Last week, the Federal Trade Commission (“FTC”) announced that the United States District Court for the Middle District of Florida had granted a summary judgment motion against various businesses, law firms and individuals for FTC Act and the Mortgage Assistance Relief Services Rule violations. In awarding the FTC summary judgment, the Court permanently enjoined the defendants from selling secured and unsecured debt relief products and services, and from misrepresenting any financial products or services, in the future. In addition, the defendants must pay a judgment of more than $13.5 million, which represents the defendants’ net revenues associated with the venture.
Why did the Court Award Summary Judgment against the Mortgage Modification Business?
FTC Awarded Summary Judgment against Mortgage Modification and Debt Relief Service Business
According to the allegations of the FTC, the defendants falsely promised financially-distressed consumers that the defendants’ services would prevent home foreclosure and that the defendants would work to lower consumers’ mortgage payments and interest rates. Moreover, the defendants promised consumers an 85%-100% chance of receiving a mortgage modification and, based on such promises, collected upwards of $4,000 in advance and then $300 or more per month from each consumer that enrolled in the program. In the end, of course, the defendants could not live up to their promises. The Court found that defendants had made numerous misrepresentations to consumers, and that the “law firms” involved were sham businesses.
It is important that businesses refrain from making statements and promises in advertising that can be construed by the FTC and other regulators as misleading. We recently blogged about the FTC’s nationwide crackdown on deceptive marketing campaigns. In this regulatory climate, businesses must consult with experienced counsel to prevent substantial marketing-related legal exposure.