Mrs. Ramirez has always made her mortgage payments on time. Over the last few years, however, her expenses have crept up slowly while her salary has remained stagnant, making it increasingly difficult for her to make her monthly mortgage payment. Declining home prices have left her with negative equity and very few options. Mrs. Ramirez remembers hearing something about government programs created to give homeowners mortgage relief and tries doing some research online for information, but English is not her native language, and she finds the dense information listed on the website overwhelming.
One day she receives a call at home from a friendly telemarketer named Carlos who, speaking in fluent Spanish, tells her that he works for a large, well-established mortgage assistance relief company that can help her obtain a loan modification and avoid foreclosure. Carlos is professional and articulate, and he informs Mrs. Ramirez that the company he works for is a government-approved company that administers President Obama’s Making Home Affordable Program and that he has contacted her because she qualifies for a loan modification. She looks online and sees the company’s polished website and an address on Michigan Avenue in downtown Chicago. During multiple, lengthy calls, Carlos answers her questions and, given the ease of communication in Spanish, they develop a rapport. Carlos asks Mrs. Ramirez some basic questions and then quotes her a revised monthly payment amount that is hundreds of dollars lower than her current payment. Carlos guarantees or virtually guarantees he can obtain this modification for her for a one-time fee of $995. When she says she cannot afford this hefty fee, he instructs her to stop making her monthly mortgage payments and to use that money to cover the fee, assuring her that the delinquency will establish her inability to pay and help her obtain a more favorable modification. She then receives a professional-looking packet in the mail requesting her personal and financial information, including copies of paycheck stubs and bank statements. Desperate to save her home and believing what she has heard, Mrs. Ramirez sends in the requested information and writes her first check to Carlos’s company.
Over the course of several months, when she calls Carlos to follow-up, he tells her the modification is going well and is about to be approved. He tells her during one call that he’s been able to secure an even lower monthly payment, but to take advantage of this opportunity, she must pay another $995 processing fee. She pays the fee and waits. Several more weeks pass, and she tells Carlos that she is frustrated with the lack of progress. Soon after this conversation, Mrs. Ramirez receives a letter with her mortgage lender’s logo at the top finalizing the modification and requesting $1,500 to cover the closing costs. She pays this fee as well. Too late, Mrs. Ramirez learns that Carlos has spun lie after lie to get her money. Carlos did not get her a loan modification; he may not have even contacted her lender. The company had no affiliation with the Making Home Affordable Program. And the Chicago office was just a virtual office—the real company was located offshore in the Dominican Republic.
Although Mrs. Ramirez and Carlos in the illustration above are not real people, the experience is typical of thousands of homeowners who have fallen victim to foreclosure-relief scams whose perpetrators have been sued by the Federal Trade Commission (FTC). In particular, the experience described represents the FTC’s allegations in its 2012 case against Freedom Companies and its related companies and principals. Freedom Companies, the FTC alleged, targeted Spanish-speaking consumers with its loan modification scam and, over the course of three years, bilked consumers out of over $2.39 million. The FTC sued Freedom Companies in 2012, immediately halted the illegal activity, and froze its assets.
Fraud specifically targeting Spanish-speaking consumers remains a serious problem. A recent FTC survey shows that Hispanics are 1.5 times more likely to be victims of fraud than non-Hispanics; out of 25.6 million Americans who were fraud victims in 2011, 13.4 percent were Hispanic. The FTC is committed to combating fraud against Latino consumers in several ways, including enforcement actions and consumer education and outreach.
I had the opportunity to contribute to such efforts as the lead attorney on the Freedom Companies case. It was my first case on a scam targeting non-English speakers, and I experienced firsthand the unique challenges presented when the majority of the victims are not proficient in English. In gathering my evidence, I turned to a resource that I had not relied upon in the past—a legal services program. What resulted was a wonderful collaborative effort that produced meaningful results for the FTC, the legal services program, and the consumers we both serve. Here I share my experience working together with a Texas RioGrande Legal Aid attorney on the Freedom Companies case, an experience that highlights several important reasons why the FTC and legal services programs should partner, whenever possible, to combat consumer fraud.
The Federal Trade Commission’s Legal Services Collaboration
The FTC is the nation’s consumer protection agency. The FTC and legal services programs share a common goal: to protect consumers. In 2009, as the country faced mortgage foreclosures, record unemployment, and scores of other problems, the FTC formed its Legal Services Collaboration. The purpose of this collaboration was to build and strengthen the relationship between the FTC and legal services attorneys and to create mutually beneficial projects around the country to protect low-income consumers. As part of the initiative, the FTC began to host regular “Common Ground” conferences, which are still being held across the country, where state and federal law enforcement and legal services attorneys come together to discuss the issues facing legal services clients. From these conferences, ongoing relationships have developed; information has been shared; investigations have been launched to stop predatory practices; and consumers have been helped.
