Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud, and Daniel Rosen

Agency: Consumer Financial Protection Bureau
Date: Sept. 20, 2021
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/daniel-a-rosen-inc-dba-credit-
Pages: 67
PDFs: 3 documents (links below)

Documents in this case

Complaint · Sept. 2021 · 17 p.
Amended complaint · Jan. 2022 · 22 p.
Stipulation · Aug. 2024 · 27 p.

Case summary

On September 20, 2021, the Bureau filed a lawsuit against Credit Repair Cloud — a Los Angeles, California, company that since at least 2013 has provided an “all-in-one solution” for people to start their own credit repair businesses — and its owner and CEO, Daniel Rosen. On January 7, 2022, the Bureau filed an amended complaint. The Bureau alleged that Credit Repair Cloud and Daniel Rosen violated the Telemarketing Sales Rule by providing substantial assistance to credit repair businesses that violated the Telemarketing Sales Rule’s advance-fee prohibition. Specifically, the Bureau alleged that Mr. Rosen and Credit Repair Cloud encouraged the credit repair businesses that use their services — including Credit Repair Cloud’s trainings, materials, and software — to telemarket and charge unlawful advance fees. The Bureau further alleged that Mr. Rosen and Credit Repair Cloud knew or consciously avoided knowing that these credit repair businesses were telemarketing their services and charging consumers unlawful advance fees. The Bureau also alleged that by violating the Telemarketing Sales Rule, Credit Repair Cloud and Daniel Rosen violated the Consumer Financial Protection Act of 2010. The defendants filed a motion to dismiss the amended complaint on January 28, 2022, which the court denied on April 5, 2022. On August 12, 2024, the court entered a Stipulated Final Judgment and Order that requires Daniel Rosen to pay $2 million in civil money penalties and Credit Repair Cloud to pay $1 million in civil money penalties. The order also, among other requirements, prohibits the defendants from violating the Telemarketing Sales Rule’s advance-fee prohibition or assisting credit repair businesses that do so. It also requires the defendants to implement a comprehensive compliance program to determine whether the credit repair businesses that use the defendants’ services are telemarketing and charging illegal advance fees. And it requires the defendants to remove from Credit Repair Cloud’s software, websites, training and marketing materials, blog posts, books, other publications, and templates any reference to soliciting potential customers for credit repair services by telephone or videoconferencing and any language or software feature that recommends that Credit Repair Cloud’s customers charge consumers monthly fees for credit repair services.

Complaint (Sept. 2021)

PDF of this document (17 pages)

Page 2

COMPLAINT

Amanda J. Krause (NY Reg. #5323357) (Application for Pro Hac Vice Admission Pending)

Tel.: (202) 445-8767 / Email: [email protected] Joyce Chen (NY Reg. #4717245) (Application for Pro Hac Vice Admission Pending) Tel.: (202) 702-4226 / Email: [email protected] Jeffrey Blumberg (MD Bar) (Application for Pro Hac Vice Admission Pending) Tel.: (202) 435-9687 / Email: [email protected] Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Fax: (202) 435-7722

LEANNE E. HARTMANN, CA Bar # 264787- Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Fax: (415) 844-9788 Email: [email protected] Attorneys for Plaintiff Consumer Financial Protection Bureau

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION

Consumer Financial Protection Bureau,

Plaintiff, v.

Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud, and Daniel Rosen,

Defendants.

Case No.

COMPLAINT FOR INJUNCTIVE RELIEF, RESTITUTION, DISGORGEMENT, DAMAGES, AND CIVIL MONEY PENALTIES

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 1 of 17 Page ID #:1

Page 3

COMPLAINT

Introduction 1.

The Consumer Financial Protection Bureau (“Bureau”) brings this action against Daniel A. Rosen, Inc. d/b/a Credit Repair Cloud (“Credit Repair Cloud” or “CRC”) and Daniel Rosen under the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. §§ 6102(c), 6105(d); the Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310; and the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5536(a), 5564, 5565. This Court has subject-matter jurisdiction over this action because it is brought under federal consumer financial law, 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345. 2.

Defendants Credit Repair Cloud and Daniel Rosen have provided substantial assistance or support to credit-repair businesses charging unlawful advance fees to consumers in violation of the TSR.

The Bureau brings this action to stop Defendants’ unlawful conduct, obtain relief for harmed consumers from Defendants, disgorge Defendants’ unjust gains, and impose civil money penalties on Defendants for their unlawful actions. Venue 4.

Venue is proper in this district because each Defendant is located, resides, or does business in this District. 12 U.S.C. § 5564(f). Parties 5.

The Bureau is an independent agency of the United States created by the CFPA. 12 U.S.C. § 5491(a). It has independent litigating authority and may secure appropriate relief for violations of the CFPA, 12 U.S.C. § 5564(a)-(b), and for violations of the TSR with respect to consumer financial products or services subject to the CFPA, 15 U.S.C. §§ 6102(c), 6105(d).

Credit Repair Cloud is a privately owned California corporation that operates out of 12517 Venice Blvd., Los Angeles, CA 90066. Since 2013, Credit Repair Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 2 of 17 Page ID #:2

Page 4

COMPLAINT

Cloud has advertised, marketed, promoted, offered for sale, and sold credit-repairbusiness software and other tools to credit-repair businesses (“CRC Users” or “Users”) throughout the United States.

Daniel Rosen is the founder, owner, and CEO of Credit Repair Cloud. Rosen resides in Los Angeles, California.

The TSR and Credit-Repair Services 8.

A credit-repair business offers or provides to consumers services represented to remove derogatory information from, or improve, a consumer’s credit history, credit record, or credit rating.

Credit-repair businesses challenge or dispute negative items that appear on consumer reports on consumers’ behalf. Such items are supposed to be removed if found to be inaccurate or incomplete, or if they cannot be verified. 10.

The TSR prohibits credit-repair businesses that telemarket their services from requesting or receiving any fee until they have provided the consumer with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 16 C.F.R. § 310.4(a)(2). Credit Repair Cloud’s Business Practices 11.

Credit Repair Cloud offers an “all-in-one solution” for people to start and run their own credit-repair businesses. Credit Repair Cloud markets and sells its services to individuals and businesses nationwide.

12.

Credit Repair Cloud advertises that to start a credit-repair business using Credit Repair Cloud, “all you need is a computer, a phone and software.” 13.

Credit Repair Cloud targets as clients individuals who are seeking to start their own business and advertises that “credit repair is the lowest cost & most profitable business you can launch,” and that a credit repair business is “a very affordable startup” that costs “close to nothing.”

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 3 of 17 Page ID #:3

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COMPLAINT

14.

Credit Repair Cloud provides CRC Users with software (the “Software”) that provides, among other things, a customer-relationship management (“CRM”) system. Through the CRM system, Users can track and organize customer details and activity, including customer names, contact information, the date they signed up for credit-repair services, and whether customers are up-to-date on their payments for credit-repair services.

15.

The Software allows CRC Users to import and review their customers’ credit reports, and the Software will automatically flag negative items on customers’ credit reports for Users.

16.

The Software contains a database of over 100 template-dispute letters that the Software will automatically pre-populate with customer information, allowing CRC Users to generate letters to mail to consumer-reporting agencies disputing information on customers’ credit reports.

17.

The Software allows CRC Users to track whether a particular disputed item on a consumer’s credit report has been validated, whether it has been found to be inaccurate or incomplete, or whether it cannot be verified. 18.

The Software contains template contracts for CRC Users to supply to their customers.

19.

CRC Users can connect the Software with a third-party billing platform that allows CRC Users to easily set up monthly recurring billing for their customers. 20.

Through the Software, CRC Users can track customer activity and key performance indicators, such as average revenue.

21.

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 4 of 17 Page ID #:4

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COMPLAINT

22.

Credit Repair Cloud makes clear on its website that the goal for CRC Users is to remove derogatory information from, or improve, their customers’ credit history, credit record, or credit rating. In a section of its website entitled, “Introduction: How Does Credit Repair Work,” Credit Repair Cloud lays out steps for disputing “negative items” with the three nationwide consumer reporting agencies using the template letters the company provides. The final step listed on that page is: “Over time negative items are corrected, and the consumer’s score goes up! The client is thrilled and keeps paying your monthly fee!” On the same page, in response to the question, “How do successful Credit Repair companies make a profit,” Credit Repair Cloud states that such companies, among other things, “Deliver what they promise.”

23.

The template marketing materials that Credit Repair Cloud provides to Users, including printable pamphlets, fliers, and business cards, make clear what those “promises” are. Those marketing materials include statements such as: “Most people can raise their credit scores by 50-100 points or more by following our program”; “Credit issues? We can help! Most credit reports contain errors that can lower your score and keep you from living the life you deserve”; and “We can get your life back, so you can … get approved for a mortgage; get approved for your dream car; get approved for credit cards.”

24.

In addition to providing instructions and materials for Users, Credit Repair Cloud facilitates networking among Users through social media as well as through inperson gatherings. Credit Repair Cloud hosts an annual credit-repair conference, and it created a private community chat group on Facebook, through which Users solicit feedback on their websites and their advertisements, inquire about fee structures, or ask questions regarding, among other things, legal compliance issues related to credit-repair. The private group provides an opportunity for Users to ask questions to other members of the Facebook group, and Daniel Rosen participates in responding to questions. Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 5 of 17 Page ID #:5

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COMPLAINT

Role of Daniel Rosen in Credit Repair Cloud 25.

Rosen is the sole owner and director of Credit Repair Cloud and has managerial responsibility for the company.

26.

Rosen controls Credit Repair Cloud’s finances, as well as the content of the Software and the Credit Repair Cloud training programs. 27.

