Telemarketing Sales Rule & Payment Restrictions On Sales Of Credit Repair Services
Did you know that credit repair companies are governed by the Federal Trade Commission and the Consumer Financial Protection Bureau? Good. Did you also know that the FTC and CFPB have prohibited credit repair companies from charging fees for credit repair until at least six (6) months after the credit repair company has completed the promised services? No? Keep reading. This rule is part of the Telemarketing Sales Rules (“TSRs”).
Were you aware that if you are selling credit repair services on behalf of a company that is not complying with the TSRs, that you, personally, could get nailed by the FTC and the CFPB? Well, your ignorance of the law is not going to shield you.
The CFPB Has Started Filing Lawsuits Against Those Who Help Or Work With Credit Repair Companies That Do Not Comply With The TSRs
Since 2019, the CFPB has filed a slew of lawsuits against credit repair companies that have not complied with the TSRs. These companies have collected fees for credit repair on a monthly basis. Some have been permanently banned from the credit repair industry. Others have been fined hundreds of thousands of dollars and in some cases, millions of dollars. The latest lawsuit filed in September of 2021 is CFPB v Credit Repair Cloud and Daniel Rosen. Credit Repair Cloud is NOT a credit repair company. Rather it’s a software vendor that sells, for a monthly fee, a software as a service product that allows people to get into the credit repair business. In their words it’s a “business in a box.” Their software is very user friendly and feature rich. So why is the CFPB picking on Credit Repair Cloud? Because they are, allegedly, providing support to people who do sell credit repair services and are not complying with the TSR rules. The CFPB is now striking out against vendors.
TSRs Prohibit Assisting & Facilitating Sellers Or Telemarketers Who Violate The TSRs
The FTC put out a guide that explains the TSRs and how to comply with them and what is required. The FTC makes it clear that it’s a violation of the TSRs to “substantially assist a seller or telemarketer while knowingly – or consciously avoiding knowing that the seller or telemarketer is violating the TSRs.”
Third parties who do business with sellers and telemarketers should be aware that their dealings may provide a factual basis to support an inference that they know- or deliberately remain ignorant of-the TSR violations of these sellers or telemarketers. Examples include third parties who, directly or indirectly (1) provide sellers with mailing lists, automated dialing software, or telephony services, (2) help in creating sales scripts or direct mail pieces, or (3) furnishes any other substantial assistance while knowing or consciously avoiding knowing that the seller or telemarketer is engaged in a TSR violation may be violating the TSR.
Are You a Vendor For a Credit Repair Company That Is Not Complying With The TSRs? You Better Beware
I have friends in the credit repair industry and am talking to them seriously about their positions and options. Unfortunately, some of these companies are charging monthly fees to their credit repair clients and that is just illegal. Some of these credit repair companies have salespeople. I think these companies have an ethical obligation to inform their salespeople about the rules against charging monthly fees for credit repair.
While a nonprofit company is not subject to the TSRs, the third-party company and its agents are. It’s only a matter of time before the third-party company and its agents get into the cross hairs of the CFPB. These entities are just too big to fly under the radar. If you are selling credit repair services for a credit repair company that is subject to the TSRs, you better make sure that they are not charging fees before the 6-month period after they have completed the promised results has passed.
This latest lawsuit against Credit Repair Cloud and Rosen shows that the CFPB is not playing around about enforcing the TSRs against credit repair companies and now, vendors, suppliers and agents to credit repair companies.
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