CFPB Files Complaint Against Company for Alleged Misrepresentations to Consumers in Violation of Regulation O and CFPA

The CFPB recently filed a Complaint against a company, its president and CEO, and an auditor, for alleged violations of Regulation O and the Consumer Financial Protection Act.  The company provides financial advisory and mortgage assistance relief services, purportedly to assist consumers avoid foreclosures and negotiate loan modifications.

The matter is in litigation with the company and the CEO; the auditor agreed to a permanent ban from engaging in mortgage assistance relief services to consumers and will pay a civil money penalty under the terms of a proposed Stipulated Final Judgement and Order.

In the Complaint, the CFPB alleges the company collected up-front fees for marketing and sale of auditing services in violation of Regulation O, and misrepresented its services to consumers in an unfair and deceptive manner.  It is alleged that the company’s marketing materials led consumers to believe the company would provide consumers with documents in the form of an “audit” of the consumers’ mortgage, lender, servicer, and related securitization trusts, along with a set of “litigation” materials at cost of $1,495, to assist consumers in defending against foreclosure proceedings.

In fact, as stated in the Complaint, the documents provided to consumers were templates that did not vary significantly from one consumer to the next.  Only the borrower’s name, address and mortgage lender and servicers were modified.  The Complaint also alleges numerous misrepresentations were made to consumers, in marketing testimonials and by other means, that the company and multiple expert auditors would review consumer loans as part of the service provided, and that leading attorneys and experts in the mortgage industry with specific certification in mortgage securitization auditor training were involved in the preparation of purported litigation documents.

The alleged Regulation O violations consist of (i) the company’s receipt of payment from consumers before consumers agreed in writing with loan holders or servicers to incorporate offers of mortgage relief assistance obtained by the company, and (ii) misrepresenting, among other things, the likelihood of being able to obtain mortgage loan modifications based upon unreliable evidence to substantiate those assertions. 

The CFPA allegations relate to the company’s representations that its audits and litigation documents (i) would help consumers avoid foreclosure, settle foreclosure proceedings, or obtain loan modifications, (ii) were prepared by experts, and (iii) took unreasonable advantage of consumer’s lack of understanding of the risks, costs, or conditions of the service provided.