Recently the Ninth Circuit Court of Appeals issued its opinion in the appeal of Stout v. FreeScore, LLC concerning the scope of the Credit Repair Organizations Act (“CROA”). The result is not good for advertisers of credit counseling, debt relief services, credit monitoring, and similar products and services, principally because it further confuses application of CROA across the nation. The Ninth Circuit’s decision is a departure from the text of CROA and falls in line with a broad view that has been asserted by the Federal Trade Commission and class action attorneys. Accordingly, companies advertising credit-related products and services will need to consider CROA compliance as part of their overall compliance program.
In this case, the defendant offered credit scores, reports, and consumer credit information via an online website and television advertising. The plaintiffs in a putative class action alleged that the defendants were subject to the strict requirements of CROA. The district court dismissed the action for failure to state a claim. On appeal, the panel reversed the judgment of the district court and remanded the case for further proceedings. The appeals court held that the defendant was a “credit repair organization” because the defendant, through the representations it made on its website and in its television advertising, offered a service, in return for the payment of money, for the implied purpose of providing advice or assistance to consumers with regard to improving the consumer’s credit record, credit history, or credit rating.
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