CCH Financial Reform News Center

Countrywide to Pay $108 Million for Overcharging Homeowners

This story appeared in Bank Digest.

The Federal Trade Commission has announced that two Countrywide mortgage servicing companies will pay $108 million to settle charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The money will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008. According to the complaint filed by the FTC, Countrywide's loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees that could add up to hundreds or thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide's lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages and loans made with little or no income or asset documentation, the complaint states. In addition, the settlement order prohibits Countrywide from “taking advantage of borrowers who have fallen behind on their payments.” The companies continue to service millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and foreclosure.

Advice Provided for Credit Card Debt Settlement

This story appeared in Bank Digest.

The FTC has issued a new publication, Settling Your Credit Card Debts, which provides red flags to watch out for from companies that promise to settle credit card debt, and discusses practical no-cost and low-cost options for help, including dealing with creditors directly and contacting a credit counselor. The FTC noted that there is no guarantee that debt settlement companies can persuade a credit card company to accept partial payment of a legitimate debt. Even if they can, clients must put aside money for their creditors each month and may have to pay hefty fees up front to the debt settlement company--putting them further in the hole before they get any relief.

FTC Seeks to Regulate Mortgage Assistance Relief Services

This story appeared in Bank Digest.

The Federal Trade Commission has issued a notice of proposed rulemaking concerning the practices of for-profit companies that, in exchange for a fee, offer to work with lenders and servicers on behalf of consumers to modify the terms of mortgage loans or to avoid foreclosure on those loans. The proposed rule would, among other things: prohibit providers of these services from making false or misleading claims; mandate that providers disclose certain information about these services; bar the collection of advance fees for these services; prohibit persons from providing substantial assistance or support to an entity they know or consciously avoid knowing is engaged in a violation of the regulations; and impose recordkeeping and compliance requirements. The FTC is taking this action pursuant to the 2009 Omnibus Appropriations Act, which was later clarified by the Credit Card Accountability and Responsibility and Disclosure Act of 2009.

FTC Proposes to Regulate Mortgage Foreclosure Assistance Services

This story appeared in Bank Digest.

In an effort to protect consumers from bogus foreclosure rescue and mortgage modification services, the FTC has proposed a rule that would prevent companies from charging up-front for these services. Instead, a company could only collect payment after it has a documented offer from a mortgage lender or servicer that lives up to the promises the company has made. The proposed rule would bar service providers from telling consumers to stop communicating with their lenders or mortgage servicers and ban certain misrepresentations about the services and costs. It also would impose disclosure requirements.

The proposed rule would apply to for-profit companies that, in exchange for a fee, offer to work with lenders and servicers on behalf of consumers to modify the terms of mortgage loans or to take other steps to avoid foreclosure on those loans. Attorneys representing consumers in bankruptcy or other legal proceedings would be exempt from the advance-fee ban but not from the rest of the rule.

Agencies Issue Final Rules on Risk-Based Pricing Notices

This story appeared in Bank Digest.

The Federal Reserve Board and the Federal Trade Commission have jointly announced final rules that generally require a creditor to provide a consumer with a notice when, based on the consumer’s credit report, the creditor provides credit to the consumer on less favorable terms than it provides to other consumers. Consumers who receive this “risk-based pricing” notice will be able to obtain a free credit report to check the accuracy of the report. Risk-based pricing refers to the practice of setting or adjusting the price and other terms of credit provided to a particular consumer based on the consumer’s creditworthiness.

CCH Briefing Paper Examines House Legislation

The CCH Editorial Staff of banking and securities law analysts has authored a detailed overview titled, "House Passes Wall Street Reform Act." From the introduction:

On December 11, 2009, the U.S. House of Representatives passed legislation to restructure the financial services regulatory system, the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), by a vote of 223-202. As discussed below, the sweeping array of reforms includes the Financial Stability Improvement Act, which would create a systemic risk regulator, strengthen regulation of depository institutions and bank holding companies, improve the asset-backed securitization process, and provide for an enhanced dissolution authority. The legislation also would create a Consumer Financial Protection Agency, reform the over-the-counter derivatives market, subject hedge funds to stricter scrutiny, impose new corporate governance mandates, adopt heightened requirements for credit rating agencies and expand regulatory enforcement powers. Among other measures, the legislation features expansive consumer mortgage protections and creates a Federal Insurance Office.

