CFPB Sues Software Provider For Encouraging Credit Repair Cos. to Charge Upfront Fees

The Consumer Financial Protection Bureau has filed a lawsuit against a software provider for allegedly helping illegal credit repair businesses break federal law and seeks relief for consumers who have been harmed, an injunction to stop what they have allegedly been doing, civil fines, and returning the money they have made selling their products.

A copy of the lawsuit, filed in federal court in California, against Credit Repair Cloud and Daniel Rosen, can be accessed by clicking here.

The defendant is accused of violating the Telemarketing Sales Rule and the Consumer Financial Protection Act by encouraging its users to charge upfront fees to consumers, which is against the law.

“Credit Repair Cloud and Rosen have been breaking the law,” said Acting CFPB Director David Uejio, in a statement. “They are actively assisting credit-repair businesses in violating federal consumer protection laws. They facilitated and encouraged credit-repair businesses to charge illegal advance fees, causing broader consumer harm in the marketplace. The CFPB will not tolerate companies facilitating and profiting from other companies’ violations of federal consumer protection laws.”

On its website, in documents, and in training materials, the software provider repeatedly referred to the collection of upfront fees from consumers, going as far as to allegedly pre-populate contract templates with what it called “first work” fees and then monthly fees thereafter.

The company also allegedly used credit repair companies that have violated the Telemarketing Sales Rule to promote its “Millionaire’s Club” which showcased its users that have earned at least $1 million in revenue.

In a book written by Rosen, he lays out a strategy for charging upfront fees, according to the complaint. “People charge in different ways: flat fee, pay per deletion, etc. But of all the methods we see, charging a one-time ‘first work’ fee followed one month later by affordable, recurring monthly payments is always the ticket to high revenue,” he wrote. “Since each client takes less than 5 minutes of processing per month (after setup), a small reasonable monthly fee is appropriate.”

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