CFPB and Florida AG obtain judgments against foreclosure relief companies

Ballard Spahr LLP

The CFPB announced that, together with the Florida AG, it has obtained judgments against several Florida companies and their individual operators who were charged in a complaint filed in a Florida federal court with using deceptive marketing practices and collecting illegal advance fees from consumers seeking mortgage relief services. A default judgment entered against the companies and stipulated judgments entered against the individuals provide for a judgment against each defendant for equitable monetary relief in the amount of $11,730,579, representing the amount of illegal fees allegedly paid by consumers. The default judgment requires the companies to pay a $10 million civil money penalty to the CFPB and civil penalties of $6 million to the State of Florida. (One of the companies is also required to pay an additional $5,000 penalty to the State of Florida.)

The default judgment deems uncollectible and suspends the balance of the $11,730,579 judgment beyond the amount in the receivership estate (approximately $655,000). The stipulated judgments suspend the $11,730,579 judgments against the individuals upon their surrender of certain assets and transfer of property interests or other benefits to the court-appointed receiver and require each individual to pay a civil money penalty of $1.00 to the CFPB.

The complaint charged the defendants with violations of the Consumer Financial Protection Act, the Mortgage Assistance Relief Services Rule (Regulation O), and Florida law, including the Florida Unfair and Deceptive Trade Practices Act. The defendants were alleged to have deceptively marketed their services to consumers by using misleading advertisements about proposed mass joinder litigation that the defendants represented would help consumers get mortgage modifications and foreclosure relief. They were also alleged to have collected advance payments from consumers before consumers had modification agreements in place with their lenders or servicers, represented that consumers should not communicate directly with their lenders or servicers, discouraged consumers from making mortgage payments to their lenders and servicers (and to make payments to the defendant companies instead), and failed to make required disclosures.

In addition to requiring the defendants to make monetary payments and ordering the other relief described above, the judgments direct the receiver to liquidate any remaining assets of the defendant companies. (In July 2014, the CFPB and Florida AG had obtained a temporary restraining order that froze the defendants’ assets and placed the companies into receivership.) They also permanently ban the individual defendants from engaging in various activities relating to the offering of consumer financial products and services.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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