Download the briefing paper

Federal and State Agencies Target Mortgage Relief Scams

This story appeared in Bank Digest.

FTC Chairman Jon Leibowitz, joined by Senate Majority Leader Harry Reid, D-Nev., Nevada Attorney General Catherine Cortez Masto, and Assistant Attorney General Tony West of the Civil Division of the Department of Justice, announced “Operation Stolen Hope” as part of a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. The operation involves 118 actions by 26 federal and state agencies. The FTC actions were announced in Nevada, where one in every 23 homes is facing foreclosure. “These operators targeted consumers who were on the brink of financial disaster, and instead of holding them back, they pushed them over,” Leibowitz said. “If you're worried about keeping your home, avoid any company that asks for a large fee in advance, guarantees that they'll stop a foreclosure or modify a loan, or tells you to stop paying your mortgage company and to pay them instead.”

FTC Dismisses Individual as “Making Home Affordable” Imposter

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Federal Trade Commission has voted to dismiss defendant Neil Sperry from FTC v. Cantkier, a law enforcement action against several defendants marketing homeowner relief programs. The FTC alleged the defendants misrepresented that they are affiliated with free federal government programs, such as Making Home Affordable, in marketing mortgage modification or foreclosure relief programs for a fee to consumers. After the FTC filed its complaint earlier this year, a federal court issued an order stopping the defendants from making deceptive claims pending trial. FTC staff later learned that Sperry had no part in the alleged deceptive practices, and that his identity was used by unnamed persons as part of the scheme. The FTC therefore recommended that Sperry be dismissed from the case.

Two Credit Repair Operations Agree to Settle FTC Charges

This story appeared in Bank Digest.

Two credit repair companies and their principals have agreed to settle Federal Trade Commission charges that they falsely claimed they could clean up consumers’ credit reports and collected up-front fees for their services in violation of federal law. In one case, the agency alleged that the defendants marketed their services via web sites and real estate investment seminars and falsely claimed that their special relationships with creditors, collection companies, public records providers and credit bureaus enabled them to remove derogatory information from consumers’ credit reports. In the other case, a husband-wife team allegedly falsely claimed, through the Internet and newspaper classified ads, that their expertise enabled them to achieve the same results, the agency said. The settlement orders bar the defendants from making false claims when marketing credit repair services or any other product or service and specifically prohibit them from misrepresenting material facts. They also impose judgments of about $10.75 million, but suspend payments due to the defendants' financial conditions.

News Release at http://ftc.gov/opa/2009/10/successcredit.shtm

FTC v. Strobel at http://ftc.gov/os/caselist/0823141/index.shtm

FTC v. Successful Credit Service Corporation at http://ftc.gov/os/caselist/0823233/index.shtm

FTC Sues Organizations for Alleged Foreclosure Rescue Fraud

This story appeared in Bank Digest.

The FTC has announced the filing of lawsuits against two different groups of companies and individuals that allegedly engaged in fraud while offering assistance to consumers who were seeking mortgage loan modifications. According to the agency, Nations Housing Modification Center and its principals violated the Federal Trade Commission Act and the Telemarketing Sales Rule by misrepresenting themselves as a federal government agency or affiliate and falsely claiming that they would obtain mortgage modifications that would make consumers' loan payments substantially more affordable in virtually every instance. The FTC charged that Infinity Group Services and its president violated the FTC Act by falsely representing that they would: obtain a loan modification in all, or virtually all, instances; give full refunds if they failed to do so; and obtain loan refinancing for an up-front fee of $995. The agency also described preliminary injunctions or amended charges in four earlier cases.