WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) recently announced a significant step in its ongoing efforts to protect consumers from unlawful financial practices. The Bureau recently filed a proposed order to settle its lawsuit against Credit Repair Cloud and CEO Daniel A. Rosen for assisting credit repair businesses in charging illegal advance fees to consumers.
The proposed order, pending court approval, will impose a $2 million civil penalty on Rosen and a $1 million civil penalty on Credit Repair Cloud. Furthermore, the order mandates the cessation of activities that enable credit repair companies to charge illegal fees.
“Credit Repair Cloud and its CEO Daniel Rosen enabled credit repair companies that harvested illegal fees from struggling consumers,” said CFPB Director Rohit Chopra. “We will continue our work to hold individual executives accountable when they violate federal law.”
Credit Repair Cloud, based in California, was founded by Rosen and has been operational since 2013. The company provides software and tools designed to help individuals start and manage credit repair businesses. These businesses claim to assist consumers in removing negative information from their credit reports, thereby improving their credit scores.
Key allegations from the CFPB highlight that Credit Repair Cloud and Rosen provided substantial assistance to these companies, particularly those using telemarketing to reach consumers. The Telemarketing Sales Rule prohibits charging fees before delivering tangible results to consumers, typically demonstrated by a credit report issued more than six months after achieving the promised improvements.
The CFPB’s complaint details how Credit Repair Cloud’s system facilitated illegal activities by generating and tracking disputes, integrating a billing system, and offering training, marketing tools, and model websites. Rosen is accused of direct involvement, including training credit repair companies, providing sample scripts, and advising on fee collection practices.
CFPB Takes Action
The CFPB has the authority under the Consumer Financial Protection Act to take action against individuals and entities that violate consumer financial protection laws. The proposed order includes several critical measures:
Civil Penalties: The order requires Rosen to pay a $2 million civil penalty and Credit Repair Cloud to pay a $1 million civil penalty. These funds will be deposited into the CFPB’s Civil Penalty Fund, which supports victims of financial violations.
Prohibition on Illegal Assistance: The order will permanently bar Credit Repair Cloud and Rosen from assisting any companies that use telemarketing to sell credit repair services while charging advance fees. Additionally, they must remove any language related to telemarketing and advance fees from their tools and services.
Notification and Monitoring: Credit Repair Cloud and Rosen must notify all companies using their platform about the illegality of certain telemarketing and fee practices. They are also required to monitor compliance among their users.
Protecting Consumers and Promoting Fairness
This enforcement action underscores the CFPB’s commitment to protecting consumers from predatory financial practices. By targeting both the company and its CEO, the Bureau aims to ensure accountability at the highest levels.
Consumers are advised to be cautious when dealing with credit repair services, especially those that demand upfront fees. It is essential to understand the legal protections in place and to seek transparent, lawful assistance when attempting to repair credit.
The proposed order, if approved, will serve as a significant deterrent against unlawful financial practices and promote greater transparency and fairness in the credit repair industry.
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