Rosen writes blog posts that are posted on the Credit Repair Cloud website in which he provides advice to prospective and active CRC Users regarding, among other things, how to convert prospective customers into active paying customers and how and when to collect fees.

29.

Rosen wrote a book about how to start and run a credit-repair business, which included template-dispute letters, and he hosts a podcast on which he has interviewed successful CRC Users. Rosen’s book and podcast are advertised on the Credit Repair Cloud website.

30.

Rosen also sends emails directly to prospective and current CRC Users in which he, among other things, markets Credit Repair Cloud’s training programs and provides tips on how to remove items from consumers’ credit reports. CRC Users Have Been Violating the TSR by Telemarketing and Charging Advance Fees to Consumers 31.

CRC Users offer credit-repair services.

32.

At least some, and likely many, Users are engaged in telemarketing, and therefore they are required to comply with the TSR. At least some, and likely many, Users advertise toll-free telephone numbers on their websites and on social-media websites and conduct telephone calls with consumers in more than one state to induce those consumers to purchase their credit-repair services. Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 6 of 17 Page ID #:6

Page 8

COMPLAINT

33.

Nevertheless, at least some, and likely many, such Users have been charging fees to consumers well in advance of the waiting period imposed by the TSR. Specifically, at least some, and likely many, Users charge consumers an initial fee at the time of enrollment in credit-repair services, followed by monthly recurring fees. 34.

Therefore, such Users have been violating the TSR.

35.

As discussed below, Credit Repair Cloud and Rosen have encouraged and facilitated both the use of telemarketing and the charging of advance fees by Users. Credit Repair Cloud and Rosen Have Encouraged CRC Users to Telemarket their Credit-Repair Services 36.

Credit Repair Cloud and Rosen have encouraged the use of telemarketing to sell credit-repair services.

37.

For example, Credit Repair Cloud encourages CRC Users to provide their telephone number on their websites because “[s]ome people want to speak to a real person.” Also, the template websites Credit Repair Cloud provides to Users include tollfree telephone numbers and stock language instructing potential customers to call Users. And Credit Repair Cloud includes links on its website to some of its successful Users’ websites, which in turn advertise toll-free telephone numbers. 38.

Through blog posts available on the Credit Repair Cloud website, his book, and his podcast, Rosen encourages Users to conduct telephone sales calls. For instance, in a July 26, 2015 blog post on Credit Repair Cloud’s website titled “Creating a Killer Sales Script for Credit Repair Services,” Rosen provides advice regarding what to include in a successful sales call. In that post he writes: “When creating a script or training your sales representatives to communicate with prospects, especially over the phone, building in opportunities to share their passion and energy is key.” 39.

Credit Repair Cloud and Rosen also provide Users with template sales scripts to use during telemarketing calls and give advice on how to approach and handle sales calls. They distribute such scripts, including one entitled, “The Perfect Sales Script Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 7 of 17 Page ID #:7

Page 9

COMPLAINT

for Credit Repair Leads,” in Credit Repair Cloud training courses, including the Master Class course taught by Rosen.

Credit Repair Cloud and Rosen Have Encouraged and Facilitate CRC Users’ Charging of Advance Fees 40.

Credit Repair Cloud and Rosen have encouraged CRC Users to charge consumers at enrollment, with monthly fees thereafter. 41.

Credit Repair Cloud advises Users to charge an initial fee after doing “some initial document processing,” followed by monthly recurring fees. In the FAQ page on its website, in response to the question, “Can I charge upfront fees for Credit Repair,” Credit Repair Cloud states:

This is how all successful credit repair companies get paid: …they import a report and send off a round of letters (about 10 mins of work) and then they charge a ‘1st work fee.’ Then every month they send off another round of letters or click to update status of items that were removed (about 5 minutes of work) and they charge a monthly fee. This is why the monthly recurring model [of charging] works so well for credit repair.

42.

Credit Repair Cloud’s materials guide Users to charge initial fees followed by monthly recurring fees. For example, the template contracts provided by Credit Repair Cloud are prepopulated with blanks for Users to fill in amounts for the “first work” fee and the monthly fee.

43.

And the Software integrates a billing platform that allows Users to charge an enrollment or first-work fee, as well as monthly recurring fees. Rosen encourages Users to sign up for this billing platform, which he says will “pay[] for itself in the extra revenue it collects for you.”

44.

Neither Credit Repair Cloud nor Rosen instruct or encourage Users to wait to charge fees until after they have provided the consumer a consumer report, issued more than six months after the promised results have been achieved. Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 8 of 17 Page ID #:8

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COMPLAINT

45.

Credit Repair Cloud further encourages the charging of advance fees by holding out as models certain Users who employ a business model that violates the TSR. 46.

In many of Credit Repair Cloud’s social-media postings and on its website, it advertises a Millionaire’s Club, showcasing Users who have obtained $1 million in revenue and suggesting, though its advertisements, that new Users can also achieve the same success.

47.

For instance, Credit Repair Cloud advertises that Users can “build [their] dream business” and “learn how to become a credit repair millionaire from industry leaders through a built-in membership community and a simple business management platform.”

48.

Credit Repair Cloud highlights the business practices, business models, and websites of some of the Users who are members of the Millionaires Club, and such Users also discuss their business model and success at in-person gatherings. At least some of the Users who are showcased as Millionaires telemarket and charge advance fees in violation of the TSR.

49.

Rosen himself encourages Users to charge consumers enrollment fees and monthly recurring fees, including through his blog posts available on the Credit Repair Cloud website, his book, and his podcast.

50.

For instance, in his book, Rosen writes: “People charge in different ways: flat fee, pay per deletion, etc. But of all the methods we see, charging a one-time ‘first work’ fee followed one month later by affordable, recurring monthly payments is always the ticket to high revenue. Since each client takes less than 5 minutes of processing per month (after setup), a small reasonable monthly fee is appropriate.”

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 9 of 17 Page ID #:9

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COMPLAINT

Credit Repair Cloud’s and Rosen’s Knowledge of CRC Users’ Violations of the TSR 51.

Credit Repair Cloud and Rosen have known or have consciously avoided knowing that its Users were telemarketing and charging advance fees in violation of the TSR.

52.

Through, among other things, social-media interaction, in-person networking gatherings, interviews of Users, access to information regarding Users’ fee structure, and review of Users’ business models, including but not limited to those of the Millionaire’s Club members, Credit Repair Cloud and Rosen have been aware that Users were actually engaging in those practices.

53.

Credit Repair Cloud employees have been aware that Users conduct telephone sales calls with consumers in more than one state. For example, on his podcast, Rosen discussed the telemarketing tactics of a particular CRC User, which included the fact that such User was making or receiving telephone calls to sell his credit-repair services to consumers. And through their administrative access on the back-end of the Software, Rosen and Credit Repair Cloud employees who provide User support are able to see the Software from the User’s perspective, including information showing that Users’ customers reside in more than one state.

54.

Credit Repair Cloud and Rosen have known or consciously avoided knowing that CRC Users charge advance fees. Through the back-end of the Software, Credit Repair Cloud employees, including Rosen, can view Users’ fee structures, which are outlined in the Software for anyone enrolled in the integrated subscription billing service, as well as in Users’ individual customer contracts. Credit Repair Cloud employees, including Rosen, in fact reviewed CRC Users’ revenue to identify members of the Millionaire’s Club.

55.

Through the Master Class and in training materials, Credit Repair Cloud and Rosen have helped Users build their websites and provided template content for those Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 10 of 17 Page ID #:10

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COMPLAINT

websites. These websites routinely include information regarding fee structure such as monthly fees and enrollment fees.

VIOLATIONS OF THE TSR 56.

The Bureau is authorized to enforce the Telemarketing Act and the TSR with respect to the offering or provision of a consumer-financial product or service subject to the CFPA. 15 U.S.C. § 6105(d). A consumer-financial product or service is defined by the CFPA to include, among other things, “providing financial advisory services … including … credit counseling” and “collecting, analyzing, maintaining, or providing consumer report information, including information relating to the credit history of consumers.” 12 U.S.C. § 5481(15)(A)(viii), (ix). 57.

The TSR defines a “seller” as “any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration.” 16 C.F.R. § 310.2(dd). 58.

The TSR defines a “telemarketer” as “any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer….” 16 C.F.R. § 310.2(ff).

59.

The TSR defines “telemarketing” in relevant part as “a plan, program, or campaign which is conducted to induce the purchase of goods or services … by use of one or more telephones and which involves more than one interstate telephone call.” 16 C.F.R. § 310.2(gg).

60.

Many CRC Users are engaged in “telemarketing” because they engaged in a plan, program, or campaign through which they made telephone calls to, or received telephone calls from, consumers in more than one state to induce those consumers to purchase credit-repair services. 16 C.F.R. § 310.2(gg). 61.

Many CRC Users are “sellers” under the TSR because, in connection with telemarketing transactions, they are persons who provide, offer to provide, or arrange for Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 11 of 17 Page ID #:11

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COMPLAINT

others to provide goods or services to consumers in exchange for consideration. 16 C.F.R. § 310.2(dd).

62.

Many CRC Users are “telemarketers” under the TSR because they are persons who, in connection with telemarketing, initiate or receive telephone calls to or from consumers residing in more than one state. 16 C.F.R. § 310.2(ff), (gg). 63.

It is an abusive telemarketing act or practice and a violation of the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating, until: a. the timeframe in which the seller has represented that all of the goods or services will be provided to that person has expired; and b. the seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 16 C.F.R. § 310.4(a)(2).

64.

CRC Users have made representations to consumers that their credit-repair services would remove derogatory information from, or improve, the consumers’ credit histories, credit record, or credit rating.

