Markets Wired

As part of its continuing crackdown on scams that target consumers in financial distress, the Federal Trade Commission obtained a settlement order resolving charges against a nationwide scam operating from the Dominican Republic and banning the defendants from providing mortgage assistance relief. 

Pretending to be in Chicago, the Freedom Companies operation allegedly peddled fake mortgage assistance relief to financially distressed Spanish-speaking homeowners in the United States.  At the request of the FTC, a U.S. district court halted the operation in July.

The FTC settlement order bans the eight defendants – David F. Preiner, Daniel Hungria, Freedom Companies Marketing, Inc., and five other companies controlled by Preiner and Hungria – from marketing any mortgage assistance relief products or services.  The settlement also prohibits the defendants from making misleading claims about any product, service, plan, or program that they market or advertise.

Filed in July 2012, the FTC’s complaint charged the defendants with violating the FTC Act and the Mortgage Assistance Relief Services Rule, known as the MARS Rule.  According to the complaint, the defendants promised to dramatically lower homeowners’ monthly mortgage payments in exchange for a hefty upfront fee, and collected more than $2 million in fees in three years, but failed to provide homeowners with the promised services.  Speaking in Spanish and targeting homeowners behind in their payments or facing foreclosure, telemarketers empathized about the tough economy and claimed to provide information about federal mortgage assistance programs, according to the complaint.  In lengthy sales calls, the telemarketers falsely claimed to be affiliated with or approved by the consumers’ lenders or the federal government, “making sure to mention President Obama or the (federal) Making Home Affordable Program by name,” according to documents filed with the court.

The settlement also imposes a $2.39 million judgment, which reflects the full amount of consumer injury during the three years before the operation was shut down.  The judgment will be suspended due to the defendants’ inability to pay after they turn over the operation’s remaining $17,337 in assets.  If it is determined that the financial information the defendants gave the FTC was untruthful, the full amount of the judgment will become due.

Charging what they said was a one-time advance fee of $995 to $1,500, the callers allegedly falsely promised homeowners a mortgage modification in 30 to 90 days, often advising them to stop paying their lenders.

Homeowners who signed up received a batch of forms in the mail that required them to provide extensive personal and financial information and pay an advance fee, according to the complaint.  After paying the fee and not hearing further from the defendants for weeks afterward, some homeowners who managed to reach a live representative were told that the modification process was underway, but that they needed to pay up to several thousand dollars in additional fees.  In the end, the FTC alleged, few homeowners received a loan modification – or anything else of value from the defendants.  And what they did receive, they could have gotten for themselves for free.

In addition to Freedom Companies Marketing, Inc., Preiner, and Hungria, who was added as a defendant shortly after the complaint was filed, the settlement order also names:  Freedom Companies Lending, Inc.; Freedom Companies, Inc.; Grupo Marketing Dominicana; Freedom Information Services, Inc.; and Haiti Management, Inc.

The Commission has advice for consumers about managing their mortgages.  For more information see:  Mortgage Relief Scams in English, and Estafas de alivio para deudores hipotecarios in Spanish.

The Commission vote authorizing the staff to file the proposed consent agreement was 5-0.  The FTC filed the proposed consent agreement in the U.S. District Court for the Northern District of Illinois, Eastern Division, and the court granted the FTC’s request on December 26, 2012.

NOTE:  This consent decree is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated.  Consent decrees have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.