The court of appeals reversed the dismissal of Stout’s putative class action against FreeScore under the Credit Repair Organizations Act (CROA). The district court concluded that FreeScore is not a “credit repair organization” as defined in the CROA. The court of appeals reversed because FreeScore, “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.”
FreeScore is an online “provider of credit scores, reports and consumer credit information.” Its website says a lot about the importance of staying out of financial trouble, the importance of knowing one’s credit score to staying out of financial trouble, etc. E.g.:
See your Credit Report & FREE Credit Scores online today and start your climb to financial freedom… Now more than ever, you need to ensure your Credit Report is clean. Lending standards are extremely strict. Poor Credit Scores and a damaged Credit Report could put your dreams of home ownership, a new car or even a new career on hold today – and haunt you for years to come. You can’t afford to bury your head in the dirt when it comes to your credit any longer.
I’m omitting a lot, but it goes on in this vein extensively, and juxtaposes these statements with offers to enroll in its service so that users can “see what lenders see,” “[G]et your complete credit picture,” etc. FreeScore’s reports allegedly allow users to spot errors “so you can quickly address incorrect information,” “[g]et your Scores to negotiate your best mortgage, auto and loan interest rates,” etc. TV ads tout FreeScore as some sort of way to address the problem of being hounded by creditors, though the direct statements are in the vein “you can’t fix errors on your credit report if you haven’t seen it… [K]nowing your credit score could be the difference between being down there, and being up here.” The tagline: “Life costs more without FreeScore.”
FreeScore also talks a bunch about FICO scores, including
[H]ow can you deal with or improve a FICO® score? It’s a long process that starts with knowing more about all the details of your overall financial situation. Many people take years to micromanage their accounts, attempting to repair a damaged credit score, and many find that the best solution is preventative credit maintenance. Learning to manage your credit starts with getting informed about your credit. That means utilizing services like credit monitoring to find out what may be changing in your credit history report; those changes can have an immediate effect in your credit score.
FreeScore requires an initial fee (which must be authorized at the time of an initial 7-day “free” trial), plus $29.95/month. The fine print at the bottom of the enrollment page that Stout used stated that FreeScore provided tools for monitoring credit information, but that “FreeScore and its benefit providers are not credit repair service providers and do not receive fees for such services, nor are they credit clinics, credit repair or credit services organizations or businesses, as defined by federal and state law.” The enrollment page also enumerated the “benefits” of membership, and explained that “Knowing All 3 Credit Scores Gives You the Power to Negotiate the Best Rates Possible.”
The district court held that FreeScore wasn’t a “credit repair organization” because it didn’t promise to improve consumers’ credit. It promised to provide a credit score, but it was up to the consumer to improve it.
The court of appeals first turned to the plain language of the CROA, which was part of a statute that Congress intended courts to construe broadly to fulfill its remedial purpose. The CROA defines a credit repair organization as:
[A]ny person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of –
(i) improving any consumer’s credit record, credit history, or credit rating; or
(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i). (emphasis added)
Congress also found that consumers had been harmed by certain advertising and business practices of some credit repair companies, particularly consumers “of limited economic means and who are inexperienced in credit matters.” The purposes of the statute were to ensure that prospective clients were provided with the information necessary to make informed decisions, and to protect the public from “unfair or deceptive advertising and business practices by credit repair organizations.”
FreeScore “falls squarely within the CROA’s definition.” A covered person need not actually provide credit repair services to do so. Instead, it need only “represent that it can or will sell, provide, or perform a service for the purpose of providing advice or assistance to a consumer with regard to improving a consumer’s credit record, credit history, or credit rating.”
FreeScore’s ads represented that it provided a service “for the purpose of assisting a consumer in improving the consumer’s credit record, history or rating.” Citing an FTC case, the court held that the proper inquiry was to examine the “overall net impression” of an ad “to determine what message a viewer may reasonably ascribe to it.”
Here, FreeScore did more than provide credit reports. It advertised that its report allows consumers to “[s]pot damaging inaccuracies on [their] Free Credit Report at a glance so [they] can quickly address incorrect information dragging down [their] Credit Scores,” that it will “keep an eye on [consumers’] Credit Reports at all three bureaus 24/7 so [they] don’t have to,” and that “[i]nstant email alerts notify you when critical changes appear on your Credit Report so you can make corrections fast!” The TV ad similarly claimed “FreeScore.com even sends me an alert when there’s any change to my credit report.” “FreeScore clearly states that the express purpose of credit monitoring, through services such as email alerts, is so that steps may be taken to improve credit: ‘Learning to manage your credit starts with getting informed about your credit.’”
Further, FreeScore affirmatively represented that its services could improve, or help improve, consumers’ credit record, history, or rating. FreeScore’s FICO page asks, “So how can you deal with or improve a FICO® score?” It continues, “many find that the best solution is preventative credit maintenance.” The page concludes, “Learning to manage your credit starts with getting informed about your credit. That means utilizing services like credit monitoring to find out what may be changing in your credit history report; those changes can have an immediate effect on your credit score.” Thus, FreeScore claimed both explicitly and implicitly that its services could improve or assist in improving consumers’ credit records. Of course, FreeScore’s “self-serving disclaimer” was ineffective, given its own representations.
Comment: The FTC’s rule is that lawyerly parsing of the kind that might avoid a perjury conviction isn’t enough for an ad. Juxtaposing so many words about improving credit scores with FreeScore’s services clearly implies that the service will help raise scores.
The court continued: “FreeScore offers services aimed at improving future creditworthy behavior with prospective promises of improved credit. It advertises on FreeScore.com that consumers must ‘ensure [their] Credit Report is clean,’ ‘[s]pot damaging inaccuracies’ on their credit reports, and ‘start [their] climb to financial freedom’ by utilizing the services it offers.” Its TV ad stated that consumers who used FreeScore would be able to “fix errors on [their] credit report,” and that credit scores can determine whether consumers can “get a loan, a better interest rate, or a new job.”
FreeScore said it only promised to provide information, not to “improve” a consumer’s credit. But FreeScore’s ads clearly went beyond providing information. It even recommended a course of action to consumers: use FreeScore.com to “[s]pot damaging inaccuracies,” and use “[i]nstant email alerts … so [they] can make corrections fast!” FreeScore wasn’t just selling data—it was giving advice about what consumers could or should do with the data. “The overall net impression communicated by FreeScore.com is that in order to ‘repair a damaged credit score,’ the ‘best solution’ is to ‘utilize[e] services like credit monitoring,’ which ‘can have an immediate effect on your credit score.’” (Note that the “immediate effect” language might look to a lawyer like it was referring to the errors, but that’s not what a reasonable consumer targeted by such services would likely take away.)
Other cases have found similarly with respect to defendants that promised things like “personal credit analysis.” As with those defendants, “FreeScore, while not actually providing credit repair services, has represented that it can or will sell, provide, or perform a service for the purpose of providing advice or assistance to a consumer with regard to improving a consumer’s credit record, history, or rating.” Literal alteration of historical records isn’t required to be a credit repair organization. FreeScore’s ads gave the net overall impression that its services would improve consumers’ credit.