65.

CRC Users have routinely requested and received payment of a fee or consideration for their credit-repair services before: a. the timeframe in which they represented that all of the goods or services would be provided to consumers has expired; and b. they provided consumers with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 12 of 17 Page ID #:12

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COMPLAINT

Count I Violations of the TSR by Credit Repair Cloud and Rosen 66.

The Bureau re-alleges and incorporates by reference paragraphs 1–65. 67.

The TSR prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that constitutes deceptive or abusive conduct under the TSR. 16 C.F.R. § 310.3(b). 68.

Credit Repair Cloud is a person under the TSR. 16 C.F.R. § 310.2(y). 69.

Credit Repair Cloud has provided substantial assistance or support to CRC Users by, among other things, providing CRC Users with telemarketing scripts; template marketing materials; training on credit repair; advice on how and when to collect fees; and the Software, which automatically flags negative items on consumers’ credit reports, generates pre-populated dispute letters, integrates with other companies’ subscriptionbilling systems to facilitate the collection of advance fees, and includes a CRM system. 70.

Credit Repair Cloud has known or consciously avoided knowing that CRC Users were engaged in telemarketing and were requesting and receiving fees from consumers for credit-repair services before providing consumers with documentation in the form of a consumer report from a consumer-reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved, in violation of the TSR. 16 C.F.R. § 310.4(a)(2). 71.

Rosen has participated directly in Credit Repair Cloud’s provision of substantial assistance or support to CRC Users.

72.

Rosen, as the owner and CEO of Credit Repair Cloud, has had the authority to control, and he has controlled, Credit Repair Cloud’s provision of substantial assistance or support to CRC Users.

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 13 of 17 Page ID #:13

Page 15

COMPLAINT

73.

Rosen has known or has been recklessly indifferent to the fact that Credit Repair Cloud has been providing substantial assistance or support to CRC Users in violation of the TSR.

74.

Therefore, Credit Repair Cloud and Rosen have violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b). Count II Violations of the TSR by Rosen 75.

The Bureau re-alleges and incorporates by reference paragraphs 1–65. 76.

Rosen is a person under the TSR. 16 C.F.R. § 310.2(y). 78.

Rosen has provided substantial assistance or support to CRC Users by, among other things, conducting training on how to use the Software, how to convert prospective customers to paying customers, and how much to charge customers; emailing CRC Users with tips on how to remove items from consumers’ credit reports; and providing CRC Users with telemarketing scripts and advice on how and when to collect fees.

79.

Rosen has known or consciously avoided knowing that CRC Users were engaged in telemarketing and were requesting and receiving fees from consumers for credit-repair services before providing consumers with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved violates the TSR. 16 C.F.R. § 310.4(a)(2). 80.

Therefore, Rosen has violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b). Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 14 of 17 Page ID #:14

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COMPLAINT

VIOLATIONS OF THE CFPA Count III Violations of the CFPA by Credit Repair Cloud and Rosen 81.

The Bureau re-alleges and incorporates by reference paragraphs 1–65. 82.

Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful for any covered person or service provider to offer or provide to a consumer a financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).

83.

Under the CFPA, the term “service provider” means “any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.” 12 U.S.C. § 5481(26).

84.

CRC Users are “covered persons” under 12 U.S.C. § 5481(6)(A) because they offer or provide a consumer-financial product or service for use by consumers primarily for personal, family, or household purposes. The services offered or provided by CRC Users consist of financial-advisory services, including credit counseling, and “collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers ….” 12 U.S.C. § 5481(15)(A)(viii), (ix). 85.

Credit Repair Cloud and Rosen are “service providers” under 12 U.S.C. § 5481(26) because they participate in designing, operating, or maintaining CRC Users’ provision of credit-repair services, and they therefore provide a material service to CRC Users.

86.

The TSR is a federal consumer-financial law, as defined by the CFPA. 12 U.S.C § 5481(14); 15 U.S.C § 6105(d).

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 15 of 17 Page ID #:15

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COMPLAINT

87.

Therefore, Credit Repair Cloud’s and Rosen’s violations of the TSR, described in Counts I and II, constitute violations of section 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 16 of 17 Page ID #:16

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COMPLAINT

DEMAND FOR RELIEF WHEREFORE, the Bureau requests, under 12 U.S.C. § 5565, that the Court: a.

impose appropriate injunctive relief against Credit Repair Cloud and Rosen for their violations of the TSR and the CFPA; b.

grant additional injunctive relief as the Court may deem to be just and proper;

award monetary relief against Defendants, including but not limited to the refund of monies paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages;

award the Bureau civil money penalties; e.

award the Bureau the costs of bringing this action; and f.

award such other and additional relief as the Court may determine to be just and proper.

Dated: September 20, 2021 Respectfully submitted,

/s/ Leanne E. Hartmann Leanne E. Hartmann Amanda J. Krause (pro hac vice pending) Joyce Chen (pro hac vice pending) Jeffrey Blumberg (pro hac vice pending) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G St., NW Washington, DC 20552

Attorneys for Plaintiff Consumer Financial Protection Bureau Case 2:21-cv-07492 Document 1 Filed 09/20/21 Page 17 of 17 Page ID #:17

Amended complaint (Jan. 2022)

PDF of this document (22 pages)

Page 19

AMENDED COMPLAINT

Amanda J. Krause (NY Reg. #5323357) (Admitted pro hac vice) Tel.: (202) 445-8767 / Email: [email protected] Joyce Chen (NY Reg. #4717245) (Admitted pro hac vice) Tel.: (202) 702-4226 / Email: [email protected] Jeffrey Blumberg (MD Bar) (Admitted pro hac vice) Tel.: (202) 435-9687 / Email: [email protected] Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Fax: (202) 435-7722

Leanne E. Hartmann, CA Bar # 264787- Local Counsel 301 Howard St., Suite 1200 San Francisco, CA 94105 Phone: (415) 844-9787 Fax: (415) 844-9788 Email: [email protected]

Attorneys for Plaintiff Consumer Financial Protection Bureau

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION

Consumer Financial Protection Bureau,

Plaintiff, v.

Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud, and Daniel Rosen,

Defendants.

Case No. 2:21-cv-07492-VAP-JDE

AMENDED COMPLAINT FOR INJUNCTIVE RELIEF, RESTITUTION, DISGORGEMENT, DAMAGES, AND CIVIL MONEY PENALTIES

Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 1 of 22 Page ID #:162

Page 20

AMENDED COMPLAINT

Introduction 1.

Defendants Credit Repair Cloud and Daniel Rosen have provided substantial assistance or support to credit-repair businesses charging unlawful advance fees to consumers in violation of the TSR.

Venue is proper in this district because each Defendant is located, resides, or does business in this District. 12 U.S.C. § 5564(f). Parties 5.

Credit Repair Cloud is a privately owned California corporation that operates out of 12517 Venice Blvd., Los Angeles, CA 90066. Since 2013, Credit Repair Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 2 of 22 Page ID #:163

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AMENDED COMPLAINT

Daniel Rosen is the founder, owner, and CEO of Credit Repair Cloud. Rosen resides in Los Angeles, California.

The TSR and Credit-Repair Services 8.

A credit-repair business offers or provides to consumers services represented to remove derogatory information from, or improve, a consumer’s credit history, credit record, or credit rating.

Credit Repair Cloud offers an “all-in-one solution” for people to start and run their own credit-repair businesses. Credit Repair Cloud has advertised that it gives its Users “EVERYTHING you need to start a … credit repair business!” 12.

Credit Repair Cloud markets and sells its products and services to individuals and businesses nationwide.

13.

Credit Repair Cloud advertises that to start a credit-repair business using Credit Repair Cloud, “all you need is a computer, a phone and software.” 14.

Credit Repair Cloud targets as clients individuals who are seeking to start their own business and advertises that “credit repair is the lowest cost & most profitable Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 3 of 22 Page ID #:164

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business you can launch,” and that a credit repair business is “a very affordable startup” that costs “close to nothing.”

15.

Credit Repair Cloud further advertises that it provides substantial support to its Users in conducting their credit-repair businesses. Specifically, Credit Repair Cloud advertises: “We’ll hold you by the hand as you launch your very own Credit Repair Business,” and in a Credit Repair Cloud training video, Rosen states that Credit Repair Cloud “will be directly involved in your success.”

16.

17.

The Software allows CRC Users to import and review their customers’ credit reports, and the Software will automatically flag negative items on customers’ credit reports for Users. Credit Repair Cloud has advertised that Users can “import credit reports and generate credit audits with 1 click!”

18.

19.

The Software contains template contracts for CRC Users to supply to their customers.

Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 4 of 22 Page ID #:165

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21.

CRC Users can connect the Software with a third-party billing platform that allows CRC Users to easily set up monthly recurring billing for their customers. 22.

Through the Software, CRC Users can track customer activity and key performance indicators, such as average revenue.

23.

In addition to the Software, Credit Repair Cloud provides training programs on how to start and run a credit-repair business, as well as other resources to CRC Users, including telemarketing sales scripts, template marketing materials, and customizable website templates. Credit Repair Cloud advertises that its website templates are “professionally written and ready for your Credit Repair Business” and that Users can customize themselves “by easy point and click. No design experience necessary.” 24.

Credit Repair Cloud’s training includes guidance on how CRC Users can increase their sales by generating more leads—i.e., prospective customers—to add to a “sales funnel.” That guidance includes buying advertisements or enlisting affiliates, such as mortgage loan officers or auto lenders, to refer potential customers to the CRC User’s credit repair business.

25.

The Software includes an affiliate portal for Users to employ, which allows affiliates to enter contact information, including telephone numbers, of potential customers who are seeking to improve their credit.

