The Consumer Financial Protection Bureau yesterday announced an enforcement action against Credit Repair Cloud and its CEO, Daniel A. Rosen, for their role in aiding credit repair businesses that charged illegal advance fees to consumers. The proposed order, pending court approval, mandates a $2 million civil penalty against Rosen and a $1 million penalty against Credit Repair Cloud, alongside other compliance measures to prevent future violations.
Credit Repair Cloud, a California-based corporation founded by Rosen in 2013, provides software and tools to help individuals start and operate credit repair businesses. These businesses claim to remove derogatory information from credit reports or improve credit scores. However, the CFPB alleges that Credit Repair Cloud and Rosen facilitated illegal practices by enabling these businesses to charge advance fees, which is prohibited under the Telemarketing Sales Rule. The CFPB’s complaint, filed in 2021, highlighted that Rosen personally participated in the creation and distribution of materials that encouraged illegal fee structures, including telemarketing scripts and billing systems designed to collect fees before delivering the promised services.
The TSR stipulates that credit repair companies using telemarketing cannot charge fees until they have provided a consumer with a credit report showing the promised results, issued more than six months after achieving those results. The CFPB’s complaint highlights that Credit Repair Cloud’s system included features such as dispute generation and tracking, integrated billing, and training materials that encouraged illegal fee structures.
If the court approves the proposed order, Credit Repair Cloud and Rosen will face several enforcement measures:
- Civil Penalties: Rosen will pay a $2 million civil penalty, and Credit Repair Cloud will pay a $1 million penalty, both deposited into the CFPB’s Civil Penalty Fund for victim relief.
- Cease Assistance: Credit Repair Cloud and Rosen will be permanently barred from assisting any companies that use telemarketing to sell credit repair services and charge advance fees.
- Tool and Service Adjustments: They must remove any language related to telemarketing and advance fees from their tools and services.
- Compliance and Monitoring: They must notify all companies using their tools that charging illegal upfront fees is prohibited and monitor compliance.
