July 23, 2014

CFPB, FTC sue over foreclosure scams

July 24, 2014 – CFPB, the Federal Trade Commission and 15 states announced lawsuits Wednesday against companies and individuals that collected illegal advance fees for falsely promising to prevent foreclosures or renegotiate mortgages.

CFPB is filing three lawsuits, FTC is filing six, and the states are taking a total of 32 actions.

CFPB said the companies collected more than $25 million illegally after using deceptive marketing to take advantage of distressed homeowners. The scammers were law firms or associated with law firms, which the bureau alleges violated Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) Rule, which prohibits service providers from requesting and receiving payments before consumers have signed mortgage modification agreements with their lenders.

CFPB also put out a consumer advisory about the warning signs of foreclosure relief scams, including: demands of upfront payment; claims that modification is guaranteed; or a "hard sell." The guidance also includes advice about authorizing third parties to act on consumers' behalf when seeking mortgage relief, and notes CFPB's new model third party authorization form for mortgage servicers, which the bureau developed to build on privacy and fraud controls and make it easier to spot scams.