A District Court judge in Massachusetts has denied a credit repair organization’s motion to dismiss after it was sued by the Consumer Financial Protection Bureau and the state of Massachusetts for allegedly collecting upfront fees and misrepresenting its effectiveness at improving the credit scores for individuals who signed up for its services, ruling that the claims made by the plaintiffs are not unconstitutionally vague or discriminatory.
A copy of the ruling in the case of CFPB and Commonwealth of Massachusetts v. Commonwealth Equity Group, d/b/a Key Credit Repair and Nikitas Tsoukales can be accessed by clicking here.
The plaintiffs filed their lawsuit back in 2020, accusing the defendant of taking advantage of nearly 40,000 individuals and collecting $23 million in fees. The defendant allegedly charged an enrollment fee of $160 and $160 a month and promised to improve the credit scores of individuals by as much as 90 points. The defendants were accused of violating the Consumer Financial Protection Act and the Telemarketing Sales Rule.
The defendant attempted to argue that the TSR conflicted with the Credit Repair Organizations Act, that the TSR violated the Due Process clause of the Constitution because it failed to adequately define telemarketing, that the definition of telemarketing that is in the TSR violated the First Amendment by placing a content-based restriction on free speech, that the FTC exceeded its authority in promulgating the TSR, and that the CFPB overstepped its authority following the Supreme Court’s ruling in Seila v. CFPB.
But Judge Ryan Zobel of the District Court for the District of Massachusetts was persuaded by none of the defendant’s arguments.
