Last week, the Federal Trade Commission turned its attention to the mortgage relief industry once again. In its most recent enforcement action, the FTC joined forces for the first time with the California Department of Financial Protection and Innovation (DFPI).

On September 12, 2022, the agencies jointly filed a complaint in the U.S. District Court for the Central District of California against several companies alleged to have operated a mortgage relief scam. Two days later, the court issued a temporary restraining order (TRO) appointing a receiver and freezing the defendants’ assets until the parties can be heard on whether to issue a preliminary injunction.

The defendants consist of various corporate entities doing business as Home Matters USA, Academy Home Services, Atlantic Pacific Service Group, and Golden Home Services America, and two individual defendants who own the companies.

The FTC and DFPI allege that, since at least June 2018, the defendants deceptively marketed and sold mortgage assistance relief services to consumers. Specifically, the agencies allege that the defendants represented to consumers that, in exchange for up-front payments, they would negotiate with consumers’ mortgage companies to lower interest rates and/or principal amounts to make mortgage payments more affordable. According to the complaint, however, the defendants often failed to provide any of the advertised services and instead simply pocketed millions of dollars paid by consumers.

The agencies assert that the defendants used telemarketing calls, text messages, and online advertising to “prey on financially distressed homeowners” with claims that they can reduce consumers’ mortgage payments within three months. They also accuse the defendants of falsely representing to consumers that the defendants are associated with government mortgage relief programs, including federal COVID-19 relief programs. According to the complaint, the defendants would charge anywhere from $500 to $2,900 per month before ever obtaining a modification to consumers’ mortgage payment terms.

The FTC and DFPI contend that consumers suffered many harms as a result of the defendants’ conduct:

  • They argue that consumers were duped into paying for mortgage relief services based on misleading representations, including claims that the defendants regularly “beat the system” and “do not get beat by the system,” but that the defendants frequently failed to deliver any meaningful benefit to consumers.
  • Beyond the payments made for services, the agencies assert that, in many cases, the defendants instructed consumers not to pay their mortgage or communicate with their mortgage lender while using the service, which, according to the agencies, led many consumers to face late fees and lower credit scores.
  • Last, they allege that consumers were required to sign cease and desist letters to be sent to their mortgage lenders, which required lenders to communicate with the defendants rather than the consumers. Thus, the agencies allege that some consumers found themselves to be in foreclosure after not receiving notices of missing payments or default, despite the consumers’ continued payments to the defendants.

The FTC and DFPI allege that the defendants’ conduct violates the Federal Trade Commission Act, the Mortgage Assistance Relief Services (MARS) Rule, the Telemarketing Sales Rule, the COVID-19 Consumer Protection Act, and the California Consumer Financial Protection Law.

After seeking and obtaining a TRO and asset freeze, the agencies now seek a preliminary and, ultimately, a permanent injunction, refunds and restitution, and monetary penalties. The hearing for a preliminary injunction is set for September 28, 2022. The Commission voted unanimously 5-0 in bringing this action.

In the wake of the AMG Capital decision, the FTC announced its plan to partner with state consumer protection authorities so as to avail the FTC of the states’ ability to obtain monetary relief where the FTC might not be able to do so, and this case continues this trend. Here the FTC leveraged that authority to obtain an asset freeze, a procedure that has been used less by the FTC since AMG Capital.

Given the rise of inflation and the expanding economic struggles many Americans face, the FTC’s return to the mortgage relief business comes as no surprise, and we could continue to see more from the FTC in this area.

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