Federal bureau, credit repair group launch legal fight

The controversial Consumer Financial Protection Bureau is becoming embroiled in litigation with credit repair companies.

Greenspoon Marder, based in Fort Lauderdale filed a lawsuit in the U.S. District Court for the Southern District of Florida on behalf of the National Association of Credit Service Organizations against the bureau, seeking a declaratory judgment to halt enforcement of what it terms an outdated regulation.

The Obama era agency has been under frequent attack in Congress and an exhibit to the lawsuit shows a number of Congressmen are supporting NACSO’s position.

NACSO, a nonprofit national association of credit repair organizations and their supporting vendors, provide services to help improve consumers’ credit history, records or ratings. NACSO’s credit repair company members are regulated by the Credit Repair Organization Act (CROA), a federal statute passed by Congress in 1996, Greenspoon Marder noted in a press release.

The Greenspoon Marder team representing NACSO includes Robby H. Birnbaum, Beth-Ann E. Krimsky and Lawren A. Zann.

The press release by Greenspoon Marder says the CFPB doesn’t have the legal authority to regulate NACSO members under CROA as enacted by Congress, but the CFPB is seeking to enforce an older, outdated regulation that requires companies to wait 6 months after completing all services until they can be paid for their work. The plaintiffs say this appears to be an effort to regulate the industry out of business just when many consumers are in need of this type of help.

Greenspoon Marder filed a complaint for declaratory relief on behalf of NACSO, stating that applying superseded regulations is an “unconstitutional and a statutorily unauthorized, and thus unlawful, regulation infringing on the fully-protected speech of credit repair organizations.” The complaint explains that the arbitrary six-month waiting period “eviscerates” the ability of NACSO’s members to be paid for work they have already performed and unfairly places the full burden of a consumer’s credit status on the credit repair organization, despite factors entirely out of an organization’s control such as the current COVID-19 crisis.

On Friday, the day after NACSO filed its action seeking protection from the courts, the CFPB filed a lawsuit against one of NACSO’s members, which Greenspoon Marder says was riddled with false information and inflated numbers. Greenspoon Marder did not name the member firm.

A news release posted Friday on the CFPB website says the bureau and Commonwealth of Massachusetts Attorney General Maura Healey jointly filed a lawsuit against Commonwealth Equity Group, LLC, which does business as Key Credit Repair and its owner.

Kevin Gale
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