Alert August 07, 2012

CFPB Files Enforcement Action in Federal Court Against Mortgage Relief Service

The CFPB has filed an enforcement action in the Central District of California seeking injunctive relief and damages against a provider of “mortgage assistance relief services.”  The CFPB alleges defendants, apparently operated by a single individual using a variety of commercial entities, violated the Consumer Financial Protection Act through deceptive marketing of mortgage relief services to distressed homeowners.  The CFPB alleges defendants operated a two-part business structure—charging $2,500 to $4,000 to conduct a “forensic audit” designed to uncover illegal conduct in the origination and servicing of a homeowner’s loan, while offering to provide the actual modification assistance “pro bono” once the forensic audit was complete.  According to the CFPB, the two-part structure was designed to avoid the mandates of the CFPA, which prohibits advance fees in exchange for mortgage relief services.  This action illustrates the broad scope of the CFPB’s mandate.  While the Bureau’s actions against large financial institutions have garnered significant media attention, it has also targeted other smaller providers of financial services, such as mortgage relief assistance providers, who are alleged to engage in deceptive conduct that harms consumers.