Law Firms

Former mortgage-relief law firms ordered to pay $59M for misrepresenting their services

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A federal judge in Wisconsin has ordered two defunct mortgage-relief law firms and their attorney principals to pay $59 million in restitution and civil penalties for misrepresenting their services to consumers.

U.S. District Judge William Conley ordered the payments Nov. 4, report Law360 and Bloomberg Law.

The Consumer Financial Protection Bureau had alleged in its July 2014 lawsuit that the Mortgage Law Group and the Consumer First Legal Group promised to help homeowners with loan modifications and foreclosure relief, then failed to deliver the promised services.

The $59 million judgment included $21.7 million in restitution, which can be used to cover the civil penalties if the CFPB isn’t able to return the money to the firms’ former clients. The restitution amount is based on the law firms’ net revenues.

In a July 2015 summary judgment order, a prior judge in the case said the law firms collected up-front fees. Consumer regulations bar collection of fees before a consumer obtains mortgage relief in a written agreement with the lender.

An exception to the advance-fee rule is made for lawyers who provide mortgage assistance as part of their law practice. But the lawyers for the mortgage groups didn’t qualify for the exemption, Conley ruled in November 2018 after a bench trial.

Conley also cited evidence that intake specialists violated the law by advising consumers not to speak with their lenders and by telling consumers that they had no obligation to continue making loan payments.

Conley also said in the November decision “consumers certainly did not receive the services or attention that they were led to expect.” The misrepresentations included assertions that the consumers would receive legal representation in receiving a loan modification.

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