The Legal Services Collaboration is an invaluable resource for the FTC and legal services programs. Legal services attorneys have on-the-ground presence and deep knowledge of the scams and abusive marketing practices affecting their clients. Their experience and expertise is vital to the FTC, allowing the agency to serve better a segment of the population to whose voices it often did not have access. For its part, the FTC has the resources to bring large cases and engage in aggressive law enforcement, to share the expertise of its many attorneys and investigators, and to distribute high-quality consumer education materials free of charge. This national network of consumer advocates continues to expand and work to ensure that people in underserved and at-risk communities have access to consumer protections.
Texas RioGrande Legal Aid
The FTC first learned about Freedom Companies when the Idaho Department of Finance contacted our office to inform us about a cease and desist order it had filed against Freedom Companies for defrauding several Idaho residents. The company, according to the Idaho Department of Finance, was targeting Spanish-speaking consumers and purportedly operating from downtown Chicago. FTC investigator Roberto Menjivar began to look further into this company by searching the FTC’s complaint database for consumer complaints. Menjivar found two complaints (one original complaint and one update) filed with the FTC by an attorney at Texas RioGrande Legal Aid on behalf of her clients. The Texas RioGrande Legal Aid complaints were more detailed than many of the other complaints we had located, and perhaps most valuable, they allowed us to contact Texas RioGrande Legal Aid directly to obtain more information.
When the FTC investigates and puts together a case against a target, we often contact consumer victims directly to interview them and obtain sworn statements detailing what happened. These personalized statements breathe life into our cases by giving a human element to the injury caused by the defendants’ fraud. They are also important for demonstrating the patterns in our defendants’ practices.
In the case of Freedom Companies, when I contacted Texas RioGrande Legal Aid about the complaints it had filed, I received an immediate response from the attorney, Kayla Dreyer, who had filed the complaints. Dreyer was pleased to hear from me and agreed, unequivocally, to assist in any way that she could. Dreyer’s clients, whose native language was not English, paid over $7,500 to Freedom Companies and were brought to the brink of foreclosure. Their story was such an important one to capture because it was a particularly egregious example of how the operation worked. Freedom Companies had instructed Dreyer’s clients to stop making mortgage payments to their bank and to remit payments directly to Freedom Companies. The deception lasted for months, and her clients were able to save their home only by borrowing thousands of dollars from family members in the eleventh hour.
Dreyer’s assistance proved to be invaluable. First, Dreyer already had a trusting relationship with her clients and could easily facilitate our communication with them. She could help us get the conversation started, obtain her clients’ consent to provide a sworn statement, and collect for us all the pertinent documents from her clients, a process which would have taken me weeks or months to complete were I to contact her clients on my own. In fact, we had already attempted to contact numerous other consumer complainants without success; many victims simply did not return our calls. The consumer victims we did reach were understandably hesitant to speak openly with us, having already been scammed by someone else, speaking in Spanish, claiming to be “affiliated with the government,” and asking questions about their mortgage. In addition, many of the documents we were requesting from consumers contained their personal, financial information, and consumers did not feel comfortable giving us these records.
Second, Dreyer spoke fluent Spanish and therefore was well-equipped to navigate the language barrier. Not only could she thoroughly gather the details about the transaction, including the finer points of the claims made by the seller, but also she could clearly communicate to us her clients’ understanding of what had been promised. Although I speak conversational Spanish, I found that even after spending some time studying mortgage-related vocabulary words, interviewing native Spanish-speakers about mortgage loan modifications was challenging. The challenge was heightened because Freedom Companies’ telemarketing calls had been involved and tailored to each consumer, and the transaction often entailed numerous telephone conversations, document exchanges, and multiple payments.
Finally, Dreyer had legal expertise and knowledge about mortgage scams. In talking to her clients and obtaining information for us, she had already ferreted out the details that mattered and had separated them from the less relevant facts.
Dreyer drastically streamlined the process of procuring a statement from her clients, and, in the end, delivered to us a complete package. With her clients’ consent, Dreyer gave me all the relevant documentation her clients had, including all the correspondence, paperwork, and payment information. These materials proved useful to our investigation. Dreyer worked with her clients to craft an excellent, detailed declaration in English, with a certificate of translation certifying that the document had been translated from English to Spanish and reviewed by the clients for completeness and accuracy. The declaration we received was ready for use in court.
