Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Mortgage Assistance Operation Settles FTC Fraud Charges, (Jan 8, 2013)

By Tobias J. Gillett, J.D., LLM.

Freedom Companies Marketing, Inc., a Dominican Republic-based operation, and affiliated companies and individuals have agreed to settle FTC charges that they fraudulently offered false mortgage assistance services to Spanish-speaking homeowners in the United States, the FTC has announced.

The stipulated order for permanent injunction and final judgment permanently bans the defendants, David F. Preiner, Daniel Hungria, and six companies controlled by Preiner and Hungria, from offering any mortgage assistance relief products or services, or assisting others with such offers. The order also prohibits the defendants from making various misrepresentations regarding financial or any other products or services that they may offer in future.

The order also imposes a monetary judgment of $2.39 million, although the judgment will be suspended due to the defendants’ inability to pay, providing that the defendants turn over the operation’s remaining $17,337 in assets. The full amount of the judgment will immediately come due should the financial information provided by the defendants prove to be false.

The FTC’s complaint alleged that the defendants’ conduct constituted violations of the FTC Act and the Mortgage Assistance Relief Services Rule (MARS). The MARS Rule, issued pursuant to authority granted by Congress in 2009, limits the activities of mortgage relief services providers by imposing certain disclosure requirements, fee limitations, and record-keeping requirements, among other provisions. The Dodd-Frank Act transferred rule-making authority to the Consumer Financial Protection Bureau, but the FTC retains authority to enforce the MARS Rule.

The defendants had allegedly offered false mortgage assistance services to Spanish-speaking consumers in financial distress. The defendants would claim to be located in the United States, and would offer to help the consumers to obtain loan modifications that would result in much lower mortgage payments and interest rates. The defendants would claim that the modifications were available through a federal government program, and would sometimes claim to be affiliated with or approved by the federal government.

The defendants would allegedly then request the consumers to pay an up-front one-time charge of $995 to $1,500, and would instruct the consumers to stop paying on their mortgages in order to pay the charge, sometimes claiming that stopping payment would be required to demonstrate financial need.

Those who signed up for the service would receive blank forms and agreements in the mail that requested sensitive financial information and payment of the fee. If the fee was paid, the defendants would often make requests for additional fees, sometimes adding up to thousands of dollars. Although the defendants would sometimes file a request for a loan modification for a consumer, and be denied, they would allegedly not perform any service that the consumers could not have performed themselves.

The FTC previously announced on July 30, 2012, that it had obtained a temporary restraining order from the federal district court in Chicago that froze the defendants’ assets, withheld their mail, prohibited them from disclosing customer information, ordered them to make various disclosures in any customer communications, ordered repatriation of assets, and ordered expedited discovery, among other relief.

News: FederalTradeCommissionNews ConsumerProtection