On July 23rd, the CFPB, FTC, and 15 states announced the filing of three separate lawsuits against companies and individuals that collected more than $25 million in illegal advance fees for services that falsely promised to prevent foreclosures or renegotiate troubled mortgages. The CFPB is seeking compensation for victims, civil fines, and injunctions against the alleged scammers. Separately, the FTC is filing 6 lawsuits, and the states are taking 32 actions.
The CFPB alleges that the scammers used deceptive marketing to persuade thousands of consumers to pay millions in illegal, upfront fees for promised mortgage modifications. Each of the scammers was a law firm or was associated with one. The defendants disguised their false promises of foreclosure relief for struggling homeowners with claims that they were performing legal work.
The CFPB alleges that the defendants violated Regulation O, formerly known as the Mortgage Assistance Relief Services Rule, which generally bans mortgage assistance relief service providers from requesting or receiving payment from consumers for mortgage modifications before a consumer has signed a mortgage modification agreement from their lender. It also prohibits deceptive statements and requires certain disclosures when companies market mortgage assistance relief services. In addition, the CFPB alleges that some of the defendants violated the Dodd-Frank Act, which generally prohibits deceptive practices in the consumer financial market.
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