A Florida court on Friday sided with the Consumer Financial Protection Bureau and the state over claims that a law firm charged illegal fees to consumers seeking foreclosure relief.
The Southern District Court of Florida found Hoffman Law Group, a firm in North Palm Beach, Fla., and its affiliates liable for $11.7 million in illegal upfront fees. The lawsuit said the firm charged consumers for foreclosure mitigation services that often went nowhere. In addition to the liability, the firm was ordered to pay a $10 million civil money penalty to the CFPB, and a $6 million penalty to the state.
However, much of the penalty appears to be uncollectable. A receiver appointed by the court to take charge of the company will pay $655,737, which is the remainder of the Hoffman Law Group and its affiliates' assets. The state and the CFPB last year had obtained a temporary restraining order and asset freeze against the companies.
"The false promises made by these companies lured struggling homeowners into scams that led to greater financial hardship," CFPB Director Richard Cordray said in a press release. "We are working to protect consumers from illegal predatory practices by holding bad actors accountable for their actions."
The CFPB and state of Florida sued Hoffman for violating a federal rule dealing with mortgage assistance relief as well as Florida law. They claimed the firm charged advance fees of $6,000 to homeowners who sought to adjust their loans to keep their homes and would then also charge consumers a monthly fee of $495. The defendants also "discouraged consumers from communicating directly with their lenders or servicers and claimed that they [would] handle all communications," according to court documents. Federal rules prohibit efforts to prevent consumers from contacting their lenders and servicers.
According to the court, Hoffman also led clients on with unrealistic expectations that foreclosure cases could result in modifications of their loans and foreclosure prevention. Hoffman failed "to provide the required, 'clear and prominent," disclosures," the court ruling said.
"Scamming homeowners worried about losing their homes is not only illegal, it is despicable, and thanks to the great work of my consumer protection division and the Consumer Financial Protection Bureau, these defendants will pay for preying on Florida homeowners facing foreclosure," Florida Attorney General Pam Bondi said in the CFPB press release.