It appears the Consumer Financial Protection Bureau, under Enforcement Director, Kent Markus, is finally taking the gloves off and going after debt relief groups. This action moves against a law firm and lawyer that was working with outside parties to sell advanced fee loan modification and foreclosure resue services.
According to Loeb & Loeb, “The CFPB sought and obtained a temporary restraining order freezing the defendants’ assets and appointing a temporary receiver; District Court Judge Ronald Lew granted the CFPB’s requests the same day the action was filed.”
The Consumer Financial Protection Bureau has filed suit against Chance Gordon, Gordon & Associates, The Law Offices of Change Gordon, The Law Offices of C. Edward Gordon, The C.E.G. Law Firm, National Legal Source, Resource Law Center, Resource Law Group, Resource Legal Group, The Gordon Law Firm, Abraham Pessar, Division One Investment and Loan, Division One Business Solutions, D1 Companies, Division One, Division 1, Home Savers national, D1 Marketing Solutions, Relief Council, Processing Division, Qualification Intake Department, The Relief Network, and Relief Network.
On July 18, 2012 the CFPB filed suit against the small town of Defendants and alleged they violated the Mortgage Assistance Relief Services Rule (MARS or MARS Rule).
The suit states:
Since at least early 2010, Gordon (including the Gordon Entities), Gordon Law Firm, Pessar, Division One Investment and Processing Division (collectively “Defendants”) have engaged in an ongoing, unlawful mortgage relief scheme that preys on fmancially distressed homeowners nationwide by falsely promising a loan modification in exchange for an advance fee. Defendants attract distressed homeowners via websites, mailers, and phone calls, deceptively promising substantial relief from unaffordable mortgages and foreclosures. Defendants promise a substantial reduction in the homeowners’ mortgage payments in exchange for an advance fee ranging from $2,500 to $4,500. Rather than helping homeowners modify their mortgage loans or avoid foreclosure, Defendants dupe distressed homeowners into paying thousands of dollars based on false promises and misrepresentations. Indeed, Defendants provide little, if any, meaningful assistance to modify homeowners’ mortgage loans or prevent foreclosure.
As part of the scheme, Defendants gain consumers’ confidence by misrepresenting affiliation with government entities in direct mail solicitations sent to consumers. For example, one solicitation Defendants sent states at the top of the solicitation in large, capitalized font “NOTICE OF HUD RIGHTS.” Defendants also make or have made representations on the telephone in the initial sales pitch to consumers that Defendants are the government, are affiliated with the government, or that they are “sponsored” by a government grant.
During the initial calls and interactions with homeowners, Defendants promise homeowners substantial reductions in homeowners’ mortgage payments and interest rates in exchange for an upfront fee. To entice homeowners into this arrangement, Defendants represent to consumers that the firm has successfully obtained a large number of modifications in the past and are one of the best firms at obtaining loan modifications.
Defendants typically require consumers to sign paperwork indicating that the consumer’s upfiont payment is for Defendants’ “Pre-Litigation Monetary Claims Program” (“Pre-Litigation Program”). Defendants’ Pre-Litigation Program purportedly provides the homeowner with a detailed legal analysis of illegal conduct engaged in by their particular lender, often called a “forensic audit.”
At the same time, Defendants purport to provide loan modification services for free under the guise of pro bono legal services. Defendants, however, tell consumers that failure to make a payment will result in an inability to process the consumer’s paperwork and to submit the documents, including the loan modification documents that are purportedly prepared pro bono, to the lender.
Defendants’ bifurcated business model involving a fee-based “forensic audit” and pro bono “legal services” is specifically designed to avoid the mandates of laws such as MARS and Regulation O that prohibit advance fees and deception by mortgage relief operations like those run by Defendants.
In reality, Defendants do little or nothing to assist consumers. Rather, Defendants direct consumers to avoid interactions with their lender and to stop making their mortgage payments. While Defendants fail to take any meaningful action, many consumers enter foreclosure or lose their properties.
In numerous instances, constuners who paid Defendants’ fee have suffered significant economic injury, including foreclosure and the loss of their properties.
