Three separate lawsuits filed by the Federal Trade Commission in federal court aim to halt the allegedly deceptive practices of three operations that preyed on distressed homeowners.
In all three cases announced Tuesday, the FTC took action against defendants who allegedly peddled bogus mortgage relief services, in violation of the FTC Act and the MARS Rule, then charged consumers thousands of dollars upfront while offering little or no help. The agency also charged that two of the operations violated the Telemarketing Sales Rule.
The breakdown of companies involved includes:
Prime Legal Plans/Reaching U Network. The FTC alleged that from at least mid-2010, the defendants behind this scheme marketed mortgage relief services in English and Spanish, including under the names “Reaching U Network,” and “American Legal Plans.”
They allegedly told consumers who were in debt that attorneys would review their mortgage loan documents to see if their lenders complied with state and federal mortgage laws, and would use the resulting “forensic audit” information to help save their homes and negotiate more favorable mortgage terms. The defendants told consumers that “80 percent of mortgages contain some fraud,” and “Our network attorneys have helped hundreds of Americans stay in their homes,” according to the FTC complaint.
But instead of helping consumers, the defendants charged them up to $750 a month, while little or nothing was done to save their homes from foreclosure, according to the FTC.
The FTC alleged that on company Web sites, the defendants would falsely claim to be a “private charity working for struggling consumers that can’t afford legal representation.” When responding to consumers who called the toll-free number on the websites, and when cold-calling consumers, including those listed on the Do Not Call registry, the defendants routinely failed to provide the disclosures required by the MARS Rule, collected up-front fees, and misrepresented the results that consumers could expect, according to the complaint.
The FTC charged that the defendants violated the Telemarketing Sales Rule, the FTC Act, and the MARS Rule by: calling consumers whose numbers were listed on the Do Not Call Registry; not paying the required annual fee to access the Registry; misrepresenting that they would get mortgage modifications to make consumers’ payments significantly more affordable and help prevent foreclosure, and that they would use so-called forensic audits to do this; misrepresenting the amount of time it would take to get results; failing to provide required disclosures about mortgage modification relief; and collecting advance fees.
A federal judge granted the FTC’s request for a temporary restraining order and ordered a freeze of the defendants’ assets and the appointment of a receiver. The preliminary injunction hearing is scheduled for Thursday.
American Mortgage Consulting Group. The FTC alleged that since early 2011, the defendants claimed a phony affiliation with the U.S. government, pretended to be attorneys, and promised to substantially lower monthly mortgage payments in exchange for an up-front fee ranging from $1,495 to $4,495.
Along with two companies he controls – American Mortgage Consulting Group LLC and Home Guardian Management Solutions LLC – defendant Mark Nagy Atalla allegedly violated "nearly every provision of the Mortgage Assistance Relief Services Rule."
The defendants telemarketed mortgage relief services to consumers nationwide, often stating that they were paid by the federal government to assist homeowners and obtain so-called “Home Saver” grants from the government to reduce consumers’ up-front fees, according to the FTC’s complaint. They also allegedly proclaimed themselves to be “a California Professional Legal Team,” sent documents to consumers from their so-called “Legal Department,” and referred to their operation in e-mails as a “law office.”
The defendants claimed they were virtually certain they could obtain loan modifications for their clients, and that the clients would receive a full refund if that did not happen, even though they did little or nothing to help consumers and they failed to provide refunds, according to the FTC.
Also, in violation of the MARS Rule, the defendants allegedly told consumers to stop communicating with their lenders, and failed to disclose that:
• consumers would only have to pay the defendants if they accepted the terms of the mortgage assistance the defendants obtained from their lenders;
• the defendants are not associated with the government and their services are not approved by the government or the consumer’s lender; and
• even if a consumer used the defendants’ services, the lender may not agree to change the terms of the consumer’s loan.
By their actions, the defendants diverted consumers in danger of losing their homes from pursuing authentic, government-affiliated programs, and duped them into paying thousands of dollars based on false promises and misrepresentations, according to the complaint.
A federal judge granted the FTC’s request for a temporary restraining order and preliminary injunction, froze the defendants’ assets and appointed a receiver.
Expense Management America. Presenting themselves as the solution to all the consumer’s financial problems, the defendants have cold-called thousands of U.S. consumers from their call center in Montreal since at least mid-2010, including those whose numbers were registered on the Do Not Call Registry, according to the FTC complaint.
Whether the consumer struggled with a mortgage, credit card debt, student loans, car payments or a poor credit score, the defendants charged an up-front fee of $2,200 to $10,000 that they claimed was being used to pay off debts, according to the complaint.
The defendants allegedly claimed that their relationships with lenders and their ability to negotiate on behalf of large groups of consumers made it possible to substantially reduce their payments. But according to the FTC, the defendants failed to produce any of the promised results.
The defendants – Expense Management America, six affiliated companies, and five individuals, who operated in Canada and the U.S. – also used a series of Web sites that lured consumers to call them, according to the complaint. After pitching consumers by phone, the defendants allegedly would send brochures and financial documents to consumers via e-mail, and obtain their authorization to withdraw funds from their checking accounts.
One brochure, the Expense Management Guide, explicitly told consumers they must follow the “Golden Rule,” which was to cease communicating with their creditors and let the defendants do the talking:
The Prime Legal Plans/Reaching U Network complaint names as defendants: Prime Legal Plans, LLC; Consumer Legal Plans LLC (Nevada); Consumer Legal Plans, LLC (Wyoming); Frontier Legal Plans LLC, 123 Save A Home, Inc.; American Hardship LLC; Back Office Support Systems LLC; Consumer Acquisition Network, LLC; Legal Servicing and Billing Partners LLC; Lazaro Dinh; Kim Landolfi; Derek Radzikowski; Andrew Primavera; Christopher Edwards; and Jason Desmond. The complaint also names The 2007 San Lazaro Irrevocable Life Insurance Trust and its trustee, Maria Soltura, as relief defendants.
The Expense Management America complaint names as defendants: E.M.A. Nationwide, Inc., also doing business as EMA and Expense Management America; New Life Financial Solutions, Inc., also d/b/a New Life Financial, and New Life Financial Services; 1UC Inc., also d/b/a 1st United Consultants, and First United Consultants; 7242701 Canada Inc.; 7242697 Canada Inc.; 7246293 Canada Inc., 7246421 Canada Inc.; James Benhaim, a/k/a Jimmy Benhaim; Daniel Michaels, a/k/a Dan Michaels, a/k/a Dan Michles; Phillip Hee Min Kwon, a/k/a Phillip H. Kwon; Joseph Shamolian; and Nissim N. Ohayon.