CFPB sues the software company; Alleges he encourages credit repair companies to charge illegal fees

On September 20, 2021, the CFPB issued a press release announcing that it had taken legal action against a California-based software company, Credit Repair Cloud (Cloud), and its owner, Daniel Rosen, for allegedly helping illegal credit repair companies. CFPB Alleges Cloud and Mr. Rosen Violated Telemarketing Selling Rule (TSR) and Consumer Financial Protection Act 2010 (CFPA) by Providing Substantial Assistance, Including Training, Hardware and Software credit repair companies that use telemarketing to reach consumers and bill illegal advances.

The TSR prohibits credit repair companies that telemarket their service from charging or receiving charges until they have provided the consumer with a credit report that is more than six months old and shows the desired results. The CFPA prohibits any covered person from offering or providing a consumer with a financial product or service that does not comply with federal consumer finance law.

Against this background, based on advertising material, Cloud’s website, Mr. Rosen’s podcast, and social media accounts managed by Cloud and Mr. Rosen, among other allegations, the lawsuit alleges that Cloud:

• Offers an all-in-one solution to start and run a credit repair business, based on the need for only a computer, phone, and software.

• Provides over 100 letter of dispute templates that the software automatically pre-populates with consumer information and templates for cloud customers to provide to consumers.

• Provides training on how to start and run a credit repair business, including telemarketing, sales scripts, marketing material templates, and website templates.

• Establishes steps to dispute negative items on credit reports and encourage consumers to charge monthly fees.

• Provides information to users through social media and hosts annual conference on credit repair.

• Encourages the use of telemark to sell credit repair services and provides sales scripts for these calls.

• Encourages and advises users to bill consumers upon registration with subsequent monthly fees, including an FAQ that states that billing upfront fees is how all credit repair companies are paid.

• Provides a billing platform that allows users to charge upfront fees and encourages users to sign up for this platform.

The CFPB seeks redress from the defendants for the aggrieved consumers, restitution of their unfair earnings, an injunction to end their (allegedly) illegal conduct and civil penalties. According to Acting Director David Uejio, “Credit Repair Cloud and Rosen broke the law. They actively help credit repair companies break federal consumer protection laws. They facilitated and encouraged credit repair companies to charge illegal advances, causing wider harm to consumers in the market. The CFPB will not tolerate companies that facilitate and profit from violations by other companies of federal consumer protection laws.

InsideARM perspective:

While many in the accounts receivable management industry know how harmful some credit repair companies can be to consumers, it can still be shocking that the CFPB has chosen to sue a software company for breach of the law. TSA and CFPA. After all, software companies usually provide a platform, and the end user usually decides how to use it.

It’s important to note here that most of the allegations in the CFPB complaint came from publicly available resources: Cloud’s website, Mr. Rosen’s podcast, and a Facebook page where Mr. Rosen provides advice and comments frequently. . If the allegations are true, the CFPB complaint indicates that Cloud is not a typical software company, nor is Mr. Rosen a typical software business owner. Instead, the allegations suggest that Cloud and Mr. Rosen have actively trained and encouraged their customers to break consumer protection laws.

IIt appears that instead of suing credit repair companies using cloud software (at least for now), the CFPB is tackling what it perceives to be the root of the problem – the software company. Time will tell if CFPB will use this approach in other areas.