Last week the Consumer Financial Protection Agency and the State of Florida filed a complaint against a whole host of folks for selling consumers mass joinder lawsuits against their lenders.
The named Plaintiffs included Benn Willcox, BM Marketing Group, File Intake Solutions, Legal Intake Solutions, Marc Hoffman, Michael Harper, Nationwide Management Solutions, The Hoffman Law Group, and The Residential Litigation Group.
Since 2011 I’ve been writing articles about mass joinder issues and marketing. These sales pitches generally claim the mortgage holder can pay $5,000-$10,000 to join in a lawsuit against the banks. People have been promised all sorts of outcomes including getting their house free and clear, winning millions of dollars in damages, having their mortgage loan modified, etc.
Since 2011 there have been a number of warnings to consumers about these sales efforts. The Federal Trade Commission, Better Business Bureau, Consumer Financial Protection Bureau, a number of State Attorneys Generals, consumer groups and others have warned consumers to be careful or outright avoid these outfits.
The suit filed by the Consumer Financial Protection Bureau and the State of Florida, in my opinion, does a good job of laying out yet again the types of services consumers should be wary of before paying money for promises of magical mortgage modification or elimination.
As the suit says, “In the midst of America’s foreclosure crisis, an illicit industry of mortgage modification scams began making money by charging distressed homeowners upfront fees on the promise that they could obtain mortgage modifications for those homeowners, often doing little to nothing to actually assist the homeowners. To combat this practice, many states, including Florida, enacted laws to prohibit these schemes, and federal regulators further enhanced these laws by making it illegal in every state for mortgage assistance relief providers to charge homeowners a fee for mortgage modification services before actually obtaining mortgage modifications for those homeowners. 12 C.F.R. Part 1015 (2012).
Since at least early 2012, an enterprise operating in the name of the Hoffman Law Group (the “HLG Enterprise”) has generated millions of dollars in illegal upfront fees by convincing consumers to pay for the opportunity to be included as a plaintiff in so-called “mass-joinder” lawsuits against their mortgage lenders. This enterprise induces consumers to enroll by falsely promising that the lawsuits will induce banks to give the consumers mortgage modifications or foreclosure relief.
Run by veterans of mortgage modification schemes, the HLG Enterprise uses these promises to convince consumers to pay fees before the HLG Enterprise obtains, or even tries to obtain, mortgage modifications for the consumers it signs up.
The HLG Enterprise charges consumers varying amounts, typically a $6,000 initial payment, followed by a $495 monthly fee.
In reality, defendants do little or nothing to actually assist consumers. Rather, in numerous instances, they have directed consumers to avoid interactions with their lenders or servicers and, in some instances, instructed consumers to stop making their mortgage payments. When consumers discover that the HLG Enterprise has never even contacted their lenders on their behalf, many find themselves in default and some have lost their properties through foreclosure.
The Consumer Financial Protection Bureau, an agency created by Congress in 2010 and charged with protecting consumers from financial industry misconduct, and the Attorney General of the State of Florida, bring this action to halt the HLG Enterprise’s scam, to hold the individuals who run the Enterprise accountable, and to provide redress for the injuries to consumers that the Enterprise has caused.
More specifically, the plaintiffs bring this action under (1) Sections 1054 and 1055 of the Consumer Financial Protection Act of 2010, 12 U.S.C. 5564, and 5565; and (2) Section 626 of the Omnibus Appropriations Act, 2009 (as amended by Section 1097 of the CFPA), 12 U.S.C. 5538, and its implementing regulation, the Mortgage Assistance Relief Services Rule, 12 C.F.R. Part 1015 (2012) (“Regulation O”). Florida asserts further claim s under the Florida Unfair and Deceptive Trade Practices Act (“FDUTPA”), Chapter 501, Part 1I, Florida Statutes and other state laws.
Regulation O requires providers of mortgage assistance relief services to make certain disclosures, such as that the business is not affiliated with the government and that the consumer may reject any proposed modification. It also prohibits these providers from making certain representations, such as that a consumer is not obligated to continue making his mortgage payments. And Regulation O generally prohibits mortgage assistance relief service providers from collecting an advance fee for such services. See 12 C.F.R. Part 1015.
The plaintiffs support consumers’ right to challenge alleged fraud by mortgage lenders or services. But regardless of the underlying merits of the consumers’ claims in the mass-joinder lawsuits that the HLG Enterprise files, it should not be allowed to violate the law in the process of recruiting consumers to join those lawsuits.
The HLG Enterprise has misled thousands of homeowners nationwide and as a result, has pocketed well over $5 million. In this action, the plaintiffs seek an order
permanently enjoining Defendants from engaging in their illicit business practices,
granting restitution for affected consumers, imposing civil penalties, and granting other relief available under the CFPA, Regulation O, and FDUTPA. This will make Defendants’ victims whole again and will prevent the HLG enterprise from causing the same harm to other homeowners.”
As I reported last week, The Hoffman Law Group offices were raided by law enforcement agents and an asset freeze was put in place by the Court.
You can read the full unsealed complaint, here.