For the second time, the Consumer Financial Protection Bureau has gone after a legal services provider for allegedly offering bogus mortgage relief assistance to struggling homeowners.
The CFPB announced today that a California federal judge has issued a temporary restraining order shutting down the National Legal Help Center, which allegedly offered legal representation to consumers "even though the individual defendants are not attorneys and consumers received no actual legal representation," according to the CFPB.
California residents Najia Jalan and Richard Nelson allegedly claimed they could help consumers get benefits from the recent nationwide mortgage servicing settlement between state attorneys general, the federal government and the five largest mortgage servicers. The defendants also claimed that they were associated with the Independent Foreclosure Review program overseen by the Office of the Comptroller of the Currency and the Federal Reserve, according to the CFPB.
On December 4, U.S. District Court for the Central District of California Judge Andrew Guilford granted the CFPB's request for a temporary restraining order, writing that there was "good cause" to believe the defendants have violated the Dodd-Frank Act and Regulation O, formerly known as the Mortgage Assistance Relief Services Rule, and that the CFPB is "likely to prevail on the merits of this action." The order includes the appointment of a temporary receiver and an asset freeze.
In July, the CFPB filed a similar complaint against the Gordon Law Firm also in California's Central District and won a temporary restraining order the following day. On November 16, the court entered a preliminary injunction order halting the defendants' allegedly unlawful conduct and freezing their assets while the case proceeds.
"We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure," said CFPB Director Richard Cordray in a news release. "We are especially concerned with those who misrepresent government programs or websites to divert distressed homeowners from needed assistance."
The case involving the National Legal Help Center was referred to the CFPB by the Office of the Special Inspector General for the Troubled Asset Relief Program and Treasury's Office of Financial Stability.
According to the CFPB complaint, the defendants made more than 90,000 phone calls to consumers in all 50 states, "deceptively promising foreclosure relief or mortgage modifications that will make consumers' payments substantially more affordable."
They also sent spam emails with official-sounding sender names like "United States Department of Mortgage Fraud and Consumer Assistance," and included marks from agencies including Housing and Urban Development and the Office of the Comptroller of the Currency. The defendants also allegedly purported to be part of the California Office of the Attorney General.
They charged up-front fees of $1,000 to $3,000, and in some cases more than $10,000, raking in at least $1.6 million since early 2010, the CFPB reported. It is against the law for mortgage relief providers to charge fees before services are provided.
According to the complaint, the defendants passed themselves off as a full-service law firm, and said that consumers would be represented by attorneys who specialized in foreclosure relief or negotiating mortgage loan modifications. "In reality, Defendants merely affiliate with attorneys who neither represent consumers nor have an attorney-client relationship with them," the complaint states.
The CFPB alleged that the defendants did "little or nothing to assist consumers," and that "many consumers suffer significant economic injury, including foreclosure and the loss of their homes."