26.

Credit Repair Cloud makes clear on its website that the goal for CRC Users is to remove derogatory information from, or improve, their customers’ credit history, credit record, or credit rating. In a section of its website entitled, “Introduction: How Does Credit Repair Work,” Credit Repair Cloud lays out steps for disputing “negative items” with the three nationwide consumer reporting agencies using the template letters the company provides. The final step listed on that page is: “Over time negative items are corrected, and the consumer’s score goes up! The client is thrilled and keeps paying your monthly fee!” On the same page, in response to the question, “How do successful Credit Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 5 of 22 Page ID #:166

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Repair companies make a profit,” Credit Repair Cloud states that such companies, among other things, “Deliver what they promise.”

27.

28.

In addition to providing instructions and materials for Users, Credit Repair Cloud facilitates networking among Users through social media as well as through inperson gatherings. Credit Repair Cloud hosts an annual credit-repair conference, and it created a private community chat group on Facebook, through which Users solicit feedback on their websites and their advertisements, inquire about fee structures, or ask questions regarding, among other things, legal compliance issues related to credit repair. The private group provides an opportunity for Users to ask questions to other members of the Facebook group, and Daniel Rosen participates in responding to questions. Role of Daniel Rosen in Credit Repair Cloud 29.

Rosen is the sole owner and director of Credit Repair Cloud and has managerial responsibility for the company.

30.

Rosen controls Credit Repair Cloud’s finances, as well as the content of the Software and the Credit Repair Cloud training programs. 31.

Rosen participates directly in the Credit Repair Cloud training programs, including teaching Credit Repair Cloud’s “Master Class” on credit repair, and he is the featured speaker on many of the training videos available to CRC Users. He appears in over 100 videos on Credit Repair Cloud’s social media pages, in which he teaches on Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 6 of 22 Page ID #:167

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credit repair, how to get rich with a credit repair business, how to quickly start a creditrepair business, how to use affiliates for marketing, and how to convert leads into sales, among other topics. Rosen writes blog posts that are posted on the Credit Repair Cloud website in which he provides advice to prospective and active CRC Users regarding, among other things, how to convert prospective customers into active paying customers and how and when to collect fees.

32.

33.

CRC Users offer credit-repair services to consumers. CRC Users have advertised that their credit-repair services can help consumers get approved for a mortgage or auto loan or help reduce loan interest rates. 35.

At least some, and likely many, CRC Users are engaged in telemarketing, and therefore they are required to comply with the TSR. 36.

CRC Users advertise their credit-repair services in various mediums, including social media, and receive calls from and make calls to potential customers during which such Users endeavor to sell their credit-repair services. Some Users partner with third-party affiliates, such as mortgage brokers or auto lenders, who refer potential customers to the User, after which the User receives a call from or makes a call to the potential customer. Credit Repair Cloud’s affiliate portal is used by such affiliates to Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 7 of 22 Page ID #:168

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provide telephone numbers of potential customers for Users to call. Some Users utilize a combination of advertising and affiliate referrals to generate leads. 37.

Many Users’ websites request that potential customers provide their telephone number in order to receive a free telephone credit consultation, during which the User describes to the potential customer how the User’s credit-repair services might help the potential customer improve or repair their credit. The credit consultation, therefore, is essentially a call to market and sell the User’s credit-repair services. 38.

For example, one CRC User (User A) uses the telephone to make sales calls to potential customers who provide their telephone number to User A through User A’s website. User A has utilized Credit Repair Cloud’s website template. The Credit Repair Cloud website template includes a telephone number for the User and a link to a web form that encourages potential customers to fill out their contact information, including a telephone number, that the User can employ to reach out to the potential customer to make a sale. User A has contacted potential customers who have completed the form to schedule a telephone call, during which User A would explain the credit repair process and answer the potential customer’s questions, and from there, enroll the customer in User A’s credit-repair services. User A conducted such telephone calls with customers in more than one state.

39.

User A has charged customers a fee at the time of enrollment, followed by recurring monthly fees.

40.

Another CRC User (User B) has conducted telephone sales calls with customers residing in more than one state, and has used a robo-dialer to conduct calls. User B also has conducted telephone sales calls with potential customers whose phone numbers have been input into Credit Repair Cloud’s affiliate portal by User B’s affiliates. 41.

User B has charged customers a fee for an initial consultation, followed by recurring monthly fees.

Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 8 of 22 Page ID #:169

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42.

A third CRC User (User C) has advertised on social media and paid social media influencers to advertise its credit-repair services, and has advertised its telephone number on its website next to a statement that reads: “CALL TODAY.” When potential customers have called the telephone number advertised on User C’s website, either an employee of User C would answer the call, or the potential customer would hear a prerecorded message that explained User C’s credit-repair services before being connected with an employee to enroll the customer in credit-repair services. User C has conducted such calls with customers residing in more than one state. 43.

User C has charged customers at the time of enrollment, followed by recurring monthly fees.

44.

A fourth CRC User (User D) has received referrals of potential customers from affiliates, including mortgage loan officers, after which User D would initiate a telephone call to the potential customer, or the potential customer would call User D. During such calls, User D has explained its credit-repair services, answered the potential customers questions, and then enrolled customers in User D’s credit-repair services. User D has conducted such calls with customers in more than one state. 45.

User D has charged customers for an initial consultation, followed by recurring monthly fees.

46.

None of the CRC Users described in paragraphs 38–45 have waited to request or receive payment from customers until after providing such customers with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. 47.

At least 80 additional CRC Users have advertised telephone numbers on their websites, sometimes accompanied by statements encouraging potential customers to call the CRC User to learn more about their services. Those same websites show that those Users charge fees at enrollment, on a recurring monthly basis, or both. Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 9 of 22 Page ID #:170

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48.

Therefore, CRC Users have been violating the TSR.

49.

Credit Repair Cloud and Rosen have encouraged the use of telemarketing to sell credit-repair services.

51.

Credit Repair Cloud encourages CRC Users to provide their telephone number on their websites because “[s]ome people want to speak to a real person.” 52.

In a Credit Repair Cloud training video, Rosen states that the most important information on a CRC User’s website should be at the top of the page, which should include a “visible call to action.” According to Rosen: “Call to action is a button … that should be visible in the top part above the fold. And [that button] should go to a form that populates right into your software. That’s going to get you the most leads that you follow-up with by phone.”

53.

In the same training video, Rosen further advises: “Make sure you have your phone number on the site. Yes, you do want to have your phone number. You do want leads to call you, this is sales and people need to reach you.” Rosen further states: “Remember the goal of the [web]site is lead generation. By having a … [web]site that pushes people to request information from you … they become leads in your sales funnel.”

54.

The template websites Credit Repair Cloud provides to Users include tollfree telephone numbers and stock language instructing potential customers to call Users, and the template marketing materials Credit Repair Cloud provides Users include tollfree telephone numbers along with language encouraging a potential customer to “call now for a free consultation and credit analysis.”

Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 10 of 22 Page ID #:171

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55.

Credit Repair Cloud has included links on its website to some of its successful Users’ websites, which in turn advertise toll-free telephone numbers. 56.

In addition to encouraging Users to advertise a telephone number to conduct sales, Credit Repair Cloud and Rosen—through the Credit Repair Cloud training program, blog posts available on the Credit Repair Cloud website, Rosen’s book, and Rosen’s podcast—advise Users on how to conduct a successful telephone sales call. 57.

For instance, in a July 26, 2015 blog post on Credit Repair Cloud’s website titled “Creating a Killer Sales Script for Credit Repair Services,” Rosen writes: “When creating a script or training your sales representatives to communicate with prospects, especially over the phone, building in opportunities to share their passion and energy is key.”

58.

In his book, Rosen provides guidance regarding how to conduct a telephone sales call, including guidance on what Users should say to prospective customers to induce the purchase of credit-repair services:

Convincing [potential customers] that your credit repair service can help them achieve their goals requires a softer, more engaging technique that begins the process of building trust. … First, it helps a great deal to think about sales as an extension of your marketing pipeline. Before each sales call, your sales reps should know how the prospect entered the pipeline. This will create context for their conversation. … [W]hen you’re working with leads and prospects it’s very important to keep detailed sales notes in your Credit Repair Cloud.

Ultimately, the goal is to invite the client to a free consultation where you will explain the credit repair process, how the bureaus work, give them a general timeline, help them order a credit report, and encourage them to start services.

59.

Credit Repair Cloud and Rosen also provide Users with template sales scripts to use during telemarketing calls. They distribute such scripts, including one entitled, “The Perfect Sales Script for Credit Repair Leads” in Credit Repair Cloud Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 11 of 22 Page ID #:172

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training courses, including the Master Class course taught by Rosen. “The Perfect Sales Script for Credit Repair Leads” includes multiple references to conducting sales calls by telephone.

Credit Repair Cloud and Rosen Have Encouraged and Facilitate CRC Users’ Charging of Advance Fees 60.

Credit Repair Cloud and Rosen have encouraged CRC Users to charge consumers at enrollment, with monthly fees thereafter. 61.

This is how all successful credit repair companies get paid: … they import a report and send off a round of letters (about 10 mins of work) and then they charge a ‘1st work fee.’ Then every month they send off another round of letters or click to update status of items that were removed (about 5 minutes of work) and they charge a monthly fee. This is why the monthly recurring model [of charging] works so well for credit repair.

62.

In Credit Repair Cloud’s training program, the company represents: “We have seen thousands of credit repair companies. The companies that do the best follow the other leaders in this business. They charge a ‘First Work’ fee when the client first signs up. Then they charge a small monthly fee each month.” 63.

64.

The Software integrates a billing platform, run by a third party, that allows Users to charge an enrollment or first-work fee, as well as monthly recurring fees. Rosen Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 12 of 22 Page ID #:173

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encourages Users to sign up for this third-party billing platform, which he says will “pay[] for itself in the extra revenue it collects for you.” 65.

Credit Repair Cloud has advertised that using the third-party billing platform integrated with Credit Repair Cloud’s Software allows Users to “[c]ollect recurring client payments from within Credit Repair Cloud” and that customer payments “can be triggered by events in Credit Repair Cloud.”

66.

Credit Repair Cloud further encourages the charging of advance fees by holding out as models certain Users who employ a business model that violates the TSR. 68.

69.

70.

Credit Repair Cloud has highlighted the business practices, business models, or websites of some of the Users who are members of the Millionaires Club, including Users B, C, and D, and some of such Users also discuss their business model and success at in-person gatherings. At least some of the Users who are showcased as Millionaires telemarket and charge advance fees in violation of the TSR, including Users B, C, and D. 71.

Rosen himself encourages Users to charge consumers enrollment fees and monthly recurring fees, including through training videos and in his blog posts available on the Credit Repair Cloud website, his book, and his podcast. Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 13 of 22 Page ID #:174

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72.

Credit Repair Cloud and Rosen have known or have consciously avoided knowing that its Users were telemarketing and charging advance fees in violation of the TSR.

74.

75.

Credit Repair Cloud and Rosen have known or consciously avoided knowing that Users conduct telephone sales calls with consumers in more than one state. They have knowledge or have consciously avoided knowing that CRC Users telemarket their credit-repair services because they have actively encouraged telemarketing to sell credit-repair services.

76.

CRC Users discuss their use of telemarketing with Rosen and Credit Repair Cloud employees.

77.

For example, User B emailed Rosen and another Credit Repair Cloud employee and referenced that the company uses a robo-dialer for its credit-repair business.

78.

User A’s owner discussed User A’s telemarketing tactics with Rosen during an interview Rosen conducted on his podcast, including the time of day User A has Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 14 of 22 Page ID #:175

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conducted sales calls with potential customers and what is discussed with those customers during calls to induce them to purchase User A’s credit-repair services. 79.

Rosen and Credit Repair Cloud employees who provide User support have administrative access that allows them to see the Software from a specific User’s perspective, including any call notes and information showing that Users’ customers reside in more than one state.

80.

Users A, B, C, and D all have information contained in the Software, including information showing that their customers reside in more than one state. 81.

Credit Repair Cloud and Rosen have known or consciously avoided knowing that CRC Users charge advance fees. They have knowledge or have consciously avoided knowing that CRC Users charge advance fees because they actively encourage the charging of advance fees.

82.

At least some CRC Users told Credit Repair Cloud employees that they charged advance fees.

83.

In the podcast interview Rosen conducted with User A referenced in paragraph 78, Rosen explained that he had reviewed User A’s website and knew that User A was charging customers monthly fees for credit-repair services. 84.

Through the back-end of the Software, Credit Repair Cloud employees, including Rosen, can view Users’ fee structures, which are outlined in the Software for anyone enrolled in the integrated subscription billing service, as well as in Users’ individual customer contracts. Credit Repair Cloud employees in fact viewed CRC Users’ Software portals to provide User support, and employees, including Rosen, have reviewed CRC Users’ revenue to identify members of the Millionaire’s Club. 85.

Users A, B, C, and D all charge consumers fees at the time of enrollment and monthly recurring fees, and they were featured by Credit Repair Cloud or Rosen on the Credit Repair Cloud website or other media after Credit Repair Cloud or Rosen Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 15 of 22 Page ID #:176

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reviewed those Users’ business models, websites, or information about those Users’ revenue that was contained in the Software.

86.

Through the Master Class and in training materials, Credit Repair Cloud and Rosen have helped Users build their websites, reviewed websites created by CRC Users, and provided template content for those websites. These websites routinely include information regarding fee structure such as monthly fees and enrollment fees. VIOLATIONS OF THE TSR 87.

The TSR defines a “telemarketer” as “any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer….” 16 C.F.R. § 310.2(ff).

90.

91.

Many CRC Users are engaged in “telemarketing” because they engaged in a plan, program, or campaign through which they made telephone calls to, or received Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 16 of 22 Page ID #:177

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telephone calls from, consumers in more than one state to induce those consumers to purchase credit-repair services. 16 C.F.R. § 310.2(gg). 92.

Many CRC Users are “sellers” under the TSR because, in connection with telemarketing transactions, they are persons who provide, offer to provide, or arrange for others to provide goods or services to consumers in exchange for consideration. 16 C.F.R. § 310.2(dd).

93.

95.

96.

CRC Users who telemarket their credit-repair services have routinely requested and received payment of a fee or consideration for their credit-repair services before:

Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 17 of 22 Page ID #:178

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a. the timeframe in which they represented that all of the goods or services would be provided to consumers has expired; and b. they provided consumers with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. Count I Violations of the TSR by Credit Repair Cloud and Rosen 97.

The Bureau re-alleges and incorporates by reference paragraphs 1–86. 98.

Credit Repair Cloud is a person under the TSR. 16 C.F.R. § 310.2(y). 100. Credit Repair Cloud has provided substantial assistance or support to CRC Users by, among other things, providing CRC Users with telemarketing scripts; template marketing materials; training on credit repair; advice on how and when to collect fees; and the Software, which automatically flags negative items on consumers’ credit reports, generates pre-populated dispute letters, integrates with other companies’ subscriptionbilling systems to facilitate the collection of advance fees, and includes a CRM system. 101. Credit Repair Cloud has known or consciously avoided knowing that CRC Users were engaged in telemarketing and were requesting and receiving fees from consumers for credit-repair services before providing consumers with documentation in the form of a consumer report from a consumer-reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved, in violation of the TSR. 16 C.F.R. § 310.4(a)(2). Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 18 of 22 Page ID #:179

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102. Rosen has participated directly in Credit Repair Cloud’s provision of substantial assistance or support to CRC Users.

103. Rosen, as the owner and CEO of Credit Repair Cloud, has had the authority to control, and he has controlled, Credit Repair Cloud’s provision of substantial assistance or support to CRC Users.

104. Rosen has known or has been recklessly indifferent to the fact that Credit Repair Cloud has been providing substantial assistance or support to CRC Users in violation of the TSR.

105. Therefore, Credit Repair Cloud and Rosen have violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b). Count II Violations of the TSR by Rosen 106. The Bureau re-alleges and incorporates by reference paragraphs 1–86. 107. The TSR prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that constitutes deceptive or abusive conduct under the TSR. 16 C.F.R. § 310.3(b). 108. Rosen is a person under the TSR. 16 C.F.R. § 310.2(y). 109. Rosen has provided substantial assistance or support to CRC Users by, among other things, conducting training on how to use the Software, how to convert prospective customers to paying customers, and how much to charge customers; emailing CRC Users with tips on how to remove items from consumers’ credit reports; and providing CRC Users with telemarketing scripts and advice on how and when to collect fees.

110. Rosen has known or consciously avoided knowing that CRC Users were engaged in telemarketing and were requesting and receiving fees from consumers for credit-repair services before providing consumers with documentation in the form of a Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 19 of 22 Page ID #:180

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consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved violates the TSR. 16 C.F.R. § 310.4(a)(2). 111. Therefore, Rosen has violated the TSR’s ban on assisting and facilitating others’ violations of that rule. 16 C.F.R. § 310.3(b). VIOLATIONS OF THE CFPA Count III Violations of the CFPA by Credit Repair Cloud and Rosen 112. The Bureau re-alleges and incorporates by reference paragraphs 1–86. 113. Section 1036(a)(1)(A) of the CFPA provides that it is “unlawful for any covered person or service provider to offer or provide to a consumer a financial product or service not in conformity with Federal consumer financial law, or otherwise commit any act or omission in violation of a Federal consumer financial law.” 12 U.S.C. § 5536(a)(1)(A).

114. Under the CFPA, the term “service provider” means “any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.” 12 U.S.C. § 5481(26).

115. CRC Users are “covered persons” under 12 U.S.C. § 5481(6)(A) because they offer or provide a consumer-financial product or service for use by consumers primarily for personal, family, or household purposes. The services offered or provided by CRC Users consist of financial-advisory services, including credit counseling, and “collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers ….” 12 U.S.C. § 5481(15)(A)(viii), (ix). 116. Credit Repair Cloud and Rosen are “service providers” under 12 U.S.C. § 5481(26) because they participate in designing, operating, or maintaining CRC Users’ Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 20 of 22 Page ID #:181

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provision of credit-repair services, and they therefore provide a material service to CRC Users.

117. The TSR is a federal consumer-financial law, as defined by the CFPA. 12 U.S.C § 5481(14); 15 U.S.C § 6105(d).

118. Therefore, Credit Repair Cloud’s and Rosen’s violations of the TSR, described in Counts I and II, constitute violations of section 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).

Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 21 of 22 Page ID #:182

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DEMAND FOR RELIEF WHEREFORE, the Bureau requests, under 12 U.S.C. § 5565, that the Court: a.

impose appropriate injunctive relief against Credit Repair Cloud and Rosen for their violations of the TSR and the CFPA; b.

grant additional injunctive relief as the Court may deem to be just and proper;

award monetary relief against Defendants, including but not limited to the refund of monies paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages;

award the Bureau civil money penalties; e.

award the Bureau the costs of bringing this action; and f.

award such other and additional relief as the Court may determine to be just and proper.

Dated: January 7, 2022

Respectfully submitted,

/s/ Amanda J. Krause Amanda J. Krause (Admitted pro hac vice) Joyce Chen (Admitted pro hac vice) Jeffrey Blumberg (Admitted pro hac vice) Leanne E. Hartmann (local counsel) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G St., NW Washington, DC 20552

Attorneys for Plaintiff Consumer Financial Protection Bureau Case 2:21-cv-07492-VAP-JDE Document 32 Filed 01/07/22 Page 22 of 22 Page ID #:183

Stipulation (Aug. 2024)

PDF of this document (27 pages)

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 1 of 27 Page ID #:2858

JS-6 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Consumer Financial Protection Bureau, Plaintiff, v.

Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud, et al., Defendants.

Case No.: 2:21-cv-07492-JFW (JDEx) STIPULATED FINAL JUDGMENT AND ORDER The Consumer Financial Protection Bureau (“Bureau”) commenced this civil action on September 21, 2021 to obtain injunctive and monetary relief and civil penalties from Daniel A. Rosen Inc., d/b/a Credit Repair Cloud (“CRC”), and Daniel Rosen (collectively, “Defendants”). The First Amended Complaint alleges violations of the Telemarketing Sales Rule (“TSR”), 16 C.F.R. § 310.3(b), and section 1036 of the Consumer Financial Protection Act (“CFPA”), 12 U.S.C. § 5536(a)(1)(A), in connection with the Defendants’ provision of substantial assistance or support to credit repair companies.

The Bureau alleged that Defendants violated the TSR and CFPA by providing CRC Tools and Services to CRC Users who used Telemarketing (by, for example,

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 2 of 27 Page ID #:2859 running advertisements that feature a number to call for more information, including such advertisements on websites or social media platforms, or otherwise encouraging Consumers to call a number) and charging Advance Fees (by, for example, requesting or receiving monthly fees, sign-up fees, first-work fees, document-processing fees, or consultation fees) in connection with providing Credit Repair Services. The Bureau and Defendants agree to entry of this Stipulated Final Judgment and Order (“Order”), without adjudication of any issue of fact or law, to settle and resolve all matters in dispute arising from the conduct alleged in the First Amended Complaint. FINDINGS 1.

This Court has jurisdiction over the parties and the subject matter of this action.

Defendants neither admit nor deny the allegations in the First Amended Complaint, except as specified in this Order. For purposes of this Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.

Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order and any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Order. Each Party agrees to bear its own costs and expenses, including, without limitation, attorneys’ fees.

Entry of this Order is in the public interest.

DEFINITIONS 5.

The following definitions apply to this Order:

a. “Active Consumer” means any Consumer identified as a client in CRC’s software for whom an activity (including but not limited to importing or providing credit reports or scores, creating or sending dispute letters, making changes or associating notes to Consumer profiles, or charging

Page 43

Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 3 of 27 Page ID #:2860 Consumers any fees) was logged on CRC’s software in the past 12 months.

b. “Advance Fee” means any fee or consideration requested or received from a Person for Credit Repair Services before: (1) the time frame in which the Seller has represented all of the goods or services will be provided to that Person has expired; and (2) the Seller has provided the Person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. Examples of fees that constitute Advance Fees include:

i. Fees charged at or around the time a Customer agrees to enroll in Credit Repair Services, regardless of whether those fees are called sign-up fees, first-work fees, document-processing fees, or consultation fees;

ii. Monthly recurring fees; and iii. “Pay-per-delete” fees charged at the time or shortly after an item is removed from a consumer’s credit report.

c. “Certification Program” means the program that Defendants are required to develop, implement, and maintain under Paragraph 8 of this Order to screen whether Users are Telemarketing and charging Advance Fees.

d. “Clearly and Prominently” means:

i. In textual communications (e.g., printed publications or words displayed on the screen of an electronic device), the disclosure must be of a type size and location sufficiently noticeable for an

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 4 of 27 Page ID #:2861 ordinary Person to read and comprehend it, in print that contrasts with the background on which it appears;

ii. In communications disseminated orally or through audible means (e.g., radio or streaming audio), the disclosure must be delivered in a volume and cadence sufficient for an ordinary Person to hear and comprehend it;

iii. In communications disseminated through video means (e.g., television or streaming video), the disclosure must be in writing in a form consistent with subsection (i), and must appear on the screen for a duration sufficient for an ordinary Person to read and comprehend it;

iv. In communications made through interactive media such as the internet, online services, and software, the disclosure must be unavoidable and presented in a form consistent with subsection (i); v. In communications that contain both audio and visual portions, the disclosure must be presented simultaneously in both the audio and visual portions of the communication; and vi. In all instances, the disclosure must be presented before the Person incurs any financial obligation, in an understandable language and syntax, and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with the Person.

e. “Consumer” means an individual or an agent, trustee, or representative acting on behalf of an individual.

f. “Compliance Monitoring Program” means the program that Defendants are required to develop, implement, and maintain under

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 5 of 27 Page ID #:2862 Paragraph 9 of this Order to monitor whether Users are Telemarketing and charging Advance Fees.

g. “Corporate Defendant” means Daniel A. Rosen, Inc. d/b/a Credit Repair Cloud, and its successors and assigns. h. “CRC Tools and Services” means any goods or services Defendants offer or provide to Persons to support the offering or provision of Credit Repair Services to Consumers and includes, but is not limited to, the Credit Repair Cloud customer-relationship management software; written or oral training materials; sales or marketing scripts; template contracts; template dispute letters; website domains; website templates; credit monitoring services; written publications including books, blog posts, and manuals; and social media groups.

i. “Credit Repair Service” means any goods or services represented to remove derogatory information from, or improve, a Person’s credit history, credit record, or credit rating.

j. “Customer” means any Person who is or may be required to pay for goods or services offered through Telemarketing. k. “Defendants” means both the Individual Defendant and the Corporate Defendant, individually, collectively, or in any combination. l. “Effective Date” means the date on which this Order is entered by the Court.

m. “Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or their delegate.

n. “Individual Defendant” means Daniel Rosen, including any other names by which he might be known.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 6 of 27 Page ID #:2863 o. “Person” means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity. p. “Related Consumer Action” means a private action by or on behalf of one or more Consumers or an enforcement action by another governmental agency brought against a Defendant based on substantially the same facts as described in the Complaint. q. “Seller” means any person who, in connection with a Telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the Customer in exchange for consideration. r. “Substantially Assisting” means providing “substantial assistance or support” within the meaning of § 310.3(b) of the TSR, and may include, but is not limited to:

i. providing customer-relationship management tools or services, including software;

ii. consulting in any form whatsoever;

iii. providing administrative support services; iv. performing customer service functions, including but not limited to, receiving or responding to consumer complaints; v. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication or advertisement. For purposes of this subpart, formulating or providing any advertising or marketing material includes formulating or providing template versions of the same; vi. formulating or providing, or arranging for the formulation or provision of, any marketing support material or service, including

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 7 of 27 Page ID #:2864 but not limited to, web or internet protocol addresses or domain name registration for any Internet websites, affiliate marketing services, or media placement services;

vii. providing names of, or assisting in the generation of, potential Customers;

viii. performing marketing, billing, or payment services of any kind; and ix. acting or serving as an owner, officer, director, manager, or principal of any entity.

Nothing in this definition shall be construed to limit any Defendant’s liability after the Effective Date for conduct otherwise prohibited by the CFPA or TSR, including § 310.3(b) of the TSR. s. “Telemarketer” means any Person who, in connection with telemarketing, initiates or receives telephone calls to or from a Customer or donor.

t. “Telemarketing” means 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. Telemarketing calls include calls conducted using any type of telephone technology, such as traditional, analog, Internet, cloud-based, cellular, Voice Over Internet Protocol (“VoIP”), and other telephone systems, with or without camera or video. Examples of conduct that constitute Telemarketing include: i. Initiating telephone calls to potential Customers or hiring others to call Customers to market or sell Credit Repair Services, if at least two of the telephone calls are interstate calls.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 8 of 27 Page ID #:2865 ii. Running advertisements on websites, social media, billboards, TV, or radio to market their Credit Repair Services that feature a number to call for more information.

iii. Emailing or mailing a letter saying they can increase Customers’ credit scores. The email or letter encourages recipients to call to learn more about the service.

iv. Hiring someone else to engage in Telemarketing the Person’s Credit Repair Services.

u. “User” means any Person that offers or provides or has offered or provided Credit Repair Services to Consumers and has paid to use any CRC Tools and Services. The term “User” does not include Consumers who directly enrolled in or subscribed to any CRC Tools and Services that do not include billing and payment features and which are solely for personal, not commercial, use.

CONDUCT PROVISIONS I Prohibited Conduct IT IS ORDERED that:

Defendants and their officers, agents, servants, employees, attorneys, and all other persons in active concert or participation with them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained from Substantially Assisting any Person who any Defendant knows or consciously avoids knowing uses Telemarketing to market or sell Credit Repair Services and who requests or receives Advance Fees for those services. Nothing in this Order shall be read as an exception to this Paragraph.

Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from violating the TSR, 16 C.F.R. pt. 310, in connection with the offering

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 9 of 27 Page ID #:2866 or providing of Credit Repair Services. Nothing in this Order shall be read as an exception to this Paragraph.