As part ofthe scheme, Defendants send direct mail solicitations to financially distressed homeowners throughout the United States to convince consumers to call Defendants to inquire about Defendants’ purported loan modification services.
In numerous instances, Defendants’ direct mail solicitations contain images and language representing an affiliation with government entities and a toll-free phone number to call for help. The solicitations tell consumers that previous attempts have been made to contact them and urge consumers to call the listed toll-free number before the deadline for the “Stimulus Program” occurs.
For example, one direct mail solicitation Defendants sent to consumers states that it is a “Notice of HUD Rights” and refers to “Stimulus Programs HAM [P] or HARP” and 2% interest rates for which the consumer may qualify.
The Washington, D.C., address provided in this solicitation is actually a UPS Store mailbox. Defendants do not otherwise have a business presence in Washington, D.C.
Indeed, this address appears to be designed solely to deceive consumers into believing that Defendants have an affiliation with Washington, D.C.-based government entities.
The reverse side ofthe direct mail solicitation indicates that applicants have a high likelihood of “qualifying” for mortgage loan modification and foreclosure prevention services, stating: “It’s a fact: 84% OF ALL HOME MORTGAGES MAY QUALIFY even if you think your situation is hopeless.”
In numerous instances, consumers call the toll-free number with the belief they are calling the Department of Housing and Urban Development (“HUD”) or a HUD-affiliated entity for loan assistance. Instead, consumers reach Defendants.
Some of Defendants’ direct mail solicitations refer to the Making Home Affordable Program and include the consumer’s loan amount, a reference number, an indication that the consumer is “pre-qualified,” and an estimated reduction amount.
Defendants’ direct mail solicitations fail to disclose in a clear and prominent manner that that (1) Defendants’ company is not associated with the government, nor approved by the government or consumer’s lender; (2) even if the consumer uses Defendants’ service the consumer’s lender may not agree to modify the loan; and (3) if Defendants tell a consumer to stop paying their mortgage, that the consumer could lose his or her home and damage his or her credit rating.
Consumers who respond to Defendants’ marketing efforts have home 3 mortgage loans, and typically are having difficulty making their monthly payments.
Consumers who call the toll-free numbers listed on the postcards or who 5 receive outbound telemarketing calls speak with Defendants’ telephone sales representatives.
In numerous instances, Defendants promise to obtain loan modifications that 8 will substantially lower consumers’ monthly mortgage payments or interest rates in 9 exchange for an advance fee.
In numerous instances, Defendants lead consumers to believe that Defendants are affiliated with a government entity or that a government entity referred Defendants to the consumer. In some cases, Defendants represent that they are the government or that they are “sponsored” by a government grant and are thus affiliated with a government agency.
In numerous instances, Defendants tell consumers that Defendants have special expertise in modification with mortgage lenders and that they have proven prior success in obtaining loan modifications from the consumers’ specific lenders.
In numerous instances, Defendants represent that Defendants will obtain a specific reduction in consumers’ mortgage interest rates or payment amounts. In many cases, Defendants promise a specific rate reduction to 2%.
In numerous cases, Defendants claim they can prevent foreclosures or that the modification process will stay lenders’ ability to foreclose. Defendants make such representations even to those consumers who inf`orm Defendants that their lenders have previously denied modifications or sent foreclosure notices.
In numerous instances, Defendants discourage consumers from communicating directly with their lenders. Defendants tell consumers (including consumers who receive foreclosure notices) not to contact their lenders and claim Defendants will handle all communications with consumers’ lenders.
In numerous instances, Defendants encourage consumers to stop making mortgage payments, and in some instances tell consumers that delinquency will demonstrate the consumers’ hardship to the consumers’ lenders. In those instances, Defendants do not disclose that if consumers stop making mortgage payments they could lose their home and damage their credit rating.
In numerous instances, Defendants tell consumers that Defendants are a law firm or are affiliated with a law finn that specializes in obtaining loan modifications and that this specialized knowledge and expertise will ensure Defendants’ success in obtaining loan modifications for consumers.
