CFPB Alleges Service Provider Helped Credit Repair Firms Charge Illegal Fees | Sheppard Mullin Richter & Hampton LLP

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On September 20, the CFPB filed a lawsuit in federal district court against a California-based software company and its owner for allegedly violating the Telemarketing Selling Rule (TSR) and Consumer Financial Protection Act. 2010 (CFPA) by providing substantial assistance or support. credit repair companies that use telemarketing and charge consumers illegal advances.

The company has sold commercial credit repair software and other tools to credit repair companies who then provide services to consumers to remove derogatory information or improve credit history, credit history or credit score. consumer credit. Credit repair companies could use the software and other tools to charge consumers an upfront fee, which is a violation of the TSR. Accordingly, the CFPB complaint alleges violations of the TSR by the software vendor based, in part, on the following:

  • Encourage and advise credit repair companies to use their software to bill consumers when signing up for subsequent monthly fees, including an FAQ stating that charging upfront fees is how all credit repair companies are. paid.
  • Provide a billing platform that allows users to charge upfront fees and encourages users to sign up for this platform.

The CFPB is asking for financial compensation for consumers, restitution of unfair earnings, an injunction and a civil fine.

Put into practice : The Dodd-Frank Act prohibits anyone from knowingly or recklessly providing material assistance to a consumer financial service provider who engages in unfair, deceptive or abusive acts or practices. Further, such substantial assistance is considered a violation of the law to the same extent as the person to whom such assistance is provided. The use of the “substantial assistance” enforcement mechanism is re-emerging as a common way for the CFPB to prosecute parties who might otherwise not appear to have directly engaged in illegal activity (we have already discussed this latest trend in consumer finance and fintech blog posts here and here).

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