CFPB: Companies Tricked Consumers into Paying Millions in Illegal Fees
Multiple companies that worked together to scam distressed homeowners out of millions of dollars have been ordered to pay $27.7 million in fines and redress.
The Consumer Financial Protection Bureau (CFPB) and the State of Florida were granted a final judgement against Hoffman Law Group and its corporate affiliates accused of using deceptive marketing practices to collect illegal advanced fees from consumers.
Working together, five companies tricked consumers into paying millions of dollars in illegal upfront fees to join frivolous lawsuits that the companies falsely claimed would pressure banks to modify their loans or provide foreclosure relief. The court found the corporate defendants liable for about $11.7 million – the full amount of illegal fees paid by consumers – and ordered them to pay a $10 million civil penalty, in addition to penalties to the State of Florida.
While the judgement found the defendants liable for about $27.7 million in penalties and fees, only about $655,700 will be collected due to the defendants' inability to pay. The collected funds will be used to pay redress to about 2,000 victims of the scam.
The Florida-based Hoffman Law Group was a law firm set up to give the appearance that consumers in financial distress needing to modify their mortgage loans or save their homes from foreclosure would get specialized help from attorneys. The related companies existed to market and support the scheme.
A Florida lawsuit charged Hoffman Law Group, its affiliated companies, and the individual defendants with violating Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) rule, and Florida state law. Regulation O prohibits charging advance fees for mortgage loan modification services, making misrepresentations about loan modification services, and it requires that consumers be given certain disclosures.
The defendants violated the law by collecting fees before obtaining a loan modification, Inflating success rates and likelihood of obtaining a modification, duping customers into thinking they would receive legal representation, and discouraging customers from talking to their lenders and from making mortgage payments.
The court judgment is available here.
Don't get Scammed
Remember, companies cannot legally accept payment for helping to obtain a mortgage modification for a consumer before the consumer has a modification agreement in place with their lender.
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