CFPB Files Suits for Operations that Used Deception and False Promises to Collect More than $25 Million in Illegal Fees from Distressed Homeowners
WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), and 15 states announced a sweep against foreclosure relief scammers that used deceptive marketing tactics to rip off distressed homeowners across the country. The Bureau is filing three lawsuits against companies and individuals that collected more than $25 million in illegal advance fees for services that falsely promised to prevent foreclosures or renegotiate troubled mortgages. The CFPB is seeking compensation for victims, civil fines, and injunctions against the scammers. Separately, the FTC is filing 6 lawsuits, and the states are taking 32 actions.
“We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure,” said CFPB Director Richard Cordray. “These companies pocketed illegal fees—taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began. These practices are not only illegal, they are reprehensible.”
The first lawsuit names Clausen & Cobb Management Company and owners Alfred Clausen and Joshua Cobb, as well as Stephen Siringoringo and his Siringoringo Law Firm. The second lawsuit is against The Mortgage Law Group, LLP, the Consumer First Legal Group, LLC, and attorneys Thomas Macey, Jeffrey Aleman, Jason Searns, and Harold Stafford. The third lawsuit is against the Hoffman Law Group, its operators, Michael Harper, Benn Wilcox, and attorney Marc Hoffman, and its affiliated companies, Nationwide Management Solutions, Legal Intake Solutions, File Intake Solutions, and BM Marketing Group. [read more]
By Nick Clements – Daily Finance
Have you ever been trapped in a bank’s call center maze? Your bank made a mistake, and you called to get it fixed. It took you five minutes just to speak with a human being. But unfortunately that person couldn’t help. So, she transferred you to someone else. And then someone else. At the end, the last person told you that there was nothing they could do.
The secret to getting out of that maze is the Consumer Financial Protection Bureau complaint system.
These twisty situations happen more than you can imagine. Most of us do our banking with enormous institutions that they have thousands of employees across multiple locations. Throughout my career, I’ve managed many such call centers all over the world. And, as much as you don’t like calling the bank, it can be even more frustrating for the people on the receiving end. Those call center employees have to navigate countless computer systems (which often are not user-friendly). No surprise, the customers whom they talk to are often very angry by the time they reach them. And those front-line bank employees have very little autonomy to change whatever caused your problem. [read more]
By Shawn Campbell – The Buffalo News
A Buffalo-based debt collection operation accused of employing shady practices that violated federal and state law and illegally gathering millions of dollars from consumers has been halted by a U.S. District Court judge upon request by State Attorney General Eric T. Schneiderman and the Federal Trade Commission.
Joseph C. Bella III and Luis Shaw, both of Buffalo, and Diane Bella of Florida, who allegedly operated the company under nine different names to evade detection, were charged with deceiving consumers, making false accusations of check fraud and subsequently threatening them if the purported debt was not paid immediately.
Since February 2010, the three collected at least $8.7 million while violating the Federal Trade Commission Act, the Fair Debt Collection Practice Act and several state laws, according to a complaint by Schneiderman and the FTC.
The company names the collection operation worked under are: National Check Registry LLC; eCapital Services LLC; Check Systems LLC; Interchex Systems LLC; American Mutual Holdings Inc.; Goldberg Maxwell LLC; Morgan Jackson LLC; Mullins & Kane LLC; and Buffalo Staffing Inc.
Under U.S. District Judge Richard J. Arcara’s preliminary injunction, the operation’s assets have been frozen and a receiver was put in place to run the business on a temporary basis.
Interviews with targeted consumers conducted by Schneiderman and the FTC found that the accused collectors withheld information. [read more]
By Donald Maurice – insideARM
Companies that hire vendors to place automated calls to cell phones may find themselves at greater risk for Telephone Consumer Protection Act troubles following a decision from the Ninth Circuit Court of Appeals in Thomas v. Taco Bell Corp. The recent decision follows a May 2013 ruling from the Federal Communications Commission in In re Dish Network, LLC, that applied an expanded view of liability for a vendor’s conduct (also known as “vicarious liability”).
Widening the TCPA Trap for Vendor Conduct
What the FCC said in In re Dish Network, LLC is that TCPA liability is not limited to the “classical” theory of a company’s responsibility for its vendor’s wrongdoing, the theory being that a company is liable if it controlled or had the right to control its vendor’s conduct. In the TCPA context, that could mean that the company controlled the manner and means by which its vendor made automated calls or text messages to cell phones. The FCC ruled that in addition, liability should also attach for a vendor’s TCPA bungles under the theories of apparent authority and ratification.
Apparent authority differs from the classical approach because it does not focus on control over the vendor’s conduct. Instead, liability for vendor conduct can arise when a person believes a vendor is acting as another’s agent, the belief is reasonable and the company that hired the vendor did something to foster the belief that the vendor was acting as its agent. Under this theory, even if the vendor is not an agent, liability can be established. [read more]
By Baker Hostetler – JDSupraJD Supra
On July 9, 2014, the Sixth Circuit affirmed a district court ruling that a consumer TCPA class action could proceed against Lake City Industrial Products, rejecting Lake City’s argument that Michigan law prohibited TCPA class actions. American Copper & Brass, Inc. v. Lake City Industrial Products, Inc., Case No. 13-2605, (6th Cir. 2014). In addition, Lake City’s potential bankruptcy and inability to pay a judgment was irrelevant at this stage of the case, so summary judgment also was affirmed.
In February 2006, Lake City, a pipe-thread sealing tape distributor, retained a fax-blasting company to transmit approximately 10,000 Lake City advertisements. American Copper, a Michigan equipment wholesaler, received Lake City’s fax later that month. American Copper had no preexisting business relationship with Lake City and had not consented to the receipt of faxes from Lake City. American Copper filed a class action law suit in federal district court in Michigan in 2009, alleging that Lake City violated the Telephone Consumer Protection Act (TCPA). The district court granted class certification and summary judgment in favor of American Copper, and Lake City appealed.
On appeal, Lake City argued that the district court erred by refusing to apply Michigan Court Rule 3.501(A)(5), which states that an “action for a penalty or minimum amount of recovery without regard to actual damages imposed or authorized by statute may not be maintained as a class action unless the statute specifically authorizes its recovery in a class action.” The Sixth Circuit acknowledged that because the TCPA provides for a minimum recovery of $500 per violation, regardless of actual damages, and does not specifically authorize class actions, TCPA suits cannot be maintained as class actions in Michigan state court. [read more]
By Jason Oliva – Reverse Mortgage Daily
The Consumer Financial Protection Bureau (CFPB) last week clarified guidance regarding mortgage brokers transitioning to a “mini-correspondent” lender model.
Concerned that some brokers may be shifting to the “mini” model under the mistaken belief that identifying themselves as such will exempt them from certain consumer protection rules regarding broker compensation, the guidance arrives in efforts to prevent consumers being steered toward high-cost and risky loans that might not be in their interest, as what the CFPB notes occurred in the days before the financial crisis.
“The CFPB’s rules on mortgage broker compensation are intended to protect consumers from this type of abuse,” stated CFPB Director Richard Cordray. “Today we are putting companies on notice that they cannot avoid those rules by calling themselves by a different name.”
The guidance details some questions the CFPB may consider when evaluating mortgage transactions involving mini-correspondent lenders, including the examination of how these lenders are structured and operating.
Areas of examination include whether or not these individuals are continuing to broker loans, its sources of funding and whether it funds its loans through a bona fide warehouse line of credit. [read more]