Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Firms settle FTC charges of mortgage and debt-relief scams, (Dec 12, 2013)

By John W. Arden, J.D., LL.M.

Firms allegedly involved in two separate mortgage and debt-relief scams have settled FTC charges and will be banned from offering mortgage and debt-relief services, the FTC announced today.

Mortgage-rate reduction. As part of the federal Distressed Homeowner Initiative, the FTC charged Mark Nagy Atalla and his companies, American Mortgage Consulting Group and Home Guardian Management Solutions, with offering false promises of mortgage-rate reductions to consumers trying to hold onto their homes. Under a stipulated final judgment with the FTC, the defendants will surrender their assets and will be banned from providing mortgage relief services to consumers.

According to the FTC’s complaint, Atalla and his companies violated the FTC Act and the Mortgage Assistance Relief Services Rule (known as the MARS Rule or Regulation O), when they promised to substantially lower consumers’ monthly mortgage payments in exchange for an up-front fee ranging from $1,495 to $4,495. The complaint alleged that the defendants misrepresented (1) that consumers were likely to obtain mortgage modifications, (2) that consumers who did not receive modifications would receive full refunds, (3) that the defendants were affiliated with the U.S. government, and (4) that they would provide legal representation to consumers.

In violation of the MARS Rule, the defendants told consumers to stop communicating with their lenders and failed to make Rule-mandated disclosures intended to ensure that consumers understood transactions with mortgage-assistance relief service providers and their rights under the Rule, the FTC claimed. A federal judge granted the FTC’s request for a temporary restraining order and preliminary injunction, froze the defendants’ assets, and appointed a receiver to take over the companies. The settlement further prohibits the defendants from misrepresenting the features of any product or service and making claims without competent and reliable evidence.

Atalla faces a $514,910 judgment, which will be suspended when he turns over items of personal property and the proceeds from the sale of other assets.

Debt relief. The defendants in the second case—Southeast Trust, LLC and its principal, Paul A. Wexler—allegedly violated the FTC Act and the agency’s Telemarketing Sales Rule by charging cash-strapped consumers hundreds of dollars based on misrepresentations that they could obtain credit card interest rates as low as zero percent. The operation also routinely called consumers on the Do Not Call Registry, according to the agency.

Under the stipulated final order for permanent injunction and settlement of claims, the defendants are banned from providing debt-relief and mortgage-relief services, making robocalls, and calling consumers on the Do Not Call list.

The complaint for permanent injunction and other equitable relief alleged that the defendants claimed to be a non-profit group and targeted consumers with robocalls and ads on websites, such as southeasttrust.com and thedebtschool.com. They promised a single monthly payment, an interest rate ranging from zero percent to six percent, and that consumers would be debt free in three to five years.

These defendants are prohibited from collecting money from consumers who used their services, making unauthorized withdrawals from consumers’ bank accounts, misrepresenting the features and characteristics of financial or other types of products and services, and making unsupported claims about products and services. They also are required to keep any consumer information they have confidential, and destroy it promptly.

The order imposes a $2.7 million judgment against Wexler, which is suspended due to his inability to pay. If it is determined that the financial information provided by the defendants was untruthful, the full amount of the judgment will become due.

News: ConsumerProtection FederalTradeCommissionNews