If you’re in the credit repair industry, you may have heard that the CFPB is suing our company –– and me.
This is one of the scariest things that’s ever happened to me. But the reality is when a company grows big enough, it becomes a target, and all kinds of legal situations arise.
Giant companies like Facebook, Google, and Apple –– have lawsuits happening continually, even involving similar federal enforcement agencies. It comes with the territory when you have a large enough business. And now it’s my turn. I guess we’ve hit it big time.
How does this affect YOU?
There is so much misinformation out there on the internet — especially when it comes to the laws around credit repair.
So in this article, I’ll share everything you need to know about the lawsuit, and more importantly, I’ll tell you exactly what YOU can do to help you steer clear of trouble in your business.
Now, I am not a lawyer, and this article is for educational purposes only. It is not intended to be legal advice. The information shared is accessible to the public and based on my review and understanding. I suggest that anyone who has legal questions consult with a lawyer. It is necessary to obey all state licensing requirements and any applicable federal and state laws that your lawyers deem applicable.
The good news is, to distill much of that misinformation, I have created a booklet that I want to share with you. I’m calling it the Credit Hero’s Guide to the Law. It has
- Links to all the major laws that you need to know about credit repair
- Important information about the TSR (Telemarketing Sales Rule)
- Information to help you in your efforts to remain legal and compliant
- And you can download it completely FREE at CreditRepairCloud.com/law.
Credit Repair Cloud Background
For those of you who don’t know my story, I started building Credit Repair Cloud almost 20 years ago when a bank error destroyed my credit. I thought of it as a way to help other people who were having the same trouble as me.
When I first started, I had a big idea and a big dream, but I was totally broke. I tried to get investors, but they all said no, so I sat in a little room for 3 years, lived on Top Ramen, and slowly bootstrapped my business from nothing.
And little by little, with lots of setbacks along the way, I’ve grown it into a very large software company with thousands of businesses using it, and a team of 90 people helping to make it an awesome experience.
It’s the accomplishment I’m most proud of in my life. I’m especially proud of all the people who have been about to start businesses, people who have been able to quit their 9-5 jobs to gain financial freedom, the 42 people here in our Millionaires Club who each made over a million dollars using Credit Repair Cloud, and most importantly, I’m proud that together, we’ve changed millions of lives.
What is CFPB?
CFPB stands for the Consumer Financial Protection Bureau. It was created in 2011 as a response to the financial crisis of 2007 and 2008 and the great recession that followed.
Those were rough years for me. While I was building Credit Repair Cloud, Bank of America was playing games with my mortgage. I was making all of my payments on time, but the bank wasn’t applying them, so that put me into collections, which is horrible! I’d be up all night with programmers trying to build Credit Repair Cloud, and then I’d be woken up every morning very early with collections calls. I was never late; I never missed a payment, but they were doing everything they could to try to take my house.
Back then, it was typical for the banks to be doing crooked things. It was like the Wild West. Eventually, I had to hire an attorney, and guess what? Bank of America suddenly found all my on-time payments, and they stopped playing games with my mortgage.
Right around that time, the CFPB was created to stop the big bad banks and the evil credit bureaus from taking advantage of consumers.
This seemed like a noble cause, but unfortunately, it was not well planned out, because there are not enough checks and balances on the CFPB with respect to enforcing the laws fairly.
So the idea initially was that the CFPB would be the watchdog agency that would protect consumers from the banks and bureaus, and it went that way for a while…
But they don’t seem to be doing that anymore. And now they are harassing people who actually DO help consumers!
TSR (The Telemarketing Sales Rule) – An Obscure Rule – and Why It Matters
For all the decades that credit repair has existed, it has been governed by its own special set of laws, which is called CROA (the Credit Repair Organizations Act) which was created by Congress to be the law of the land for exactly how credit repair businesses can operate and charge.
And everything we do and teach at CRC has always been based on respect for CROA.
But when the CFPB decided to start harassing people in credit repair who were helping consumers, they had to find a reason…. So they found a very obscure part of an old regulation that no one had ever heard of called the TSR (the Telemarketing Sales Rule) which states that if the sale occurs over the phone the client can’t be charged until at least 6 months after the work is done.
