After Credit Scoop News’ provocative article about how credit repair organizations are doomed there was quite a bit of activity from the credit repair front. Some were upset with the messenger, some with government authorities while others griped about the credit reporting agencies and the credit repair industry itself.
Credit Repair Organizations React
The pot was definitely stirring and some positive actions took place. Many owners of credit repair organizations took to social media to express their shock and ask what could be done. Credit repair organizations’ Facebook groups were buzzing with outrage, incriminations and possible solutions. Other credit repair “coaches” and “gurus”, while initially stunned, kept right on selling the six-figure dream of owning your own credit repair organization.
Credit Repair Organizations Lawsuit
The most significant response was from NACSO, the largest association of credit repair organizations. NACSO, the National Association of Credit Services Organizations sued the U.S. Consumer Financial Protection Bureau (CFPB) for enforcing a rule that the Federal Trade Commission (FTC), state Attorneys General Offices and the CFPB have successfully used countless times against credit repair companies since 1996.
We do know that NACSO credit repair association president Robby H. Birnbaum called an emergency NACSO video meeting on Facebook to address the turmoil and concern. Later NACSO held another emergency industry Zoom call on Facebook hosted by Mark Clayborne with Robby H. Birnbaum, lobbyist Nick Owens and Donna Perkins, Vice President of NACSO. Their pleas for financial help were answered by the credit repair industry and on May 21, 2010 NACSO filed suit against the CFPB.
The lawsuit was filed May 21, 2020 in the U.S. District Court for the Southern District of Florida. In the complaint the NACSO credit repair association alleged the CFPB is unfairly regulating credit repair businesses under the Telemarketing Sales Rule (a regulation that has the force of law), enacted in 1995. According to the lawsuit, those credit repair companies are regulated by the 1996 Credit Repair Organization Act (CROA), which does not mandate a six-month payment delay.
Here’s why NACSO credit repair association is now so worried about the TSR. Under the Telemarketing Sales Rule (TSR) no credit repair company may receive any payment for services until all work has been completed and the credit repair company has waited an additional 6 months, obtained a new credit report showing all the improvements. Only at this point (often more than a year after the client signed up) can the credit repair company send an invoice to the client. It’s clear that such a restrictive regulation would be a cash flow killer for any credit repair company.
The NACSO credit repair association argues in their lawsuit that the CFPB is trying to destroy the credit repair industry by enforcing the TSR. They state that applying a superseded regulation is “unconstitutional and a statutorily unauthorized, and thus unlawful, regulation infringing on the fully-protected speech of credit repair organizations.” They add that the six month period unfairly places the full burden of a consumer’s credit status on the credit repair company, despite circumstances completely out of a credit repair company’s control such as the COVID-19 crisis.
Follow Credit Scoop News
I applaud NACSO for taking action. Over the coming months Credit Scoop News will keep you updated on the lawsuit. We will cover other interesting responses to this credit repair organizations crisis from Steven Palmieri and Matthew Hearn, experts in their fields.
