The Consumer Financial Protection Bureau, the Federal Trade Commission and 15 states initiated a crackdown on foreclosure relief scams that allegedly used deceptive marketing tactics to rip off distressed homeowners, the CFPB announced July 23.
The CFPB filed three lawsuits against entities that have collected more than $25 million in illegal advance fees for services that falsely offered foreclosure prevention and renegotiation of mortgages for troubled borrowers. The CFPB is seeking compensation for victims, civil fines and injunctions.
Meanwhile the FTC is filing six lawsuits, and states are filing another 32.
Those named in the CFPB lawsuits include Clausen & Cobb Management Company and owners Alfred Clausen and Joshua Cobb; Siringoringo Law Firm and owner Stephen Siringoringo; The Mortgage Group, LLP; Consumer First Legal Group, LLC; attorneys Thomas Macey, Jeffrey Aleman, Jason Searns and Harold Stafford; Hoffman Law Group and 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.
All the defendants are law firms or are associated with one.
The CFPB’s lawsuits allege these firms employed misleading marketing in order to convince thousands of consumers to pay millions in illegal, upfront fees for assistance with mortgage modifications.
The defendants are accused of violating Regulation O, formerly known as the Mortgage Assistance Relief Services Rule. The regulation bans firms from requesting or receiving upfront payments from consumers for mortgage modifications before consumers have signed a mortgage modification agreement from their lenders. The rule also prohibits deceptive marketing, and holds companies responsible for making disclosures related to their services.
The CFPB alleged that some of the named defendants also violated the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In addition to collecting fees from consumers before obtaining loan modifications for them, the companies are accused of pocketing the money without ever assisting borrowers with modifications and then ceasing to return borrowers’ calls and emails. Defendants also allegedly inflated success rates for obtaining modifications, and many of the companies never provided consumers the promised services. They also led borrowers to believe they would receive legal representation when many of them never had their cases reviewed by attorneys or even spoke to an attorney.
On July 23, the CFPB released a Consumer Advisory to assist consumers in identifying foreclosure relief scams.