Now, there is no business in America that can wait to be paid until 6 months after they deliver their service, it is just absurd. No company of any kind could function that way
CROA vs. CFPB –– Why It’s Important To You
There are ongoing efforts in the courts right now to reverse this because it’s completely unfair — especially since CROA has spelled out for decades exactly how credit repair businesses should get paid.
Now, it seems clear that the CFPB did this to make it harder for credit repair businesses, which of course would make the banks and credit bureaus very happy because credit repair exposes their errors and costs them a lot of money.
But the strangest part is… Why sue me? Why sue Credit Repair Cloud? We don’t even do credit repair. We just make software.
Well, the reason is, that we’re the biggest vendor in credit repair. They saw us as a big central hub for the whole credit repair industry, and that made us a target; all of a sudden, they began demanding all kinds of things from us, which was terrifying!
So when I first heard from the CFPB, I assumed it was a mistake. I assumed that they didn’t understand what our company does. So our attorney explained to them what we do, and he asserted that they had no jurisdiction over CRC because it’s the CFPB’s role to protect consumers, and we don’t do business with consumers. We’re business-to-business.
Additionally, the law they are trying to enforce is about telemarketing — and we don’t telemarket. We don’t have phone sales at all. We don’t even have salespeople. So none of this made sense.
But they said we were providing substantial assistance for people to break the TSR, so in a letter, we explained that
- Our software isn’t a phone dialer
- It doesn’t take payments from consumers
- And we don’t have a way of monitoring how our customers run their business.
- We don’t know if our customers use a phone
- Or if they meet with their customers in person.
- We’re not a part of that process.
But the CFPB didn’t care. So we tried to find out how we could resolve things with them, but they didn’t have any interest in that. They wouldn’t tell us any changes they wanted from us. It was the strangest interaction I’ve ever had.
Then, nearly 2 years went by. And we thought it was all over.
And just a couple of weeks ago, out of the blue, I was notified that they actually filed a lawsuit against our company and against me.
I was scared. I wanted to hide. I wanted to cry — and to make matters worse, people were writing all kinds of things online about me. Terrible things. Untrue things. And I’ve never been so embarrassed and ashamed.
But I got up all the nerve I had and I wrote a public statement to our community to be completely transparent about what had happened. Transparency is my duty.
I thought people would be mean and say unkind things, but instead, the outpouring of love and support was amazing. Hundreds of our Credit Heroes wrote such encouraging and positive things. They told us about the businesses they had built, many said that we had changed their lives and that now THEY were changing lives — and they had my back. It was all so overwhelmingly positive. That gave me strength, and I finally knew I was going to be ok. But I also knew I needed to say more so that’s why I’m writing this article.
What the CFPB is doing is horrible. It hurts businesses. And instead of stopping, thinking, talking to us, and working with us, they just decided to file a lawsuit. That, unfortunately, is how that agency operates. It’s a bullying tactic.
Here’s the real truth:
The CFPB has not helped one single credit repair customer… Unlike all of US!!
The CFPB is not protecting consumers from banks and bureaus anymore. For the past 4½ years, unlike your companies, the CFPB has not helped one single credit repair customer.
And somehow I’m being accused of breaking the law. Me, the guy who does everything by the book. I am so careful. I don’t even jaywalk.
If you actually read the lawsuit, which you should, you’ll see that the main complaints the CFPB has against me are: (1) that I write books, (2) I make videos, (3) I create courses, (4) I have a Facebook community, (5) I answer your questions, and (6) that I celebrate success with these plaques here whenever someone makes a million dollars in their business. And that is something to celebrate.
So think about that. Writing, making videos, answering questions, and celebrating… These are my crimes? These are all protected by my First Amendment rights, and our rights to operate private businesses in compliance with the laws that apply to us.
The CFPB has no issue with our software. It’s just about things that I say and the things I write and that’s the scary part. This is America, where we have freedom of speech!
While I can’t get into more details publicly, we do have excellent legal representation, I believe the best in the industry. And because this is so ridiculous we will be filing a motion to dismiss for various grounds.
