If you are in the business of helping consumers with their credit reporting problems, you know about the CFPB’s lawsuit with Lexington and Progrexion, and you know something just happened involving the Telemarketing Sales Rule (TSR), but what?
To fully understand the impact of the court’s ruling, some TSR background is helpful.
The TSR defines “telemarketing” as:
“a plan, program, or campaign which is conducted to induce the purchase of goods or services or a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call.”
What does this mean?
- If you are talking to consumers about credit repair services over the telephone you are telemarketing within the scope of the TSR.
- If you are guiding consumers through a signup process on the phone, you are telemarketing.
- If you induce the customer’s purchase of credit repair services over the telephone, whether the consumer signs up during the call or after the call (even if online), you are telemarketing.
What happened in the lawsuit?
- The court’s ruling eliminated the need for a promised result from the services covered by the rule. “Credit repair organizations that market or sell their services over the phone, irrespective of whether they promise a specific result to consumers, must follow the TSR, including the advance fee provision.”
How does this affect a credit repair business?
As a result of the ruling, businesses that use telemarketing may not request or receive payment:
- Until after the time frame for providing services has ended; and
- Until after the business provides a credit report six months later showing results have been achieved.
Key point: The TSR imposes a billing delay of at least six months after services are delivered and results achieved.
The court’s order also makes clear that liability for TSR violations extends beyond the business providing credit repair services. According to the ruling:
“And no business may substantially assist a credit repair organization that it knows or consciously avoids knowing is engaged in an act or practice that violates the TSR, including by doing such things as providing back-office support, technical know-how, lead generation, or data that supports their non-complaint credit repair practices or billing.”
Please note – the potential financial consequences for TSR violations are enormous. The CFPB order included the return of all fees collected from consumers. Additionally, willful violations of the TSR allow for civil money penalties of up to $1 million dollars per day under the Consumer Financial Protection Act.
If you have questions about the TSR, you should seek legal advice on how to comply. Please note that this update is for educational and informational purposes only. It should not be relied on as legal advice. The American Association of Consumer Credit Professionals (AACCP) represents dedicated consumer advocates from across the full consumer credit system. AACCP members serve as a trusted resource that consumers use to understand and navigate the complex credit reporting ecosystem.
©2023 The American Association of Consumer Credit Professionals.
