Credit Repair Companies Are Prohibited From Collecting Fees Until Certain Conditions Are Met
The phrase “Telemarketing Sales Rules” send shivers to any credit repair person who has been around. These TSRs are designed to put credit repair companies on an extra short leash by making it illegal for them to charge someone for credit repair until 6 months after they have completed the work. Further still, the credit repair company has to prove that they provided the promised results by providing their customer with a credit report dated at least 6 months after they have completed the work. Why?
Credit Repair Companies Have Been Ripping Off Consumers For Years
For years, credit repair companies have used a strategy that only temporarily removed a negative item from a credit report. They would simply flood a credit bureau with a pile of dispute letters, forcing the bureau and the creditor to each examine their records to be certain that they were accurate. They then had 30 days within which to agree to the accuracy of the negative item reporting on the credit report or credit bureau had to remove it until it could ascertain the accuracy with the creditor. Using a pile of letters to overwhelm the credit bureau was, for years, a very effective tactic.
The credit repair person got paid for a job well done and the consumer could be hundreds, if not thousands of dollars lighter. But then, the negative item would reappear on the consumer’s credit report and the consumer would be furious. If the credit repair company was still around, the consumer could demand a refund, but the chances of that happening were very small.
FTC Prohibits Credit Repair Companies From Charging Fees For At Least 6 Months Until After The Credit Work Has Been Delivered
Fast forward to 2010 when the TSRs were created by the FTC to prohibit credit repair companies from demanding payment until 6 months after the credit repair company has completed its work. Its unlikely that any company can survive with its cash flow held in abeyance that long, but the FTC really does not care. They have received so many complaints about credit repair companies that they don’t know if there are really any legitimate ones in business.
Since 2019, The CFPB & The FTC Have Been Filing Loads Of Lawsuits Against Credit Repair Companies To Enforce The TSRs
The CFPB has picked up the reigns from the FTC in filing lawsuits against credit repair companies that don’t wait for their money. They are going after both high and low profile companies including the largest credit repair company in the nation; Lexington Law. That litigation is entering its 3rd year and is highly contested. Lexington Law undoubtedly makes millions and millions of dollars per year in sales. They charge consumers a monthly fee for credit repair, in direct contravention of the TSRs. How have they gotten away with it so long? I guess time will tell if they do.
The CFPB Is Now Going After Vendors Of Credit Repair Companies That Don’t Comply With The TSRs
In late September of 2021, the CFPB announced a lawsuit against Credit Repair Cloud and its owner, Mr. Daniel Rosen. Credit Repair Cloud is a software vendor that makes credit repair software. It’s “business in a box” business model allows one to sign up for this software as a service at a modest fee, and begin repairing the credit reports for consumers. Its excellent software. Very user friendly and full featured. However, now that the CFPB has sued Credit Repair Cloud, it’s very foreseeable that it will subpoena a list of Credit Repair Cloud’s customers and start going after them as well.
The CFPB and FTC want to send a message that the TSRs must be complied with or they will come knocking.
Free & Legitimate Credit Repair Is Now Available In Michigan
Michigan Consumer Credit Lawyers has a 3 For Free Program. We will draft up to 3 dispute letters for you in exchange for your credit report. There is absolutely no charge to the consumer for this as we make our money by suing the credit bureaus and the lenders who screw up your credit report. Our litigation program has no out of pocket charge to you. Call us today at (248) 353-2882 or visit us at Michigan Consumer Credit Lawyers. You can also email us for more information at [email protected].