In numerous instances, typically in subsequent calls or emails, Defendants introduce their Pre-Litigation Program to consumers. Defendants claim their “Pre-Litigation Program” will provide homeowners with a detailed analysis of illegal conduct engaged in by their particular lender to be used as leverage to improve the outcome of negotiating a loan modification with the consumer’s lender. In numerous instances Defendants instruct consumers to sign a Pre-Litigation Agreement or a Fee Agreement that states consumers’ payment of an upfront fee is for Defendants’ forensic audit services.
Defendants generally charge a fee ranging from $2,500 to $4,500. Defendants typically tell consumers that they must make the first payment, usually one-third of Defendants’ fee, before Defendants will begin to provide their services.
Defendants maintain or have maintained numerous websites including: reliefcouncil.org, thereliefnetwork.org, prelitlaw.com, resourcelawgroup.com, resourcelawcenter.com, resourcelegalgroup.com, and nationallegalsource.com.
Defendants’ websites permit consumers to submit personal information online to request a call-back or submit an email address to subscribe to a newsletter. The websites indicate that the businesses are located at the same address as the Gordon Law Firm.
In numerous instances, Defendants’ websites fail to disclose that the entity is not associated with the United States government and that their service is not approved by the government or the consu1ner’s lender.
In numerous instances, Defendants’ websites fail to disclose that even if consumers use the modification service, their lender may not agree to change their loan.
In numerous instances, Defendants fail to obtain a loan modification, substantially reduce consumers’ mortgage payments, or stop foreclosure.
In numerous instances, after consumers pay Defendants’ requested advance fees, Defendants fail to conduct forensic audits.
In numerous instances, after consumers have paid their fees, Defendants fail to answer or return consumers’ telephone calls and emails and fail to provide updates about the status of Defendants’ purported communications with lenders. When consumers are able to reach Defendants, Defendants generally assure constuners that Defendants are working with the consumers’ lenders and that the lenders will not foreclose on the consumers’ homes while processing their applications for a loan modification.
Consumers often encounter difficulty in obtaining requested refunds from Defendants. In many instances, consumers only receive refunds after making complaints to or threatening to complain to entities such as the Better Business Bureau, the State Bar of California, or law enforcement authorities. In many instances, Defendants do not provide any refund or refund an amount substantially less than consumers paid.
In numerous instances, consumers who paid Defendants’ fees suffer significant economic injury, including foreclosure and the loss of their properties.
Defendant Gordon, acting individually or in concert with others, has engaged in the offering or providing of mortgage assistance relief services. Gordon is the sole owner of the Gordon Law Firm.
Defendant Gordon also personally registered numerous fictitious business names used by Defendants to solicit consumers, including National Legal Source, Resource Law Center, Resource Law Group, Resource Legal Group, Gordon & Associates, The Law Offices of Chance E. Gordon, The Law Ofiices of C. Edward Gordon, and The C.E.G. Law Firm.
Defendant Gordon registered and pays for website domains used by Defendants to market their services, many of which use his fictitious business names.
Defendant Gordon also pays for telephone and facsimile munbers used to perpetrate the scheme, and pays Defendants’ telemarketer employees. He is the signatory on contracts and fee agreements executed with many consumers.
Defendant Gordon is also the authorized signatory for the Gordon Law Firm bank accounts.
Defendant Gordon is licensed to practice law in the state of California only.
Defendant Pessar, acting individually or in concert with others, has engaged in the offering or providing of mortgage assistance relief services. Pessar is the sole owner for Defendants Division One Investment, and Processing Division.
Defendant Pessar is the registrant and billing contact for website domains used by Defendants to market their services. He is the account holder and pays for the telephone numbers used by Defendants to conduct their telemarketing and pays Defendants’ telemarketer employees. He also pays for telephone and facsimile numbers used by the Gordon Law F inn. Additionally, Defendant Pessar, on behalf of his company Defendant Processing Division, registered the business name Qualification Intake Department- the named entity on Defendants’ postcards. Defendant Pessar is also the authorized signatory for the Defendants Division One Investment and Processing Division bank accounts. – Source