Lawsuit seeks compensation for harmed consumers, injunction, and civil penalty for alleged violations of the Telemarking Sales Rule

The Consumer Financial Protection Bureau (CFPB) today filed a lawsuit in federal district court accusing a California-based software company and its owner of providing assistance to illegal credit-repair businesses. The CFPB alleges that Credit Repair Cloud and CEO Daniel Rosen have violated the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act of 2010 (CFPA) by providing substantial assistance or support to credit-repair businesses that use telemarketing and charge unlawful advance fees to consumers. The CFPB’s lawsuit seeks relief for harmed consumers from the defendants, disgorgement of their unjust gains, an injunction to stop their illegal conduct, and civil penalties.

“Credit Repair Cloud and Rosen have been breaking the law,” said Acting CFPB Director David Uejio. “They are actively assisting credit-repair businesses in violating federal consumer protection laws. They facilitated and encouraged credit-repair businesses to charge illegal advance fees, causing broader consumer harm in the marketplace. The CFPB will not tolerate companies facilitating and profiting from other companies’ violations of federal consumer protection laws.”

Credit Repair Cloud is a California-based corporation founded by Rosen. Since 2013, Credit Repair Cloud has sold software and other tools to help others start and operate credit-repair businesses. A credit-repair business provides consumers with goods or services that purport represented to remove derogatory information from credit reports or otherwise improve a person's credit history, credit record, or credit rating. Such companies that use telemarketing are covered by the TSR, and may not request or receive fees from a consumer until the company has provided that consumer with a credit report that shows the promised results and that was issued more than six months after such results were achieved.

The CFPB’s complaint alleges that Rosen and Credit Repair Cloud are providing substantial assistance to credit-repair companies that use telemarketing to reach consumers and charge unlawful advance fees under the TSR. Specifically, the CFPB alleges that Rosen and Credit Repair Cloud have encouraged the credit-repair businesses that use their services – including trainings, materials, and software -- to charge unlawful advance fees and Rosen and Credit Repair Cloud knew or consciously avoided knowing that these customers were charging advance fees in violation of the TSR.

Enforcement Action

Under the CFPA, the CFPB has the authority to take action against companies and individuals that violate federal consumer financial laws. The CFPB is seeking monetary relief for consumers, disgorgement of unjust gains, injunctive relief, and a civil money penalty.

The complaint is not a final finding or ruling that the defendants have violated the law.