The CFPB has filed a complaint in Utah federal district court against a related group of companies that provide credit repair services for alleged violations of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA).  Rather than targeting the quality or effectiveness of the credit repair services actually provided by the defendants, the complaint targets the marketing methods allegedly used by the defendants to obtain referrals of consumers.

The primary focus of the Bureau’s complaint is the defendants’ alleged CFPA violations.  According to the complaint, to obtain referrals of consumers, the defendants relied on a network of “marketing affiliates” who primarily advertised consumer credit products or services.  The CFPB alleges that one of more of such affiliates did not actually offer or provide the advertised products or services but instead “offered illusory products or services to lure in consumers and market credit repair services.”  Specifically, the CFPB alleges that in an effort to generate payments from the defendants for leads, such affiliates falsely represented to consumers that they were required to use the defendants’ credit repair services in order to obtain the advertised credit products or services or that the credit repair services would enable them to obtain or create a high likelihood of obtaining the advertised credit products or services.

The Bureau alleges that the defendants engaged in deceptive acts or practices in violation of the CFPA by:

  • “directly or through at least one affiliate, acting on [their] behalf and for [their] benefit,” represented expressly or by implication that the advertised product or service was available through the affiliate and that use of the defendants’ credit repair services would either guarantee or provide the consumer with a high likelihood of obtaining the advertised product or service and continued to sign up consumers through the affiliate or participated in the affiliate’s deceptive conduct despite having “actual knowledge of the misrepresentations, reckless indifference to the misrepresentations, or an awareness of the high probability of the misrepresentations along with an intentional avoidance of the truth.”
  • knowingly or recklessly providing substantial assistance to at least one affiliate that was a covered person or service provider under the CFPA by providing advice and content for the affiliate’s telemarketing scripts, advice regarding its website and other marketing vehicles, the means and mechanisms for live transfers of consumers between the affiliate and the defendants, and paying the affiliate for leads that resulted in the defendants’ sale of credit repair services

With regard to the Bureau’s TSR claims, the Bureau alleges that the defendants violated the TSR by charging advance fees before providing consumers with a credit report showing that the promised results were achieved as required by the TSR, making false or misleading statements to induce a person to pay for goods or services, and facilitating TSR violations by its affiliate.