Consumer Finance Insights
May 6, 2015

CFPB Settles Claims with Corporations that Targeted Struggling Homeowners

The Consumer Financial Protection Bureau (CFPB) settled claims with three defendants after the CFPB claimed the corporations were targeting homeowners who were struggling to make mortgage payments.  The parties stipulated to final judgments for the individual defendants that were filed with the Court.  The CFPB also filed a motion for default judgment as to the corporate defendants.

The three men–a law firm owner and two management service company executives–and the corporate defendants allegedly promised to help homeowners obtain mortgage modifications and relief from foreclosure by advising them to stop paying their mortgages, and to participate in their “mass-joinder” lawsuit. Ultimately, 1,120 homeowners were recruited through telemarketing efforts and television commercials to join lawsuits against mortgage lenders. In order to participate in the lawsuits, homeowners were required to pay an initial payment, typically, this fee was $6,000. Homeowners would then pay a $495 monthly maintenance fee in attorney’s fees. Many homeowners paid these fees for over a year, and in some instances, even after lawsuits were dismissed. Homeowners also declined to seek other mortgage relief services, or communicate with their lenders and servicers, as a result of the advice provided.  The CFPB alleged that the defendants violated the Consumer Financial Protection Act, the Omnibus Appropriatoins Act, the Florida Deceptive and Unfair Trade Practices Act, and Florida’s Civil Theft Law.

Each individual defendant agreed to a permanent bar from consumer financial products or services. The individual defendants all agreed to an $11.7 million suspended judgment in restitution. The individual defendants also agreed to pay between $20,000 to $35,000 in civil penalties.

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