If you’re a credit repair business owner, YOU can stay compliant and safe from TSR.
Of course, we all know the laws will vary by what you do, so the point of this is to research, get legal advice if needed, and know what laws and rules apply to your business. But as for TSR, it applies to sales that take place by telephone.
So what does this mean to you?
Does it mean you cannot run a credit repair business? No, it doesn’t mean that!
Credit repair has been around for decades. It’s not going anywhere because there are laws that protect it and govern it. There’s the Credit Repair Organizations Act, and there are state laws to follow.
But you also need to be aware of the TSR, which is about Telemarketing. The definition of that is “completing a sales presentation over the phone and taking payment information over the phone.” If that’s how you want to run your business, then you have to wait 6 months after you complete your work to get paid. And that’s not very fair.
Does that mean you can’t use a phone for your business? No, it doesn’t mean that.
You Have Many Options! Here Are A Few:
- You can give a free consultation over the phone!
- You can do a credit audit over the phone and talk about someone’s credit situation!
- You can even have an affiliate refer a client to you over the phone!
But, you cannot complete a sales presentation and take payment information over the phone.
- You can also meet with your client in person.
- You can take payments in person.
- You can take payments by mail.
- And you can even take payments on your website!
But you cannot complete a sales presentation and take payment information over the telephone, because that’s telemarketing and would be subject to the TSR.
Or, if you want to use a phone, here’s a pretty good scenario:
- Do a credit audit over the phone (free consultation) without taking any financial information, and give a little description of your program.
- Let the customer know over the phone that if they want to learn more and sign up they can visit your site. Call ends.
- The customer completes their own review and signs up later on the website, with no interaction about payments with anyone on the phone.
- I believe you can even have a chat app on your site to answer questions because that’s not a telephone.
- Or, you can take this as a perfect opportunity to beef up your website so that you can handle all of your signups there. If you’ve got testimonials and great reviews, you can let your website do the closing for you.
- Or just meet with your clients in person And there’s no TSR!
- We haven’t gotten official opinions on Zoom calls, but it seems that due to Covid, there would be reasonable arguments that it would pass Face to Face analysis, have face-to-face meetings with your potential client and close the deal over zoom.
There’s An Exemption To TSR
Additionally, If you want to perform a more complete sale by phone, there is an exemption to the TSR if you market in any way other than by direct mail (meaning, if you don’t use the US Mail for your advertising). So, you can run online campaigns (like Google Ads, Facebook Ads), radio and TV commercials that can draw inbound calls. Then, you can answer those inbound calls and make your sale. And in this case, you would only have to follow CROA.
Now, if you go this route, and you’re advertising to draw inbound calls only, just keep in mind that there may be state telemarketing rules to consider and you must be careful to ensure that your ads are not deceptive.
I have read about these things, and I talk to attorneys and you should contact your lawyer or read up on it yourself. Knowledge is power.
It’s pretty simple, right? If you always follow the laws of your state and CROA, and you don’t break the telemarketing laws, then your business won’t run into any trouble with the law.
I hope this information helps to make things clearer for you, so you can stay compliant and keep changing lives. If you have any friends who need to hear this, please share this article widely.
My goal when I wake up each day is to help as many people as I can. Hopefully, that shows. I’m very proud of what we do here and I’m very proud of all of you, our Credit Heroes. I know I’ve found my true calling.
We have created a movement of Credit Heroes who change lives, and nothing is going to stop us. And even though there are occasional bumps in the road, being able to survive challenges is what the life of the entrepreneur is all about. After all, no one ever accomplishes anything great in life without big obstacles to overcome. It’s all part of the journey.
And if you want to get certified in disputing and launch your very own credit repair business in just a couple of weeks, I invite you to join our Credit Hero Challenge to learn more—coupled with this guide to the Law, you’ll have a great way forward to changing lives and earning an income in the process.
It’s an amazing program that has helped tons of Credit Heroes get their first clients, get certified in disputing, and gain confidence in knowing they are launching their credit repair business on a solid foundation that allows them to grow and scale FAST!
We’re starting again soon, so SIGN UP NOW at creditherochallenge.com!
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