of a service contract for a short period after signing the contract.
Jim Flynn works for Flynn & Wright LLC of Colorado Springs. Contact him at [email protected]