Not only do mortgage originators have to worry about the federal do-not-call laws, they need to be mindful that there are state laws that cover consumer marketing and contacts as well. And if convicted of violating those laws on either the state or federal level, the penalties can be very hefty.
Wisconsin attorney general J.B. Van Hollen is suing First American Funding Co. LLC, Columbus, Wis., for allegedly violating the state’s no-call and marketing laws. The state is seeking $100 for each violation of the no-call list and between $100 and $10,000 for each violation of the direct marketing laws.
A call to company owner Michael S. Eisenga was not returned by press time.
However, the legal filings note that in 2006, First American Funding entered into a stipulated consent judgment to resolve an earlier suit. That suit alleged that First American made calls to state residents but was not registered as a telephone solicitor, as well as making calls to people on the state’s no-call list.
In a press release regarding the current legal complaint, Van Hollen said, “This company used extremely misleading language in their telemarketing practices.
“They sometimes even used language that implied they were calling on behalf of the consumer’s home mortgage. When consumers called back, concerned there was a problem with their loan, they were surprised and frustrated to learn it was, in fact, a sales pitch. Such practices, along with the high volume of calls warranted this action.”
The legal filing and press release said that the state’s Department of Agriculture, Trade and Consumer Protection continued to receive complaints from consumers regarding First American Funding after the 2006 settlement agreement.
DATCP found that First American Funding made over 3 million telephone solicitations to Wisconsin residents in 2010, with a “significant amount” to consumers on the no-call list, the filing said. The agency found of First American Funding’s March 2010 calls, 64% were to consumers on the no call list. This was followed by 50% in April, 57% in May, 60% in June, 43% in July and 46% in August.
“The above-described pattern demonstrates an utter disregard by FAF for Wisconsin’s no-call laws,” the filing states.
There were 20 examples of consumer complaints regarding First American Funding included in the legal filing; in more than one case, the solicitor referenced another company as part of the reason for the call.
One consumer complaint said a First American Funding solicitor who called herself “Debra” left a message about her loan and said for the consumer to call her back. The consumer called back.
The filing quoted the consumer’s statement to DATCP: “They do not have my mortgage but were soliciting. Debra was advised never to call again and stop misrepresenting their calls.”
Other calls asked consumers who were on the no-call list if they were happy with their current mortgage lender.
There were five counts of allegations against First American Funding, with two of them regarding a renewal application for the company to be able to operate as a telemarketer that was sent to DATCP for 2010. The application stated the company would only use one telephone line for telephone solicitations during the year.
The number of telephone lines to be used for solicitations determines the fee paid to state regulators. The legal papers said First American Funding used at least seven lines for telemarketing purposes.
Past legal efforts have shown violations of state and federal do-not-call laws could be costly. In a 2008 federal settlement, Srikanth Venkataraman, who had a mortgage telemarketing company named Scorpio Systems Ltd.; its successor company, Software Transformations Inc., and Sridhar Bhupatiraju, an officer of Software Transformations, agreed to a suspended civil penalty judgments of $530,000 against each of the individuals and $160,000 against Software Transformations, which the Federal Trade Commission said represented the total gross revenues resulting from their telemarketing violations.
But based on the inability to pay, however, the order required Venkataraman to pay $15,000, Bhupatiraju to pay $10,000 and Software Transformations to pay $20,000.
The press release from FTC noted, “Scorpio allegedly called numbers on the do-not-call registry, failed to transmit its telephone number and name to consumers’ caller identification service, and failed to pay the fee required to access the registry. The telemarketer transmitted either no caller ID or a phony caller ID number, 234-567-8923, and, as a result, consumers were unable to contact the telemarketer to stop unwanted calls.”
Back in 2007, Ameriquest had to pay a $1 million fine for calling consumers on the registry whose information it had obtained from a third party. The FTC said, “Because consumers whose numbers were on the lead lists were not reaching out to Ameriquest in particular, the company had not developed an 'established business relationship’ with them, making calls to registered numbers illegal. Ameriquest also allegedly also ignored consumers’ requests to be placed on its entity-specific do-not-call list.”
At the same time it announced the Ameriquest settlement, the FTC said it was going after Global Mortgage Funding and its owner Damian Robert Kutzner for violating do not call.
In 2009 Global and Kutzner agreed to a settlement, including a $6 million civil penalty, which was suspended because the parties had filed for bankruptcy. The agreement also barred Kutzner and anyone working with him from telemarketing to consumers, and from helping others involved in telemarketing to consumers, for five years.
And it is not just the state and the FTC that can go after wayward telemarketers, the Federal Communications Commission also has enforcement powers.
FCC ordered a monetary forfeiture of $20,000 against AZ Prime One Mortgage Corp. “for willful and repeated violations of section 64.1200(c)(2) of the commission’s rules, by making telephone calls for the purpose of delivering telephone solicitations to two residential telephone consumers who had registered their telephone numbers on the National Do-Not-Call Registry.”
That order in June 2010, came one year after a similar order by FCC against AZ Prime One Mortgage for a $10,000 penalty.
