On June 27, 2017, the Consumer Financial Protection Bureau (“CFPB”) announced approximately $2 million in fines and penalties against four credit repair companies and three associated individuals for allegedly misleading consumers and charging improper fees. Under two proposed final judgments that the CFPB filed in United States District Court for the Central District of California, Prime Credit, LLC, IMC Capital, LLC, Commercial Credit Consultants, Blake Johnson and Eric Schlegel will be paying approximately $1.5 million in civil penalties, while Park View Law and Arthur Barens will be paying $500,000 in relinquished funds to the U.S. Treasury. The remedies are notable, in part, because the CFPB is imposing them not only on the companies allegedly primarily engaged in the accused conduct but also individuals involved as principals in the companies. As such, this enforcement action reflects a not-uncommon view of the CFPB and other regulatory agencies, particularly the Federal Trade Commission, that principals who control and direct the conduct of a business entity are as much directly subject to enforcement action as is the company itself.
According to the CFPB, between 2009 and 2015, the entities at issue engaged in improper credit repair practices to the detriment of consumers and in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the Telemarketing Sales Rule. Specifically, the CFPB claims that the defendants charged consumers illegal advance fees, failed to disclose the limits on “money-back guarantees” that they were offering, and misled consumers about the benefits of their services. For example, the CFPB claims that these companies misrepresented that their services would lead to the removal of negative entries on consumers’ credit reports and would result in a substantial increase to consumers’ credit scores.
The proposed final judgments also include an injunctive relief component, in addition to the monetary penalties. Under the final judgment, the defendants – including the individuals — are prohibited from doing business in the credit repair industry for five years. They are also prohibited from violating the Dodd-Frank Act or the Telemarketing Sales Rules.