A group of Utah-based defendants claiming to be legal experts in loan modifications have settled Federal Trade Commission charges that they broke the law by conning consumers into paying hefty fees for apparently worthless mortgage relief services.
The five proposed orders settling the FTCs charges ban the defendants, led by Philip J. Danielson and his company, Danielson Law Group, from offering mortgage assistance relief services and from participating in the debt relief industry.
The FTC charged the defendants with violating the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule, now known as Regulation O. The Rule bans mortgage foreclosure rescue and loan modification service providers from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.
The FTC filed its complaint in July 2014, as part of a multi-agency federal and state law enforcement sweep targeting operations that fraudulently pitched loan modifications to consumers. At the FTCs request, a U.S. district court temporarily halted the operation, which promised legal help to consumers to avoid foreclosure or get relief from unaffordable mortgages but then did little or nothing to help. The court order froze the defendants corporate and personal assets pending litigation of the case.
The defendants allegedly lured consumers into paying $500 to $3,900 by falsely promising that attorneys would negotiate loan modifications that would substantially reduce the consumers mortgage payments. The defendants touted a success rate that exceeded 90% purportedly based on their legal expertise and a pre-qualification process that identified clients that they knew they could help.
The complaint also alleged that the defendants used the name Danielson Law Group and other attorney or law firm names to look like they had lawyers all over the country, even though many consumers never met or spoke to an attorney.
"Its troubling when anyone takes advantage of homeowners in financial distress," said Jessica Rich, director of the FTCs Bureau of Consumer Protection. This scam is particularly offensive because it used an attorneys legal credentials to create a facade of authenticity.The defendants under the proposed settlements are banned from participating in the mortgage relief and debt relief industries, and are prohibited from misrepresenting various features of any product or service or making advertising claims that are unsupported by competent and reliable evidence.
The proposed settlements also impose a $28.6 million judgment against all of the defendants, reflecting the total amount of fees taken in by the scheme. The proposed judgment will be suspended as to the individual defendants provided they surrender certain of their assets, including a $200,000 house in Utah as required by the settlement orders. If it is later determined that any defendant provided false financial information to the FTC, the full amount of the judgment against them will become due. The proposed settlement also requires relief defendant April Norton to turn over unearned ill-gotten gains that she received from the scheme. The full judgment remains in effect against the corporate defendants.The settlements also resolve a contempt action the FTC concurrently filed against two individuals named in this case - Philip J. Danielson and Tony D. Norton - and four companies they controlled, Philip Danielson LLC; Foundation Business Solutions LLC; Direct Results Solutions LLC; and Strata G Solutions LLC, for violating a 2010 court order in a phony work-at-home scheme that falsely claimed ties to Google Inc.
After a court shut down that scam and prohibited the defendants from making deceptive claims, Danielson and Norton turned their sights to preying on vulnerable homeowners in violation of that order, alleged the FTC. The settlement subjects the contempt defendants to a complete ban from telemarketing activities.