Alert November 27, 2012

Obtains Preliminary Injunction Against Mortgage Relief Service

The United States District Court for the Central District of California granted the CFPB's petition for a preliminary injunction against a number of individuals alleged to have operated a fraudulent loan modification scheme. In Consumer Financial Protection Bureau v. Gordon, et al., the CFPB investigated and later charged a California attorney and several associates with numerous violations of the Consumer Financial Protection Act, based on their operation of a scheme designed to solicit payment from distressed mortgage borrowers in exchange for the negotiation of loan modifications. The terms and conditions of defendants’ services violated the CFPA for, among other reasons, collecting fees for modification services when, in fact, no modification was procured and accepted. The Court issued the preliminary injunction following its prior issuance of a temporary restraining order, asset freeze and appointment of a receiver to investigate defendants’ operations in July of 2012 (see August 7, 2012 Alert). Finding that good cause existed to continue these measures, the Court issued the injunction as necessary to preserve its ability to "grant effective final relief for consumers in the form of monetary restitution and disgorgement or compensation for unjust enrichment." The Gordon matter offers an early precedent for the prosecution of fraudulent mortgage relief services and illustrates the range of measures available to the CFPB in its efforts to combat fraud in diverse aspects of the consumer financial services sector.