FTC Releases Report on TIL Violations

The FTC announced Tuesday it has issued its annual report to the Federal Reserve Board regarding its enforcement activities in 2004 under the Federal Trade Commission Act, and the acts for Truth in Lending, Consumer Leasing, Equal Credit Opportunity and Electronic Funds Transfer. The data is to be of use for the Federal Reserve’s annual report to Congress.

In its efforts to halt unlawful subprime lending practices under the TILA, the commission filed two complaints in federal district courts and continued litigation on an ongoing lawsuit.

One of the filed complaints was against a group of Colorado-based mortgage brokers led by Philip W. Ranney for alleged violations of the FTCA and TILA. The complaint alleged the individuals deceptively claimed they would refinance mortgage at the lowest rates available at no cost to the borrower.

The group was also accused, among other things, of representing to consumers that in order to get a “no-fee” loan they would have to do multiple refinances, which involved applying for two or more loans, one with a competitive rate and the other at a subprime rate. Among other things, the complaint also alleged borrowers had liens placed on their property because the accused did not pay appraisal and other fees, and in other cases had their credit blemished and faced foreclosure proceedings, the FTC said.

Ranney and the individuals reportedly sometimes operated under the name PWR Processing Inc. The court awarded a default judgment against the corporate defendants in the suit due their failure to answer the complaint and litigation continues against the individual defendants, according to the announcement.

Another mortgage-related complaint filed in a federal district court by the FTC was that against Chase Financial Funding and its principals, who were charged with violating the FTCA, TILA and Regulation Z, in connection with spam and direct mail ads for “extremely low” mortgage rates. The California-based brokerage allegedly deceived consumers with offers of a “3.5% fixed payment” loan, but fixed-rate mortgages turned out to be adjustable rate mortgages.

The complaint also included allegations that Chase misrepresented the “annual cash savings” that borrowers would receive if they refinanced through the company and that it failed to disclose payment rates, terms of repayment and other required disclosures.

MortgageDaily.com’s coverage of the lawsuit included an interview with Chase’s president James Berry, who said a former employee of the company had altered ads and e-mailed them to the FTC.

The government agency also said in its report, dated Feb. 23, 2005, that it had continued litigation against Capital City Mortgage Corp. for allegedly violating TILA, Regulation Z and other federal statutes.

The Washington, D.C.-based lender and servicer “engaged in unfair or deceptive acts or practices in offering and extending financing and during the loans, resulting in many borrowers being overcharged on their loans and forced into default, losing their homes and equity,” according to the FTC. Capital City was also charged with violating the ECOA and Regulation B by failing to take written applications for mortgage loans, collect required information of applicants, and provide rejected applications with written notice of adverse action. And, when it did provide notice, it allegedly did not provide the applicants with the correct name and address of the commission.

The seven-year litigation was settled last week, the FTC announced. Under the agreement with the FTC, the settlement will cost Capital City a minimum of $750,000, and the company is also required to maintain a $350,000 performance fund to be available to the commission or any borrower in case it fails to comply.