Consumer Financial Protection Bureau Takes Action Against Credit Repair Companies

The CFPB recently took action against a company that it found had made misleading and deceptive representations. According to the complaint filed in court, the CFPB asserted that Federal Debt Assistance Association, LLC and Financial Document Assistance Administration, Inc., both operating as FDAA falsely promised to eliminate consumers’ debts and improve their credit scores in exchange for thousands of dollars in advance fees.

Collecting advance fees violates the Credit Repair Organization Act and the Credit Services Protection Act under Michigan law.

  • Deceiving consumers about an affiliation with the federal government: The FDAA companies marketed themselves through direct mailers that were designed to look like an official government notice. The mailers stated that they were a “regulatory notification” with a case number and “entitlement amount.” The mailers and envelopes included a seal similar to the Great Seal of the United States. FDAA’s direct mailers and telemarketing scripts deceptively misrepresented an affiliation with the federal government. In letters sent to consumers, FDAA would falsely claim they can assist consumers in retrieving restitution from CFPB enforcement actions in the form of credit-card debt reduction.
  •  Deceiving consumers about the companies’ debt-relief and credit-repair services abilities: FDAA lied about the results that could be achieved. The companies falsely advertised that they would eliminate or reduce consumers’ principal balances by at least 60 percent, that creditors would be unable to collect the debts, and that the programs would increase consumers’ credit scores.
  • Failing to make proper disclosures about not paying debts: FDAA instructed consumers to stop making payments on the debts enrolled in their program. However, they failed to disclose that not making payments may result in the consumer being sued by creditors or debt collectors and may increase the amount of money the consumer owes due to the accrual of fees and interest.
  • Taking illegal advance fees for debt-relief and credit-repair services: Federal law prohibits the collection of fees before a credit-repair or debt-relief company achieves certain results. FDAA charged and received payment of fees for debt-relief services before altering the terms of consumers’ debts. The companies also charged and received fees for credit-repair services without achieving the promised results.

While the CFPB has authority to bring claims against certain businesses it typically does so by filing lawsuits in court and then obtaining consent agreements to change corporate behavior. This means that the complaint discussed above is nothing more than a series of accusations that have not yet been established as fact by any court.

Similar Posts