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Financial Services Law Insights and Observations

District Court orders millions in restitution and civil penalties against two foreclosure relief companies

Courts CFPB Foreclosure Enforcement Regulation O Civil Money Penalties Restitution

Courts

On November 4, the U.S. District Court for the Western District of Wisconsin ordered restitution and disgorgement, civil penalties, and permanent injunctive relief in an action brought by the CFPB against two former foreclosure relief companies and their principals (collectively, “defendants”) for violations of Regulation O. As previously covered by InfoBytes, in 2014, the CFPB, FTC, and 15 state authorities took action against foreclosure relief companies and associated individuals, including the defendants, alleging the use of deceptive marketing tactics to obtain business from distressed borrowers. The CFPB filed three suits, the FTC filed six, and the state authorities collectively initiated 32 actions. Specifically, the CFPB alleged that the companies and individuals (i) collected fees before obtaining a loan modification; (ii) inflated success rates and likelihood of obtaining a modification; (iii) led borrowers to believe they would receive legal representation; and (iv) made false promises about loan modifications to consumers, in violation of Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) Rule. Among other things, the court order holds company one and its principals jointly and severally liable for over $18 million in restitution, while company two and its same principals are jointly and severally liable for nearly $3 million in restitution. Additionally, the court ordered civil penalties totaling over $37 million against company two and four principals.

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