The CFPB recently submitted a proposed stipulated final order that would shut down a credit repair service and permanently enjoin it from “[a]dvertising, marketing, promoting, providing, offering for sale, selling, assisting in the sale of, or administering Credit Repair Services.” The proposed order would also enjoin the credit repair service from “[r]eceiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any person engaged in or assisting in advertising, marketing, promoting, offering for sale, or selling Credit Repair Services.” It includes a $150,000 civil monetary penalty, but does not include any reimbursement to consumers.

In the lawsuit, which we previously blogged about here, the CFPB alleged that the credit repair service violated the Telemarketing Sales Rule and Dodd-Frank’s UDAAP Provision by: 1) charging illegal advance fees; 2) misleading consumers about the benefits of the services it provided; 3) misrepresenting the actual costs of the service; and 4) misrepresenting the numerous conditions and limitations on its “money-back guarantee.” The court originally dismissed the complaint without prejudice after it found that the CFPB failed to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading standard. Following this order, the CFPB submitted a second amended complaint, and ultimately submitted the proposed stipulated final order.

The proposed stipulated final order follows similar consent orders against credit repair companies issued by the CFPB in June 2017. The CFPB’s website also contains warnings to consumers about credit repair services and debt settlement companies.

Credit repair services cause significant headache for the financial services industry. As the CFPB’s website acknowledges, many will promise to remove even accurate information from a consumer’s credit report. They attempt to do this by disputing credit reporting data the consumer knows to be accurate and submitting large numbers of such disputes – including multiple disputes for the same consumer – to furnishers to overwhelm the furnisher’s ability to investigate the disputes. This practice harms consumers with legitimate disputes by burying furnishers in a large volume of meritless disputes, and in our view, is one of the largest current flaws in the credit reporting dispute system.  Although the CFPB’s enforcement actions against credit repair agencies are a positive step, we would like to see official guidance from the Bureau aimed at alleviating the burden that furnishers face to investigate and respond to the tidal wave of meritless FCRA disputes that are currently flooding into furnishers’ offices.

Members of Ballard Spahr’s consumer financial services group will hold a webinar on strategies for dealing with debt settlement companies at 12:00 PM ET on October 4, 2017. To register for this event, access the following link: