Mystar credit and debt help blog

Debt Settlement Companies Scamming Consumers and Facing Legal action in various States

Missouri Attorney General Announces Consent Judgment Against Debt Settlement Company Missouri Attorney General Chris Koster announced that the Florida-based debt settlement firm Vortex Debt Group, Inc., will refund fees paid by Missouri consumers and cease operating in Missouri. The Attorney General's Office alleged Vortex Debt Group engaged in deceptive and unfair practices by promising to reduce consumers' debt, taking significant fees from consumers in exchange for this claimed service, and failing to actually reduce consumers' debts. This often left consumers with more debt and less money. Under the judgment, Vortex Debt Group will no longer accept any business from Missourians and will refund fees paid by Missouri consumers who submit complaints to the Missouri Attorney General's Office within one year of today's date. The Attorney General's Office will send notices in the coming weeks to the approximately 300 Missouri consumers who had signed up for purported debt-relief services with Vortex. The notices will inform the consumers of their right to a refund of fees.  "Debt-settlement companies promise to help people reduce their debt load, but in fact these companies take significant fees from consumers without providing the promised debt relief," Koster said. "I urge Missourians experiencing debt problems to contact a not-for-profit consumer counseling agency or to seek competent legal representation from a consumer bankruptcy attorney in order to deal with debt-related issues." Koster said consumers should be aware that under Missouri law, it is illegal for these types of businesses to collect up-front fees before providing the service.

$13.8 Million Verdict Against Debt Repair Scammer A Texas jury has returned a $13.8 million verdict against a credit repair business and its owner, finding they defrauded indebted Texans and failed to register with authorities in violation of state law. The jury found that Jubilee Financial Management LLC, The Credit Card Solution (TCCS), Freedom from Debt Alliance and Robert M. Lindsey used illegal "debt invalidation" schemes that purported to help financially struggling Texans. According to the State's enforcement action, the defendants assured customers that they could eliminate their credit card debts and restore their credit ratings. The defendants claimed they could help debtors exploit loopholes in the credit reporting system and pursue litigation against debt collectors for violations Fair Debt Collection Practices Act. Simply filing lawsuits, the defendants falsely claimed, would allow their customers to erase their debts and reap thousands of dollars in court-awarded damages from debt collectors. After a week-long trial, the jury found that all four defendants violated both the Texas Deceptive Trade Practices Act and the Texas Credit Services Act. The jury also found that Lindsey and TCCS violated the Texas Business Opportunity Act. The latter violations stemmed from the defendants' attempt to use customers to sell its fraudulent services to other financially strapped Texans. Under state law, multi-level marketers must register with the Texas Secretary of State and obtain surety bonds in order to lawfully operate in the state, but the defendants failed to do so. More than 700 people paid an average of $3,000 for the defendants' fraudulent services. Because the defendants offered nothing of value - and charged thousands of dollars for the purported services - already struggling customers were worse off financially after paying TCCS. Once a customer paid TCCS, the defendants promised to help customers send "form letters" to debt collectors and credit reporting agencies. The defendants claimed that the form letters would put the recipient on notice, which TCCS claimed would ultimately benefit customers financially.

FTC Files Contempt Charges Against

FTC Files Contempt Charges Against Marketer of Credit Repair, Debt Relief, Food Stamp Services The Federal Trade Commission has filed contempt charges against a promoter of credit repair and debt relief services and three of his companies, alleging that they continued their deceptive marketing practices in violation of a federal court order. The FTC charged that the defendants tried to take advantage of financially strapped consumers by falsely telling them that almost anyone can qualify for food stamps, and by encouraging them to mislead the government about their finances to qualify for the food stamp program. As part of the FTC's ongoing efforts to protect consumers in financial distress, the agency seeks to ban the defendants from selling credit repair, debt relief, or government-related goods or services, and make them pay compensation to consumers. The FTC charged that Sam Tarad Sky, Allrepco LLC, Credit Restoration Brokers LLC (CRB), and Debt Negotiations Associates LLC (DNA) violated the terms of a March 2010 court order that resolved charges that the defendants deceptively marketed credit repair and debt relief services, and illegally charged an up-front fee for credit repair services. The court order bars them from deceptively marketing any good or service and from violating the Credit Repair Organizations Act. The FTC also alleged that the defendants charged up-front fees for credit repair services, failed to make required disclosures about their debt relief services, and failed to fully report Sky's business activities, all in violation of the court order.

Attorney General Announces Lawsuit Against Orlando Law Firm Engaged in Unlawful Debt Management Practices Colorado Attorney General John Suthers announced that his office has filed a lawsuit against Clint L. Johnson and his Orlando, Fla.-based law firm, the Johnson Law Group, suspected of engaging in unlawful debt management practices directed at Colorado consumers. According to the complaint, filed in Denver District Court, Johnson and the Johnson Law Group contracted with 665 Coloradans for debt management services between January 2008 and November 2009 when it was not licensed with the state. According to the complaint, the Johnson Law Group outsourced its debt management services to outside contractors. The Office of the Attorney General sent the Johnson Law Group a cease and desist notice on July 29, 2009 ordering the firm to comply with Colorado's licensing requirements. The firm agreed to cease its debt management practices. However, in mid-2010 the state learned that the Johnson Law Group had continued to illegally assist Colorado consumers in settling their debts.

Mortgage Fraud Hits New High

Huffingtonpost.com 5/12/2011

After the housing market crashed, reports of suspected mortgage fraud soared.

As lenders, homeowners and brokers rushed to close deals, the process during the boom years was tainted by fakery, according to reports later submitted to the Financial Crimes Enforcement Network, an agency of the Treasury Department. The number of reports of suspected mortgage fraud rose to its highest level on record last year, as 70,472 reports were submitted to the government agency, according to a new release from the LexisNexis Mortgage Asset Research Institute.

That's nearly double the number of cases reported in 2006 when the market was at its peak, and it's nearly 22 times the number of cases reported in 2000. From the LexisNexis release:

Fraudsters thrive on inadequacies within lengthy loan-related processes and a lack of consistency across organizations and/or industries that help them hide their true motives. Technology has enabled faster loan production through automation, ease of processing, and analytics. Industry professionals have keen knowledge of those processes, which makes it much easier to manipulate protocols in place to thwart adverse activities.

The number of verified cases of mortgage fraud declined from 2009 to 2010, but that's partially attributable to a decline in the number of new loans, the LexisNexis report says. Reports of suspected fraud increased nearly 5 percent during that period.

Homeowners and investors have filed numerous lawsuits against mortgage companies, claiming that crucial mortgage documents were misplaced or even forged. Some of these suits have been successful, bolstered by testimony from bank employees. In a widely cited example, an employee of the lender now owned by Bank of America testified in a New Jersey court in 2009 that her company regularly held onto mortgage notes even as the loans were sold to investors, contradicting what contracts usually require.

Without a note, a bank cannot prove it has a right to foreclose on a home; homeowners have used the absence of a note to contest foreclosures. Likewise, a missing note compromises the legal rights of an investor in a mortgage security, a situation that has prompted some investors to sue the banks that sold them the securities.

But it's not just the banks who have been accused of fraud. The Wall Street Journal describes a practice some brokers allegedly used, in which they would get artificially low valuations of distressed homes, and then help a buyer sell those homes for a profit.

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Homeowners, too, have been accused of misstating their income on mortgage documents. One borrower is now serving a 21-month prison sentence for mortgage fraud, the New York Times reported.

The chiefs of the lenders that helped fuel this boom, meanwhile, have largely escaped punishment.