CFPB Files Complaints Against Credit Repair Companies for Charging Illegal Fees and Misleading Consumers

On June 27, 2017, the Consumer Financial Protection Bureau (CFPB) announced​ that it filed two complaints and proposed final judgments against four California-based credit repair companies for misleading consumers and charging illegal fees. The CFPB alleged that the companies charged illegal advance fees for credit repair services and misrepresented their ability to repair consumers’ credit scores.  One of the proposed final judgments requires the companies to pay over $1.5 million in civil money penalties, while the second proposed final judgment requires the companies to pay $500,000 to the U.S. Treasury.

According to the complaints, the companies charged consumers millions of dollars in illegal advance fees in the form of set-up fees, consultation fees, and monthly fees.  Additionally, the companies offered a money-back guarantee for certain services without disclosing significant limitations on that guarantee, including that the consumer must pay for at least six months of the service to be eligible. The companies also represented that their credit repair services would result in the removal of negative entries on consumers’ credit reports, and likely would result in a substantial increase to consumers’ credit scores, even though they lacked a reasonable basis on which to make those claims. The CFPB alleged that these practices violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act and the Telemarketing Sales Rule.

If the proposed final judgments are approved, each company will be prohibited from doing business in the credit repair industry for five years and will be permanently prohibited from violating the Dodd-Frank Act or the Telemarketing Sales Rule. The complaints and proposed judgments have been filed with the U.S. District Court for the Central District of California.