Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC Shuts Down Mortgage Relief Operation, (Jul 2, 2013)

By Tobias J. Gillett, J.D., LL.M.

The FTC has filed a complaint in the federal district court in Los Angeles charging that three individuals and seven companies operated a scheme that falsely promised home owners relief from foreclosure and lower mortgage payments, the agency announced today (FTC v. A to Z Marketing, Inc., FTC File No. 122 3074, Case No. 8:13-cv-00919-DOC-RBN).

Atemporary restraining order entered by the court prohibits the defendants from making various misrepresentations regarding loan modifications, loan audits, and mortgage assistance relief services; from collecting advance fees; from failing to make representations required by the FTC’s Mortgage Assistance Relief Services (MARS) Rule; and from releasing consumer information. The order also closes the defendants’ websites, freezes their assets, and appoints a temporary receiver pending trial.

According to the complaint, Ratan Baid, Madhulika Baid, and William D. Goodrich, as well as the related companies Apex Solutions, Inc.; William D. Goodrich, Attorney, Inc.; A to Z Marketing, Inc.; Apex Members, LLC; Backend Inc.; Expert Processing Center, Inc.; and Smart Funding Corp., charged consumers up-front fees of $2,000 to $4,000 for legal help to avoid foreclosure and lower mortgage payments, but provided little or no aid in exchange for the fees.

The defendants would allegedly contact consumers through an official-looking flyer, through telemarketing calls, or through online, television, and radio advertisements. The websites offered a range of services, including bankruptcy advice, credit counseling, and “forensic mortgage audits.” When contacted, the scheme’s representatives would claim that an attorney would represent the consumers, and would conduct a “forensic audit” to find illegalities in the lending process. Other common claims included representations that the consumers were guaranteed to obtain a loan modification, that they could have their interest rates reduced to as low as 2% or have their principal balance reduced, that they should stop paying on their mortgages, that they should not contact their lenders directly, and that they could receive a loan modification in a brief period of time, such as a few months or within 60 to 90 days.

The FTC alleges that consumers who signed contracts with the operation would often find, many months later, that no progress had been made on their loans. Moreover, the consumers would frequently never meet or speak with an attorney. The defendants would often “fail to inform the law center that a client had been obtained, fail to turn over financial information the client provided, or work on the consumer’s file with little or no attorney involvement.” “In numerous instances, after consumers have contracted with Defendants and paid the requested advance fees, Defendants have failed to obtain a loan modification, principal reduction, or other relief to stop foreclosure or make consumers’ mortgage payments substantially more affordable,” the complaint alleges.

The complaint charges the operation with violations of Section 5 of the FTC Act and the MARS Rule. It seeks preliminary and permanent injunctive relief, redress of the injuries to consumers, and the costs of bringing the action.

Companies: Apex Solutions, Inc.; William D. Goodrich, Attorney, Inc.; A to Z Marketing, Inc.; Apex Members, LLC; Backend Inc.; Expert Processing Center, Inc.; Smart Funding Corp.

News: ConsumerProtection FederalTradeCommissionNews