Taking a page from the playbook of the Federal Trade Commission,
the new Consumer Federal Protection Bureau (CFPB) has filed its
first civil enforcement action in federal court against
participants in a Los Angeles-based loan modification program. Consumer Financial Protection Bureau v. Gordon et
al, initially filed under seal in the Central District of
California on July 18, named California attorney Chance E. Gordon
and The Gordon Law Firm, P.C., along with another individual and
corporations allegedly involved in the program.
The CFPB sought and obtained a temporary restraining order
freezing the defendants' assets and appointing a temporary
receiver; District Court Judge Ronald Lew granted the CFPB's
requests the same day the action was filed. The action also seeks
an unspecified amount of monetary equitable relief for rescission
or reformation of contracts, refund of moneys paid, restitution and
disgorgement or compensation for unjust enrichment.
The complaint alleges that the defendants charged advance fees
ranging from $2,500 to $4,500 to consumers for mortgage relief
services in violation of federal consumer financial laws governing
mortgage relief services. The suit also alleges that the
defendants made false statements about consumers' ability to
obtain relief from foreclosures and reduced mortgage payments,
misrepresented their affiliation with government entities and
failed to provide consumers with disclosures required by law.
The complaint does not specifically address potential legal issues
relating to a limited exemption for attorneys under the Consumer
Financial Protection Act of 2010 (CFPA), other than asserting that
the defendants are "covered persons" and "service
providers," as defined by the Act.
Although the action is primarily based on alleged violations of
the CFPA, it closely follows the form of typical FTC complaints and
is being prosecuted by two former FTC attorneys who joined the CFPB
after it began operating in July 2011. The FTC has used the
strategy of filing actions under seal in federal court and seeking
an order freezing the defendants' assets and appointing a
receiver without notice in many instances.
The fact that the CFPB's first civil enforcement action
targets loan modifications, which have previously been the subject
of FTC enforcement actions, indicates that both the FTC and the
CFPB may independently bring actions in areas where their
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The Consumer Financial Protection Bureau announced that it had settled enforcement actions against four insurance companies in connection with alleged improper payments between the insurance companies and mortgage lenders.
Since opening for business in July 2011, the Consumer Financial Protection Bureau ("CFPB" or the "Bureau") has focused on regulating consumer financial markets and protecting consumers through studying markets, educating consumers, and enforcement.