A Florida-based law firm and its corporate affiliates will pay about $27.7 million for illegally charging struggling homeowners upfront fees to join frivolous lawsuits that the firm and its affiliates promised would result in mortgage modifications.
The Consumer Financial Protection Bureau (CFPB) and the State of Florida last week were granted a final judgment against the Hoffman Law Group and its corporate affiliates for allegedly using deceptive marketing practices and scamming distressed homeowners into paying illegal advance fees.
Federal officials found the corporate defendants liable for $11,730,579 – the full amount of illegal fees paid by consumers – and ordered them to pay a $10 million civil penalty, in addition to penalties to the State of Florida.
Authorities say the law firm and its affiliates were set up for the purpose of scamming struggling borrowers.
‘Scamming homeowners worried about losing their homes is not only illegal, it is despicable, and thanks to the great work of my consumer protection division and the CFPB, these defendants will pay for preying on Florida homeowners facing foreclosure,’ says Florida Attorney General Pam Bondi in a statement. ‘Foreclosure rescue scammers cannot evade the law by hiding behind a law firm. It is discouraging that there are attorneys out there that will allow their licenses to be used by shady companies to target people facing foreclosure.’
The lawsuit specifically names Hoffman Law Group's operators, Michael Harper, Benn Willcox and attorney Marc Hoffman, and its affiliated companies, Nationwide Management Solutions, Legal Intake Solutions, File Intake Solutions and BM Marketing Group, all based in North Palm Beach, Fla. The related companies, which were run by Harper and Willcox, existed to market and support the scheme, authorities say.
The CFPB and Florida AG contend that Hoffman Law Group and its affiliates violated Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) rule, and Florida state law, by charging advance fees for mortgage loan modification services, making misrepresentations about loan modification services, and failing to provide consumers with certain disclosures.
Not only did the defendants collect fees before obtaining loan modifications for consumers, they also falsely advertised their success rates in obtaining modifications and misrepresented the likelihood that they would help consumers save substantial sums in mortgage payments.
The companies also falsely advertised that the consumers who paid the fees would receive legal representation.
What's more, the companies discouraged homeowners from talking to their mortgage servicer or lender, claiming that they would handle all such communications. They also discouraged consumers from making mortgage payments to their lenders and servicers – and to make payments to the Hoffman companies instead – ostensibly in order for the consumer to better demonstrate financial hardship. As a result, many consumers who participated were subject to negative credit ratings and/or foreclosure.
The companies have since been dissolved and their assets – totaling about $655,737 – have been frozen and placed into receivership, according to the CFPB's press release.
Because the companies do not have enough cash to cover the penalties, certain assets belonging to Harper, Willcox and Hoffman will be auctioned, including 11 watches, 16 pieces of jewelry, two handguns, a computer and a television – the proceeds of which will be paid to the receivership estate.
For more, click here.