II Affirmative Requirements IT IS FURTHER ORDERED that:

Within 60 days of the Effective Date, Defendants must develop, implement, and maintain a Certification Program to screen new and existing Users to determine whether those Users are Telemarketing their Credit Repair Services and charging Advance Fees. The Certification Program shall include a requirement that all Users submit to Defendants a certification, within 90 days of the Effective Date for Users who subscribed or enrolled to CRC’s software before the Certification Program was implemented or within 30 days of becoming a new User after the Certification Program is implemented, and annually thereafter, that:

a. Identifies any other Users with whom they share common ownership, including affiliated companies, parent companies, and subsidiaries; b. Certifies whether the User has engaged in or used Telemarketing to market its Credit Repair Services during the preceding 12 months; c. Certifies whether the User will engage in or use Telemarketing to market its Credit Repair Services during the next 12 months; d. Describes all fees the User charges for Credit Repair Services, including when Consumers are charged, any recurring fees or other consideration, and any preconditions to requesting or receiving payment; and e. If the User has engaged in or used Telemarketing or will engage in or use Telemarketing:

i. Certifies whether the User provides each Customer with a time frame in which all goods or services will be provided, and whether

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 10 of 27 Page ID #:2867 the User requests or receives payment of any fee or consideration before the expiration of that time frame; and ii. Certifies whether the User provides each Customer with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved, and whether the User requests or receives payment of any fee or consideration before doing so.

Within 120 days of the Effective Date, Defendants must develop, implement, and maintain a Compliance Monitoring Program to monitor new and existing Users to determine whether those Users are Telemarketing and charging Advance Fees. The Compliance Monitoring Program shall include: a. A system to monitor on an annual basis, on or around the anniversary date of the User enrolling or subscribing to CRC’s software, the total number of Active Consumers for whom the User is providing or has provided Credit Repair Services.

b. A requirement that Defendants perform the following audits to determine whether Users are Telemarketing:

i. If the monitoring system identifies that a User has provided Credit Repair Services to 150 or more Active Consumers within the prior 12-month period, then Defendants must conduct an audit of the User within 30 days. For purposes of this subparagraph, Users that have any common ownership, including affiliated companies, parent companies, and subsidiaries, shall be treated as the same User.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 11 of 27 Page ID #:2868 ii. Defendants must randomly select 50 Users per quarter for an audit who do not meet the criteria in Subparagraph (i) above. c. The audits required by Subparagraph (b) shall include, at a minimum: i. A review of the User’s website, and any other advertising or marketing material made available to Defendants, to determine whether the User’s website or other advertising or marketing material includes a telephone number for potential Customers to contact the User for more information about or to sign up for its Credit Repair Services.

ii. A review of the User’s fee structure to determine whether the User is charging a monthly fee, a first-work fee, or any other fee within the first six months of the Customer enrolling in Credit Repair Services.

d. After conducting the audit of a User required under Subparagraph (b), Defendants must make the determination and follow the provisions required by Paragraph 11.

10.

If Defendants are unable to obtain the certification(s) from a User required by Paragraph 8, Defendants must immediately revoke that User’s access to CRC’s software.

11.

For each User, Defendants must make a determination as to whether that User is Telemarketing and charging Advance Fees, and must take the following affirmative steps:

a. If Defendants determine that the User is charging Advance Fees for Telemarketed Credit Repair Services, then Defendants must immediately revoke that User’s access to CRC’s software and notify the Bureau of its determination within 5 days of the revocation of the User’s access.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 12 of 27 Page ID #:2869 b. If Defendants determine that the User is not charging Advance Fees for Telemarketed Credit Repair Services, then Defendants must document that determination with the reasons for it.

12.

Defendants must provide notice of this Order to: (1) existing Users within 30 days of the Effective Date, and (2) new Users, for a period of 5 years from the Effective Date, before they are provided access to any CRC Tools and Services. The notice shall be substantially in the form attached as Appendix A, and must Clearly and Prominently include the following:

a. A description of the Bureau’s lawsuit against Defendants; and b. A notice describing the TSR’s definition of Telemarketing and Advance Fees as applicable to the offering or provision of Credit Repair Services, including examples of what constitutes Telemarketing and Advance Fees as identified in the definitions of those terms in this Order. Defendants must require Users to certify that they have received and read the notice described in this paragraph. If any User fails to complete such certification within 30 days of delivery of the notice, Defendants must immediately revoke that User’s access to CRC’s software.

13.

Within 10 days of the Effective Date, Defendants must: a. Remove from all CRC Tools and Services any reference to soliciting potential Customers or contacting leads for Credit Repair Services by telephone or videoconferencing platforms; and b. Remove from all CRC Tools and Services any language or software feature that recommends that Users charge Consumers monthly fees for Credit Repair Services.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 13 of 27 Page ID #:2870 III.

Compliance Plan IT IS FURTHER ORDERED that:

14.

Within 60 days of the Effective Date, Defendants must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan designed to ensure that Defendants’ provision of CRC Tools and Services complies with all applicable laws that the Bureau enforces, including Federal consumer financial laws, and the terms of this Order (the “Compliance Plan”). The Compliance Plan must include, at a minimum:

a. Detailed steps for addressing each action required by this Order; b. A mechanism to ensure that the Chief Executive Officer is kept apprised of the status of compliance actions; and c. Specific timeframes and deadlines for implementation of the steps described above.

15.

The Enforcement Director will have the discretion to make a determination of non-objection to the Compliance Plan or direct Defendants to revise it. If the Enforcement Director directs Defendants to revise the Compliance Plan, Defendants must revise and resubmit the Compliance Plan to the Enforcement Director within 15 days unless the Bureau agrees in writing to extend that time. 16.

After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan, Defendants must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 14 of 27 Page ID #:2871 IV.

Role of the Executives IT IS FURTHER ORDERED that:

17.

Corporate Defendant’s Chief Executive Officer has the ultimate responsibility for ensuring that Corporate Defendant complies this Consent Order. 18.

Corporate Defendant’s Chief Executive Officer must review all plans and reports required by this Order, and any submissions to the Bureau prior to such submission.

19.

One year after the Effective Date, and yearly thereafter for a period of 5 years, Corporate Defendant must submit to the Enforcement Director an accurate written compliance progress report (the “Corporate Compliance Report”), the accuracy of which is sworn to under penalty of perjury by Corporate Defendant’s Chief Executive Officer, and which, at a minimum:

a. Describes the steps that the Chief Executive Officer has taken to reasonably assess whether Corporate Defendant is complying with the Compliance Plan, and each applicable paragraph and subparagraph of the Order;

b. Describes in detail whether and how Corporate Defendant has complied with the Compliance Plan, and each applicable paragraph and subparagraph of the Order, including the manner of verification of such compliance and any corrective actions taken to remedy potential noncompliance with the applicable requirement, paragraph, or subparagraph; and c. Attaches a copy of each Order Acknowledgment obtained under Section VIII, unless previously submitted to the Bureau. 20.

Corporate Defendant’s Chief Executive Officer must:

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 15 of 27 Page ID #:2872 a. Authorize whatever actions are necessary for Corporate Defendant to assess whether Corporate Defendant is complying with the Compliance Plan, and each applicable paragraph and subparagraph of the Order; b. Authorize whatever actions, including corrective actions, are necessary for Corporate Defendant to fully comply with the Compliance Plan, and each applicable paragraph and subparagraph of the Order; and c. Require timely reporting by management to the Chief Executive Officer on the status of compliance obligations.

MONETARY PROVISIONS V Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:

21.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the First Amended Complaint, Corporate Defendant must pay a civil money penalty of $1,000,000 to the Bureau. 22.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law alleged in the First Amended Complaint, Individual Defendant must pay a civil money penalty of $2,000,000 to the Bureau. 23.

Within 10 days of the Effective Date, Corporate Defendant must pay the full amount of its civil money penalty, and Individual Defendant must pay $500,000 of his civil money penalty. Individual Defendant must pay the remaining $1,500,000 of his civil money penalty within 90 days of the Effective Date. Defendants must make these payments by wire transfers to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions.

24.

The civil money penalties paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 16 of 27 Page ID #:2873 25.

Defendants must treat the civil money penalties paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not:

a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order; or b. Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.

26.

Defendants agree that each civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and, thus, as to Defendants, it is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).

VI Additional Monetary Provisions IT IS FURTHER ORDERED that:

27.

In the event of any default on Defendants’ obligations to make payment under this Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the Effective Date to the date of payment, and will immediately become due and payable.

28.

Defendants relinquish all dominion, control, and title to the funds paid under this Order to the fullest extent permitted by law and no part of the funds may be returned to Defendants.

29.

The facts alleged in the First Amended Complaint will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding based on the entry of the Order, including in a proceeding to enforce its rights to any payment or monetary judgment under this Order.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 17 of 27 Page ID #:2874 30.

Defendants acknowledge that their Taxpayer Identification Numbers (Social Security Number or Employer Identification Number), which Defendants previously submitted to the Bureau, may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. § 7701. 31.

Within 30 days of the entry of a final judgment, order, or settlement in a Related Consumer Action, Defendants must notify the Enforcement Director of the final judgment, order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Defendants based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Defendants must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. 32.

Upon written request of a representative of the Bureau, any consumer reporting agency must furnish consumer reports to the Bureau concerning Individual Defendant under Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 18 of 27 Page ID #:2875 COMPLIANCE PROVISIONS VII Reporting Requirements IT IS FURTHER ORDERED that:

33.

Defendants must notify the Bureau of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against any Defendant; or a change in any Defendant’s name or address. Defendants must provide this notice at least 30 days before the development or as soon as practicable after the learning about the development, but in any case, no longer than 14 days after the development.

34.

Within 7 days of the Effective Date, each Defendant must: a. Designate at least one telephone number and email, physical, and postal addresses as points of contact that the Bureau may use to communicate with each Defendant;

b. Identify all businesses for which each Defendant is the majority owner, or that such Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses;

c. Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales; d. Identify Individual Defendant’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and e. Describe in detail Individual Defendant’s involvement in any business for which he performs services in any capacity or which he wholly or

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 19 of 27 Page ID #:2876 partially owns, including Defendant’s title, role, responsibilities, participation, authority, control, and ownership. 35.

