Cap City Settles With FTC

The Federal Trade Commission has reached a $750,000 settlement with a former subprime lender, ending a seven-year legal stalemate over allegations of deceptive lending practices.The settlement permanently bars Capital City Mortgage Corp., Washington, from engaging in deceptive and fraudulent home equity lending and servicing practices. And it requires CCMC to pay up to $750,000 in consumer redress. The CCMC largely exited the residential market before the FTC filed its complaint in 1998, but it will have to stop doing "take-back" loans under the settlement, according to the company's outside attorney, Philip Musolino. Its main business today is commercial real estate lending. "We are pleased with the settlement on terms that do not disrupt Capital City's ongoing operations," the Washington attorney said. The settlement reflects the "FTC's acknowledgement that its $12 million claim was ill-advised," he added. Under the settlement, CCMC agrees not to misrepresent loan amounts and fees and to use standard industry forms in originating a loan. The settlement also places severe restrictions on its servicing practices. "The result of the settlement is they are no longer going to be able to defraud consumers," FTC attorney Alain Sheer said. CCMC did not admit to any wrongdoing as part of the settlement.