Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Mortgage relief scammers pay $28 million to settle FTC charges, (Feb 5, 2015)

By Lisa M. Goolik, J.D.

A group of Utah-based individuals and entities, led by Philip J. Danielson and the Danielson Law Group, claiming to be legal experts in loan modifications will pay more than $28 million to settle charges brought by the FTC that the group conned consumers out of thousands of dollars of advanced fees in violation of the FTC Act and Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) Rule. The rule bans mortgage foreclosure rescue and loan modification service providers from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

“It’s troubling when anyone takes advantage of homeowners in financial distress,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “This scam is particularly offensive because it used an attorney’s legal credentials to create a facade of authenticity.”

Allegations. The FTC filed its complaint in July 2014 as part of a multi-agency federal and state law enforcement sweep dubbed “Operation Mis-Modification” that targeted similar operations that fraudulently pitched loan modifications to consumers.

According to the FTC, the grouped touted a success rate that exceeded 90 percent and enticed consumers to pay advance fees ranging from $500 to $3,900 by falsely promising that attorneys would negotiate loan modifications with substantially reduced mortgage payments using their special relationships with lenders or mortgage analysis reports produced by a proprietary software program. The defendants also urged homeowners to stop paying their lenders and falsely promised full refunds if they did not obtain a loan modification.

However, the group allegedly provided little, if any, meaningful assistance to modify or prevent foreclosure, and in numerous instances, consumers suffered significant economic injury, including the loss of their homes and property.

Settlement details. The $28 million judgment reflects the total amount of fees taken in by the scheme. The proposed judgment will be suspended as to the individual defendants provided they surrender certain assets, including a $200,000 house in Utah. The proposed settlement also requires April Norton to turn over unearned ill-gotten gains that she received from the scheme. The full judgment remains in effect against the corporate defendants.

In addition, the defendants will be banned from offering mortgage assistance relief services and from participating in the debt relief industry. The group is also prohibited from misrepresenting various features of any product or service or making advertising claims that are unsupported by competent and reliable evidence.

The settlement also permanently bans Philip J. Danielson and Tony D. Norton and four companies they controlled—Philip Danielson, LLC; Foundation Business Solutions, LLC; Direct Results Solutions, LLC; and Strata G Solutions, LLC—from engaging in telemarketing, resolving a contempt action the FTC concurrently filed against the defendants for violating a 2010 court order in a phony work-at-home scheme that falsely claimed ties to Google Inc.

Companies: Danielson Law Group; Direct Results Solutions, LLC; Foundation Business Solutions; Philip Danielson, LLC; Strata G Solutions, LLC

News: ConsumerProtection FederalTradeCommissionNews