The CFPB announced that it has filed a lawsuit in a California federal district court against a credit repair company for alleged violations of the Consumer Financial Protection Act (CFPA) and Telemarketing Sales Rule (TSR).  The CFPB has previously brought enforcement actions against debt settlement companies, including its first criminal referral.  The announcement was accompanied by the CFPB’s release of a consumer advisory entitled “How to avoid credit repair service scams” that includes a list of “red flags” and a consumer’s right under the FCRA to obtain free credit reports and dispute inaccurate information.

In its complaint, the CFPB alleges the company violated the CFPA and TSR by engaging in conduct that included the following:

  • Charging unlawful advance fees before providing consumers with a credit report showing that the promised results were achieved
  • Misleading consumers about the costs of its services, such as by failing to disclose to consumers during sales calls that they would be charged a monthly fee or representing that a monthly fee would be charged only if the consumer affirmatively elected to continue services beyond 60 days while, in reality, automatically charging a monthly fee
  • Failing to disclose that the money-back guarantee offered by the company was subject to significant limits, such as a requirement for a consumer to pay for at least six months of services to be eligible for the guarantee
  • Misleading consumers about the benefits of the company’s services by representing that its services would, or likely would, result in the removal of certain negative entries on a consumer’s credit report or a significant increase in a consumer’s credit score when the company lacked a reasonable basis for making such claims