WASHINGTON, DC – Today, the Consumer Financial Protection Bureau (CFPB) filed a proposed order to settle its lawsuit against Credit Repair Cloud and CEO Daniel A. Rosen for providing substantial aid or assistance to credit repair companies that charge consumers illegal advance fee payments. The proposed order, if adopted by the court, would impose a civil penalty of $2 million on Rosen and a civil penalty of $1 million on Credit Repair Cloud. The order would also require the company and Rosen to take steps to ensure that credit repair companies that use Credit Repair Cloud stop charging consumers illegal advance fee payments.
“Credit Repair Cloud and its CEO Daniel Rosen have helped credit repair companies collect illegal fees from delinquent consumers,” said CFPB Director Rohit Chopra. “We will continue our work to hold individual executives accountable when they violate federal law.”
Credit Repair Cloud is a California-based company founded by Daniel A. Rosen. Since 2013, Credit Repair Cloud has been selling software and other tools to help others start and run credit repair businesses. A credit repair company offers consumers goods or services that purport to remove derogatory information from credit reports or otherwise improve an individual’s credit history, credit report, or credit score. Credit repair companies that use telemarketing are subject to the Telemarketing Sale Rule, which prohibits charging fees until the company has provided the consumer with a credit report that shows the promised results and that was issued more than six months after those results were achieved.
The CFPB alleges that Credit Repair Cloud and Rosen provided substantial assistance to credit repair companies that telemarketed to consumers and charged improper advance fees by providing users with a system that, among other things, generated and tracked disputes and integrated a billing system, as well as providing training, marketing tools, and model websites.
The CFPB alleges that Rosen is personally liable for Credit Repair Cloud’s violations because he controlled Credit Repair Cloud, participated in its material support acts, and knew or negligently ignored that they were occurring. Rosen’s material support acts included, among other things, training credit repair companies on how to use Credit Repair Cloud’s system, providing sample scripts, and advising on how and when to collect fees from consumers.
Enforcement measures
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against people who violate consumer protection laws, including the Telemarketing Sales Rule. If the court issues an order, defendants must:
- Pay $3 million in civil penalties: CEO Daniel Rosen would pay a $2 million civil penalty and Credit Repair Cloud would pay a $1 million civil penalty, with both amounts deposited into the CFPB’s relief fund, called the Civil Penalty Fund.
- Refrain from assisting companies in illegally charging advance fees: The order would permanently prevent Credit Repair Cloud and Rosen from providing substantial assistance to companies that use telemarketing to sell credit repair services and charge upfront fees. Credit Repair Cloud and Rosen would also be required to remove from their tools and services any language related to telemarketing and charging monthly fees for credit repair services.
- Notify companies that use its tools and services that they must not charge illegal upfront fees and monitor whether the companies comply.: Credit Repair Cloud and Rosen would be required to send a notice to all companies using Credit Repair Cloud with specific examples of improper telemarketing and advance fee charges. They would also be required to monitor whether Credit Repair Cloud users engage in telemarketing and advance fee charges.
Read today’s proposed regulation.
Consumers can file complaints about financial products or services by visiting the CFPB website or calling (855) 411-CFPB (2372).
Employees who believe their company has violated federal consumer protection laws are encouraged to send their findings to [email protected]. For more information on reporting potential industry misconduct, visit the CFPB website.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer protection laws and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.
