The CFPB announced that it had simultaneously filed two complaints and corresponding proposed stipulated final judgments in a California federal district court in actions against four credit repair companies and three individuals for alleged violations of the Consumer Financial Protection Act (CFPA) and Telemarketing Sales Rule (TSR). The judgments would require the defendants in one of the actions to pay a civil money penalty of $1.53 million and the defendants in the other action to pay $500,000 in disgorgement to the CFPB with the disgorgement payments to be deposited in the U.S. Treasury.
According to the complaints, certain of the named defendant companies in one of the complaints entered into an agreement with the named defendant company in the other complaint (whose name was Park View Law (PVL)) to provide credit repair services under PVL’s name. The CFPB alleged that that the defendants violated the CFPA and TSR through conduct that included:
- Charging unlawful advance fees before providing consumers with a credit report showing that the promised results were achieved
- Failing to clearly disclose that the money-back guarantee offered by the companies was subject to significant limits, such as requirements for a consumer to pay for at least six months of services to be eligible for the guarantee and, even if there was no improvement in the consumer’s credit score, establish that the companies’ services had not resulted in the removal of at least one disputed item from the consumer’s credit report within six months.
- Misrepresenting the effectiveness of their services by creating the impression that their services would, or likely would, result in the removal of material negative entries on a consumer’s credit report or a substantial increase in a consumer’s credit score when the companies lacked a reasonable basis for making such claim
In addition to requiring the payment of a civil money penalty or disgorgement, the proposed final judgments would bar all defendants from doing business in the credit repair industry for five years.
In its press release about the new actions, the CFPB referenced the lawsuit it filed in the same federal district court in September 2016 against Prime Marketing Holdings, LLC (PMH), a credit repair company that allegedly partnered with PVL. The CFPB has alleged that PMH engaged in similar violations of the CFPA and TSR.
This past November, the district court ruled that the CFPB’s TSR claims that relied on alleged misrepresentations were subject to the heightened pleading requirements for fraud claims under Federal Rule of Civil Procedure 9(b) and dismissed them without prejudice. This past January, ruling on PMH’s motion to dismiss the CFPB’s Amended Complaint, the court found that the CFPB had satisfied Rule 9(b) for two of the previously dismissed TSR claims. However, it again dismissed the CFPB’s TSR claim based on PMH’s alleged failure to disclose truthfully, in a clear and conspicuous manner, all material terms and conditions regarding a refund or cancellation of services before accepting payment for services. According to the court, the CFPB had failed to plead facts with sufficient particularity under Rule 9(b) indicating that PMH had ever accepted payment before providing consumers with the terms of its money-back guarantee.
The CFPB filed a Second Amended Complaint in February 2017 to which PMH has filed an answer. The court has scheduled a jury trial for February 2018.