On Wednesday, Arizona Attorney General Tom Horne, filed a lawsuit against, an Arizona-licensed attorney, Brent Randall and Phillips and Phillips Law Center, a California-based law firm, for allegedly participating in a deceptive mortgage rescue or loan modification scheme.
“State and federal law ban almost all types of up-front fees for foreclosure assistance,” Horne said.
The lawsuit is part of a joint federal-state sweep by the Consumer Financial Protection Bureau, the Federal Trade Commission and 15 states targeting operations that prey on delinquent homeowners or those facing foreclosure. Mortgage rescue scams target struggling homeowners and, for an upfront fee, promise to save their homes by negotiating lower mortgage payments with the homeowners’ lenders. But after collecting upfront fees, these scam operations often fail to negotiate or perform any services on behalf of the homeowners, placing their victims at even greater risk of foreclosure.
The Complaint, filed in Maricopa County Superior Court, alleges, among other things, that the Defendants violated the Arizona Consumer Fraud Act by using deceptive means to lure financially distressed homeowners into paying up-front fees with promises that the company would prevent foreclosure and save the consumers’ homes by negotiating modifications of mortgage loans. The State alleges that the Defendants engaged in the following deceptive conduct:
• Defendants sent out written advertisements to approximately 20,000 Arizona consumers which created the misleading impression that the communication was from the consumer’s mortgage loan holder, and that the consumer’s mortgage payments could be reduced and the terms of their mortgage “can be restructured”;
• Defendants’ advertising and marketing materials represented that if a consumer’s case was selected by the firm, the consumer could “rest assured with certainty” that Defendants would obtain mortgage relief for them when the Defendants had no substantiation for such representation;
The complaint asks the court to enter an injunction prohibiting the Defendants from engaging in any further unlawful acts, require the defendants to restore money and property to consumers, order the payment of civil penalties of up to $10,000 per violation, and to reimburse the State’s court costs and other related expenses. The case is being handled by Assistant Attorneys General Alyse Meislik and Brad Keogh in the Consumer Protection and Advocacy Division.