Defendants must report any change in the information required to be submitted under Paragraph 34 at least 30 days before the change or as soon as practicable after learning about the change, whichever is sooner. 36.

One year after the Effective Date, Individual Defendant must submit to the Enforcement Director an accurate written compliance progress report sworn to under penalty of perjury (the “Individual Compliance Report”), which, at a minimum: a. Lists each applicable paragraph and subparagraph of the Order and describes in detail whether and how Individual Defendant has complied with each such paragraph and subparagraph of this Order; and b. Attaches a copy of each Order Acknowledgment obtained under Section VIII, unless previously submitted to the Bureau. VIII Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:

37.

Within 7 days of the Effective Date, each Defendant must submit to the Enforcement Director an acknowledgment of receipt of this Order, sworn under penalty of perjury.

38.

Within 30 days of the Effective Date, Corporate Defendant, and Individual Defendant, for any business for which he is the majority owner or which he directly or indirectly controls, must deliver a copy of the First Amended Complaint and this Order to each of its executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Order.

39.

For 5 years from the Effective Date, Corporate Defendant, and Individual Defendant, for any business for which he is the majority owner or which he directly or

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 20 of 27 Page ID #:2877 indirectly controls, must deliver a copy of the First Amended Complaint and this Order to any business entity resulting from any change in structure referred to in Section VII, any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of the Order before they assume their responsibilities. 40.

Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. §§ 7001-7006, within 30 days of delivery, from all persons receiving a copy of this Order under this Section. 41.

Ninety days from the Effective Date, Defendants must provide the Bureau with a list of all persons and their titles to whom this Order was delivered through that date under Paragraphs 38 and 39 and a copy of all signed and dated statements acknowledging receipt of this Order under Paragraph 40. IX Recordkeeping IT IS FURTHER ORDERED that:

42.

Defendants must create, for at least 5 years from the Effective Date, the following business records for Corporate Defendant and for any other business related to Credit Repair Services for which Individual Defendant is a majority owner or which he directly or indirectly controls:

a. All documents and records necessary to demonstrate full compliance with the Compliance Plan and each provision of this Order, including all submissions to the Bureau.

b. For each User, a record of:

i. The User’s business name, address, telephone number, and email address;

ii. The date on which any CRC Tools and Services were purchased;

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 21 of 27 Page ID #:2878 iii. A copy of any promotional or welcome materials provided; and iv. If applicable, the date the User stopped using CRC Tools and Services, or the date and reason the User had access to any CRC Tools and Services revoked.

c. Records showing, for each employee providing User support or training, that Person’s:

i. Name, telephone number, email, physical, and postal address; ii. Job title or position;

iii. Dates of service; and, iv. If applicable, the reason for termination. Defendants must retain these documents for at least 5 years after creation and make them available to the Bureau upon the Bureau’s request. 43.

Defendants must maintain, for at least 5 years from the Effective Date or 5 years after creation, whichever is longer: a. All documents and records created by or provided to Defendants, including User certifications obtained pursuant to Paragraph 8, and documentation of Defendants’ determinations made pursuant to Paragraph 11 of this Order;

b. Copies or documentation of all CRC Tools and Services made available to Users; and c. All Consumer complaints and refund requests (whether received directly or indirectly, such as through a third party), and any responses to those complaints or requests.

Defendant must make these materials available to the Bureau upon the Bureau’s request.

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 22 of 27 Page ID #:2879 44.

All documents and records must be maintained in their original electronic format. Data should be centralized and maintained in such a way that access, retrieval, auditing, and production are not hindered.

X Notices IT IS FURTHER ORDERED that:

45.

Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Order in writing, with the subject line, “CFPB v. Daniel A. Rosen, Inc. d/b/a Credit Repair Cloud, et al., Case No. 21-07492,” and send them by email to [email protected]:

ATTN: Enforcement Director Consumer Financial Protection Bureau Office of Enforcement XI Cooperation with the Bureau IT IS FURTHER ORDERED that:

46.

Defendants must cooperate fully with the Bureau in this matter and in any investigation or litigation related to or associated with the conduct described in the First Amended Complaint. Defendants must provide truthful and complete information, evidence, and testimony. Individual Defendant must appear, and Corporate Defendant must cause Corporate Defendant’s officers, employees, representatives, or agents to appear, for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 14 days written notice, or other reasonable notice,

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 23 of 27 Page ID #:2880 at such places and times as the Bureau may designate, without the service of compulsory process.

47.

Within 30 days of the Effective Date, Corporate Defendant must complete all steps necessary to register for the Bureau’s Company Portal, including providing the information required at www.consumerfinance.gov/company-signup and in the Bureau’s Company Portal Boarding Form (OMB No. 3170-0054). Corporate Defendant, in connection with responding to consumer complaints and inquiries on the Company Portal, must comply with the timely response requirements set forth in § 1034(b)(1)-(3) of the CFPA, 12 U.S.C. § 5534(b).

XII Compliance Monitoring IT IS FURTHER ORDERED that:

48.

Within 14 days of receipt of a written request from the Bureau, Defendants must submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; provide sworn testimony; or produce documents. 49.

For purposes of this Section, the Bureau may communicate directly with Defendants, unless Defendants retain counsel related to these communications. 50.

Defendants must permit Bureau representatives to interview any employee or other person affiliated with Corporate Defendant who has agreed to such an interview regarding: (a) this matter; (b) anything related to or associated with the conduct described in the First Amended Complaint; or (c) compliance with this Order. The person interviewed may have counsel present.

51.

Nothing in this Order will limit the Bureau’s lawful use of compulsory process under 12 C.F.R. § 1080.6.

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United States District Court Judge United States District Court Judge United States District Court Judge United States District Court Judge

Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 24 of 27 Page ID #:2881 XIII Transfer or Assignment of Operations 52.

Should Defendants seek to transfer or assign all or part of their operations that are subject to this Order, Defendants must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Order.

XIV Retention of Jurisdiction IT IS FURTHER ORDERED that: 53.

The Court will retain jurisdiction of this matter for the purpose of enforcing this Order.

IT IS SO ORDERED.

DATED this 12th day of August, 2024.

_________________________________

UUnite d States District Court Judge United States District Court Judge United S tates District Court Judge United States District Court Judget

United States District Court Judgeudge

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 25 of 27 Page ID #:2882 Appendix A Notice to Users The notice shall state as follows:

On September 20, 2021, the Consumer Financial Protection Bureau (the “CFPB” or “Bureau”) sued Daniel A. Rosen, Inc. d/b/a Credit Repair Cloud and its owner, Daniel Rosen, alleging that they violated various consumer financial protection laws and regulations. The case was filed in Federal District Court in Los Angeles, California, and is captioned Consumer Financial Protection Bureau v. Daniel A. Rosen Inc., et al., 21-07492-JFW.

The Bureau and the Defendants have agreed to settle the case. A copy of the Stipulated Judgment and Order (the “Order”) entered in the case is attached to this notice. As part of that settlement, Credit Repair Cloud and Daniel Rosen are required to provide you with this notice about certain legal obligations arising from the Order.

The Order expressly prohibits Credit Repair Cloud and Daniel Rosen from providing substantial assistance or support to any credit repair organization that markets or sells its services through telemarketing and violates the Telemarketing Sales Rule (“TSR”) by charging certain fees.

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.” 16 C.F.R. § 310.2(gg). As identified in the Order, examples of conduct that constitutes telemarketing in this context include:

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 26 of 27 Page ID #:2883  Initiating telephone calls to potential customers or hiring others to call customers to market or sell credit-repair services, if at least two of the telephone calls are interstate calls.

 Running advertisements on websites, social media, billboards, TV, or radio to market their credit-repair services that feature a number to call for more information.

 Emailing or mailing a letter saying they can increase customers’ credit scores. The email or letter encourages recipients to call to learn more about the service.

 Hiring someone else to engage in telemarketing the credit repair organizations’ services.

As identified in the Order, Credit Repair Cloud and Daniel Rosen may not assist any credit repair organization that charges advance fees and either initiates phone calls to consumers or receives phone calls from consumers in response to general marketing, or hires someone else to do so. There is no exemption for companies based on the type of telephone technology used; it makes no difference whether a company makes or receives calls using low-tech equipment or the newest technology. And there is no exemption for companies who speak to consumers via webcam or videoconferencing services or platforms. Under the TSR, credit repair organizations that market or sell their services over the phone may not request or receive payment of any fee for credit repair services until (i) the time frame in which they have represented all goods or services will be provided to that person has expired; and (ii) they have provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having

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Case 2:21-cv-07492-JFW-JDE Document 153 Filed 08/12/24 Page 27 of 27 Page ID #:2884 been issued more than six months after the results were achieved. As identified in the Order, examples of advance fees in this context include:  Fees charged at or around the time a customer agrees to enroll in credit repair services, regardless of whether those fees are called sign-up fees, firstwork fees, document-processing fees, or consultation fees;  Monthly recurring fees; and  “Pay-per-delete” fees charged at the time or shortly after an item is removed from a consumer’s credit report.

The Order also requires Credit Repair Cloud and Daniel Rosen to implement a compliance program to determine whether its users are engaged in telemarketing or charging advance fees, and under certain circumstances, Credit Repair Cloud and Daniel Rosen must provide that information to the CFPB. If a credit repair organization markets and sells its services by phone and charges any fee before the waiting period required by the TSR, it may be violating the TSR. See 16 C.F.R. part 310. For more information about complying with the TSR, visit: https://www.ftc.gov/business-guidance/resources/complying-telemarketingsales-rule.