When I expressed my gratitude to Dreyer and her clients, she turned around and thanked me as well. She said that she and her clients sincerely appreciated being included in our case. Dreyer had already sent a demand letter to Freedom Companies and subsequently filed a lawsuit in state court on her clients’ behalf, but the litigation had not progressed far, and she had not yet obtained any relief for her clients. She and her clients welcomed this opportunity to contribute to our case against Freedom Companies, which had taken so much from her clients.
We ultimately filed the declaration from Dreyer’s clients, along with additional evidence we had gathered, as support for a motion for a temporary restraining order with an asset freeze and other equitable relief in federal court. The court granted our motion, temporarily shut down the operation, and froze all the assets we could locate for potential consumer redress.
Dreyer and her clients’ assistance did not end upon the filing of our case. Shortly after we filed, Univision in Texas wanted to do a story about the case and contacted us seeking the name of a consumer victim who could be interviewed. Dreyer’s clients graciously agreed to speak to Univision, and their willingness to share their story with the public went a long way toward raising awareness in the community about this important topic. Univision aired an educational segment on Telemundo about Freedom Companies and mortgage loan modification scams that target Spanish-speaking consumers. Dreyer’s clients agreed to speak to several other news outlets about their experience. One of the most important components of the FTC’s consumer protection work is preventing scams through consumer education and outreach. With Dreyer’s clients’ help, the Freedom Companies case became a vehicle for informing the public, especially Spanish speakers, about the problem of mortgage scams targeting their community and thereby helped others to avoid this type of scam.
The goal in FTC consumer protection cases is always to bring an immediate halt to deceptive and illegal practices and to return as much money to consumers as possible. Unfortunately, in many of the FTC’s cases, scam artists frequently spend or otherwise dissipate much of their revenue soon after acquiring it. In the Freedom Companies case, for example, although we froze and collected all the remaining assets from the operation, we recovered only a small fraction of the full judgment amount. We were pleased, however, to be able to return to Dreyer’s clients at least a portion of the money they lost.
Consumer Complaints and How Legal Services Can Help
As my experience with Freedom Companies illustrates, one critical way in which legal services organizations can assist the FTC in combating consumer fraud is by encouraging their clients to file a complaint with the FTC or by filing a complaint on their clients’ behalf. Consumer complaints are essential to the FTC’s work not only because they help bring a scam to our attention but also because they are a starting point for gathering evidence. The information we receive from consumer complaints leads us to additional important evidence about our targets’ practices. Having a large pool of consumer complaints from which to draw consumer evidence is always important, but it is even more critical in a case targeting consumers who are not proficient in English, as in the Freedom Companies case. In Freedom Companies, for example, we called the 35 to 40 consumers who had submitted complaints but ultimately were able to obtain only 10 declarations, including the one from Dreyer’s clients.
Assisting clients with filing a complaint is easy. The FTC administers an online complaint database called Consumer Sentinel, where it maintains complaints from consumers as well as complaints from other governmental and nongovernmental data contributors. Consumers can complain to the FTC in English or Spanish by visiting the FTC’s website, or in French, German, Japanese, Korean, Polish, and Turkish, at econsumer.gov. Consumers can call the FTC’s fraud hotline at 877-FTC-HELP and speak to a live operator in English or Spanish.
Generally, the vast majority of victims of consumer fraud do not file a complaint at all, and when a language barrier is involved, the number is even smaller. In 2013, for example, the FTC received roughly 1.2 million complaints in Consumer Sentinel about fraud (not including identity theft, which generated approximately 800,000 additional complaints). Of these 1.2 million complaints, only approximately half of one percent of these complaints, or 5,300, were submitted in Spanish. Roughly 7,000 complaints in total were submitted in a language other than English. The FTC of course cannot take law enforcement action for every complaint that it receives, but complaints give us valuable information that we frequently use to identify unlawful practices in the marketplace and develop law enforcement initiatives.
While I have always understood the rationale behind creating the Legal Services Collaboration, my work on Freedom Companies allowed me to appreciate the value of such a partnership. Collaboration between the FTC and legal services advocates can result in tangible outcomes, as I personally experienced in Freedom Companies, and it can be an effective tool as we all endeavor to do more with fewer resources. I encourage all legal services advocates to get involved in the Legal Services Collaboration by reaching out to the FTC attorneys in their region to get more information and by learning about the FTC’s Common Ground Conferences. If we work together, we can better advance our shared goal of achieving justice for underserved consumers.