Consumer Finance Insights
June 1, 2015

CFPB and Florida AG Granted Default Judgment Against Florida Mortgage Relief Companies

On May 29, 2015, the United States District Court for the Southern District of Florida granted the Consumer Financial Protection Bureau (“CFPB”) and the State of Florida​ a final default judgment​ against a Florida Foreclosure Relief Company and its corporate affiliates based on the company’s failure to answer or otherwise defend an action alleging that the defendants unlawfully and deceptively defrauded homeowners seeking mortgage modifications. Default had been entered against the company and its affiliates on September 12, 2014. Individual stipulated judgments were entered with three individual defendants on May 5 and May 6, 2015. The company and its affiliates, which have ceased operations and have been entered into receivership, were ordered to pay over $27 million in compensatory damages and civil penalties. A large majority of the $27.7 million will not be collectable because it is beyond the amount of the company’s receivership estate. ​

The CFPB and the State of Florida originally brought charges against the company, its affiliates, and the individual defendants in July 2014 under Regulation O (formerly known as the Mortgage Assistance Relief Services rule) and the Florida Deceptive and Unfair Practices Act. The complaint alleged that defendants used deceptive marketing practices and scammed distressed homeowners into paying illegal upfront fees to join lawsuits that the companies claimed would force banks to modify the borrower’s loans or provide foreclosure relief. The default judgment found the company liable for $11,730,579, which represents the fees paid by consumers to the company. The court also ordered the company to pay a $10 million civil penalty for the violation of Regulation O and a $6 million state penalty for the violation of the Florida Deceptive and Unfair Practices Act. The individual defendants were also previously ordered to pay penalties and have been permanently banned from the future advertising or sale of mortgage and debt relief products and services.