On July 23, 2014, the Consumer Financial Protection Bureau
(“Bureau”) and the Federal Trade Commission (“FTC”) jointly issued an
announcement, entitled “CFPB, FTC and States Announce Sweep Against Foreclosure
Relief Scammers” (“Announcement”).[i]
It seems that the perps (aka “perpetrators”) are out in full
force, using deception and false promises to “collect more than $25 million in
illegal fees from distressed homeowners.”[ii]
The Bureau and the FTC were joined, as well, by 15 states
(collectively, the “agencies”), letting the world know about their collective
“sweep against foreclosure relief scammers that used deceptive marketing
tactics to rip off distressed homeowners across the country.” The Bureau is
filing three lawsuits against the perps, those companies and individuals that allegedly
collected more than $25 million in illegal advance fees for services that
falsely promised to prevent foreclosures or renegotiate troubled mortgages. The
CFPB seeks compensation for victims, civil fines, and injunctions against the
scammers. The FTC is filing 6 lawsuits of their own, and the states are taking
32 actions.
The first lawsuit names Clausen & Cobb Management
Company and its owners Alfred Clausen and Joshua Cobb, as well as Stephen
Siringoringo and his Siringoringo Law Firm. The second lawsuit is against The
Mortgage Law Group, LLP, the Consumer First Legal Group, LLC, and attorneys
Thomas Macey, Jeffrey Aleman, Jason Searns, and Harold Stafford. The third
lawsuit is against the Hoffman Law Group, its operators, Michael Harper, Benn
Wilcox, and attorney Marc Hoffman, and its affiliated companies, Nationwide
Management Solutions, Legal Intake Solutions, File Intake Solutions, and BM
Marketing Group.
Here’s the allegation, in brief: the scammers used deceptive
marketing to persuade thousands of consumers to pay millions in illegal,
upfront fees for promised mortgage modifications. Each of the scammers was a
law firm or was associated with one. It is further alleged that the defendants
disguised their “false promises of foreclosure relief for struggling homeowners
with claims that they were performing legal work.”[iii]
The plaintiffs assert that these tactics are used by foreclosure relief scams
to attract victims, add credibility to their schemes, or exploit certain legal
exemptions for the practice of law.
The applicable Regulation that is cited is Regulation O, previously
known as the Mortgage Assistance Relief Services (MARS) Rule. The FTC actually
provides a guide on this rule, called “Mortgage Assistance Relief Services
Rule: A Compliance Guide for Business” (“Guide”).[iv]
Generally, this Regulation bans mortgage assistance relief service providers
from requesting or receiving payment from consumers for mortgage modifications
before a consumer has signed a mortgage modification agreement from their
lender. The Regulation also prohibits deceptive statements and requires certain
disclosures when companies market mortgage assistance relief services.
Some highlights of the Guide are worth noting:
· It's illegal to charge upfront fees.
The foreclosure relief firm can't collect money from a customer unless it delivers – and the customer agrees to – a written offer of mortgage relief from the customer's lender or servicer.
· The foreclosure relief firm must clearly and prominently disclose certain information before it signs people up for your services.
It must tell customers upfront key information about its services, including:
o
the total cost,
o
that they can stop using the firm’s services at
any time,
o
that the firm is not associated with the
government or their lender, and
o
that their lender may not agree to change the
terms of their mortgage.
