Girardi | Keese

Government-initiated business litigation halts illegal activity

When California residents think of civil litigation, they may first consider the legal claims that come from physical damage or injuries suffered in car accidents, falls or other such events. In reality, personal injury comes in a variety of guises and can even be financial in nature. Some state and federal government agencies are stepping up to halt illegal mortgage relief activity that is hurting consumers, for example.

Since 2008, the Federal Trade Commission has brought actions against fraudulent relief schemes in 48 cases. The FTC isn't alone in its fight -- the Consumer Financial Protection Bureau joined the federal agency and other state organizations in what is called Operation Mis-Modification. The operation is targeting companies that prey on individuals who are in desperate mortgage situations.

The FTC Bureau of Consumer Protection director said the illegal mortgage scheme can do additional harm to financial situations that are already risky. One goal of the operation is to halt operations that make empty promises about mortgage relief or charge up-front fees illegally.

On July 23, the FTC charged six mortgage relief companies with violating the Mortgage Assistance Relief Services Rule as well as the FTC Act. According to the rules, relief providers cannot charge fees until the homeowner has received a written offer from an acceptable lender or service provider.

Some of the defendants in the cases brought by the FTC charged up-front fees of hundreds or thousands of dollars, though not every homeowner benefited from the services. Some consumers were told to stop paying mortgages while the relief paperwork was pending, and others were told there was an 85 to 100 percent chance of success.

Individuals who are faced with illegal or unethical business practices don't have to settle for what they are being provided. There are a number of civil litigation options open to the individual, including the possibility of combining forces in a class action suit.

Source: InsuranceNewsNet, "Federal and State Agencies Stop Phony Mortgage Relief Schemes" Jul. 23, 2014

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