Fort Lauderdale, FL – May 22, 2020 – Greenspoon Marder filed a lawsuit on behalf of the National Association of Credit Service Organizations (“NACSO”) against the Consumer Financial Protection Bureau (“CFPB”), seeking a declaratory judgment to invalidate and prevent the agency’s abusive enforcement of an outdated regulation. The lawsuit was filed in the United States District Court for the Southern District of Florida on May 21, 2020. As shown in the exhibit to the lawsuit, a number of leading United States Congressmen are on record as supporting NACSO’s position.
NACSO, a nonprofit national association of credit repair organizations and their supporting vendors provide services to help improve consumers’ credit history, records or ratings. NACSO’s credit repair company members are regulated by the Credit Repair Organization Act (“CROA”), a federal statute passed by Congress in 1996. The CFPB doesn’t have the legal authority to regulate NACSO members under CROA as enacted by Congress, but in what appears to be an effort to regulate the industry out of business just when so many consumers are in need of this type of help, the CFPB is seeking to enforce an older, outdated regulation that requires companies to wait 6 months after completing all services until they can be paid for their work. Leading Congressional Representatives oppose the CFPB efforts and wrote to the CFPB warning it about its overreaching enforcement tactics- only to be substantively ignored.
In response to the CFPB’s application of outdated and inapplicable regulations to credit repair organizations, Greenspoon Marder filed a complaint for declaratory relief on behalf of NACSO, stating that applying superseded regulations is an “unconstitutional and a statutorily unauthorized, and thus unlawful, regulation infringing on the fully-protected speech of credit repair organizations.” The complaint explains that the arbitrary six-month waiting period “eviscerates” the ability of NACSO’s members to be paid for work they have already performed and unfairly places the full burden of a consumer’s credit status on the credit repair organization, despite factors entirely out of an organization’s control such as the current COVID-19 crisis.
The lawsuit asks the Court for: (1) a declaration that the TSR violates the United States Constitution and is therefore unenforceable; (2) a declaration that the application of outdated regulations to credit repair organizations unlawfully exceeds the delegated statutory rulemaking authority under the Telemarketing Act and runs contrary to CROA; and (3) supplemental relief for NACSO; among other relief.
The CFPB has openly stated that it wants to shut down the entire private credit repair industry, an industry mainly comprised of thousands of small “mom & pop” businesses across the country. The CFPB has asserted that the larger credit bureaus should handle these services instead, potentially intending to put thousands of Americans out of work through its attempts to seek to enforce outdated regulations.
The day after NACSO filed its action seeking protection from the Courts, the CFPB proceeded the Friday before Memorial Day to launch a lawsuit against one of NACSO’s members, riddled with false information and inflated numbers. Greenspoon Marder expects the CFPB to further retaliate, and NACSO is prepared to take steps to alert the White House and Congressional leaders.
“We expect the CFPB to retaliate in a continued, unlawful manner, attempting to use Operation Chokepoint style, illegal tactics to further silence members of the trade association. The hard data- which the CFPB ignores, plainly shows that these small businesses are compliant with federal law and helping thousands of American consumers. We are spending the weekend praying with our many members across the country that the court system review and agree with the will of Congress, and put the brakes on the CFPB’s retaliatory actions.” NACSO member who preferred to remain anonymous out of fear of retaliation.
The Greenspoon Marder team representing NACSO includes
Robby H. Birnbaum, Beth-Ann E. Krimsky and Lawren A. Zann.
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