The operators of an allegedly deceptive loan modification business will pay more than $750,000 in ill-gotten gains to settle Federal Trade Commission (FTC) charges. The settlements also permanently ban the 11 defendants from selling any mortgage assistance relief products. The FTC’s case against the four operators of the Debt Advocacy Center and another group of seven defendants that allegedly provided “forensic audits” to consumers are part of the agency’s ongoing crackdown on frauds targeting consumers in financial distress.
According to the complaint the FTC filed in November 2009 as part of a law enforcement sweep against mortgage relief scams, the Debt Advocacy Center defendants charged consumers $1,500 in advance and claimed a 90 percent success rate for obtaining loan modifications. These four defendants also allegedly promised a refund of $1,500 or more if they were unable to obtain a loan modification. The complaint alleged that when consumers did not get the modification, the Debt Advocacy Center told them the $1,500 was only for advice and educational materials and refused to return payments from consumers. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.
The FTC later alleged that another group of seven defendants was involved in the operation, offering so-called forensic audits. The scheme purportedly involved checking a homeowner’s loan documents for law violations that would give them leverage in negotiating with lenders to obtain a loan modification or a “short sale” of a house for an amount that was less than the mortgage balance. The forensic audit defendants collected $995 in advance for each audit even though an audit was unlikely to aid negotiations with lenders, the complaint alleged.
Under the settlements, all 11 defendants are permanently banned from selling any mortgage assistance relief services. All the defendants will be prohibited from misrepresenting any relevant facts about the marketing or sale of financial products and will need to provide support for any claims they make about the products. The four Debt Advocacy Center defendants also will be barred from misrepresenting the relevant facts about any product they market or sell.
Under the proposed settlements:
►The forensic audit defendants Credit Services Alliance Inc., Maurice Jackson, Patrick Butler, and Bradford R. Geisen will pay a judgment of $527,000. Glenn E. Gromann, John W. Smith, and CreditLawGroup PA are not subject to any monetary provisions.
►The $1.8 million judgment against Debt Advocacy Center defendants Edward J. Davidson; The Debt Advocacy Center LLC; and Smith, Gromann & Davidson PA will be suspended, based on inability to pay, when Davidson turns over certain real estate and personal property to the FTC for liquidation, and pays $37,000 in installments to the FTC. These payments are secured by his interest in a movie called The Derby Stallion.
►The $717,000 judgment against Debt Advocacy Center defendant Kevin McCormick will be suspended, based on inability to pay, when McCormick transfers approximately $20,000 from an inheritance trust to the FTC.
If it is later determined that the financial information provided to the FTC by these defendants was false, the full amount of their judgments will become due. The Commission voted 4-0 to approve the second amended complaint against the Debt Advocacy Center and forensic audit defendants, and the four proposed consent orders against Geisen, Jackson, Butler, and Credit Services Alliance Inc.; Smith, Gromann, and CreditLawGroup PA; The Debt Advocacy Center LLC and Smith, Gromann & Davidson PA.; and Kevin McCormick.
The consent orders and second amended complaint were filed in the U.S. District Court for the Northern District of Ohio Eastern Division on March 7, 2012. The court entered the second amended complaint on March 7, 2012. The consent orders for The Debt Advocacy Center, LLC; Smith, Gromann & Davidson, P.A.; Edward J. Davidson; Kevin McCormick; Bradford R. Geisen; Maurice Jackson; Patrick Butler; and Credit Services Alliance, Inc. were entered by the court on May 2, 2012. Those for Glenn E. Gromann; John W. Smith; and CreditLawGroup, P.A. were entered on June 6, 2012.