1. Recent Enforcement Actions in
Consumer Financial Services
Barristers Annual Meeting
The Bar Association of San Francisco
November 8, 2013

2. Background

3. 2007
• Freddie Mac announces it will stop buying subprime mortgages.
• S&P places 612 securities backed by subprime mortgages on credit watch.
• Bear Stearns liquidates two MBS hedge funds.
2008
• BofA buys Countrywide.
• President Bush signs Emergency Economic Stimulus Act of 2008 (the “bailout”).
2009
• President Obama proposes a consumer-protection bureau as part of Wall
Street reform.
July 21, 2010
• The Dodd-Frank Wall Street Reform and Consumer Protection Act becomes
law.
A (Very) Brief Timeline

4. Some Data

8. The Mortgage Mess

9. U.S. v. Countrywide Financial Corp.
• Between 2004 and 2007, Countrywide was one of the largest
residential mortgage lenders in U.S. reporting with net earnings of
$6.7 million.
• In December 2011, U.S. Attorneys Office for Central District of
California filed complaint alleging widespread pattern or practice
of charging higher prices to Hispanics and African-American
borrowers because of their race or national origin, and not
because of credit characteristics.
• Claims brought under FHA (42 U.S.C. § 3601-3619) and ECOA (15
U.S.C. § 1691-1691f).
• Contemporaneous consent order for $335 million to eligible
borrowers.

10. National Mortgage Servicing Settlement
• $25 billion settlement between the Justice
Department, HUD, 49 state Ags, and the five largest
mortgage servicers:
– Ally/GMAC
– BofA
– Citi
– JPMorgan Chase
– Wells Fargo
• Monetary relief to eligible borrowers
• Injunctive relief relating to servicing standards

11. CFPB v. Castle & Cooke Mortgage LLC
• In April 2011, new Loan Originator Compensation
Rule goes into effect. (12 CFR 226.36)
• July 2013, CFPB files complaint against CCM and
two officers alleging violations of LO Comp Rule.
Specifically, complaint alleged unlawful
quarterly bonus plan that paid LOs more money
for placing borrowers into costlier loans.
• November 7, 2013, parties ask court to enter
stipulated judgment for over $13 million.

12. Loan Modification Schemes

13. CFPB v. Chance Gordon
• In July 2012, CFPB files complaint against Chance Edward
Gordon, Abraham Michael Pessar, and their companies,
alleging they targeted underwater homeowners in over 25
states by using Gordon’s “law firm” status to gain trust.
• On November 16, 2012, the U.S. District Court for Central
District of California entered a preliminary injunction
freezing defendants’ assets.
• June 2013, on cross-motions for summary judgment, Court
enters judgment against defendants for over $11 million,
the amount of advance fees collected.

14. Garden Grove Attorney Charged
for Taking Illegal Advance Fees From Homeowners
• San Francisco, Oct. 15, 2012 – The State Bar of California filed disciplinary
charges against a Garden Grove attorney accused of taking illegal
advanced fees from distressed homeowners and partnering with non-
lawyers in a large-scale loan modification scheme.
• According to the notice of disciplinary charges against
him, Siringoringo, first met his non-lawyer partners in December 2009.
Soon after, Siringoringo agreed to allow them to open an office his name
in Upland, in exchange for a share of the legal fees it brought in. The office
performed legal services and with met clients without Siringoringo's
supervision. The operation generated enough money to open two other
locations in Siringoringo's name – in Glendale and Rancho Cucamonga.
• Filed Oct. 10, the disciplinary notice lists at least 23 victims of the loan
modification scam, some of them couples. It also accuses Siringoringo of
“habitually” disregarding his loan modification practice and misleading his
clients into believing he was in charge of their cases.

15. California State Bar Seeks Disbarment
of Two San Francisco Lawyers
• SAN FRANCISCO, Nov. 4, 2013 – A State Bar Court judge
recommended disbarment for two San Francisco Bay Area attorneys
involved in a scheme to defraud struggling homeowners.
• Henrioulle and Uy, and former attorney Tarik Sami Soudani, signed
up over 200 clients between July 2009 and October 2011, promising
loan modifications or foreclosure rescue services. Clients, some of
them immigrants who learned of the firm from foreign- language
radio stations, paid upfront fees of $3,995 to $4,500, followed by
monthly payments initially set at $500, which rose to $650 and
then $850.
• Despite no longer being a lawyer, Soudani was allowed to meet
with clients and in many of the cases Uy and Henrioulle did little or
no work, causing the clients to lose their homes anyway.

17. Credit Cards

18. In re: Discover Bank
• In September 2012, CFPB and FDIC settled with
Discover Bank for allegedly deceptive marketing
practices associated with credit card add-on products.
• Section 1036 prohibits covered persons/service
providers from engaging in unfair, deceptive, or
abusive acts or practices. (12 U.S.C. § 5536)
• CFPB ordered Discover to pay back $200 million to 3.5
million credit card holders, and levied a $14 million
penalty.

20. Auto Loans

21. FTC v. NAFSO VLM, Inc.
• In April 2012, sued Kore Services LLC, doing business as Auto Debt
Consulting, and NAFSO VLM, Inc., doing business as Vehicle Loan
Mod – and their principals for allegedly promising to reduce
consumers’ monthly auto loan payments by 25 to 40 percent, for
fees ranging from $350 to $799. The defendants offered a 100
percent money back guarantee.
• Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or
practices in or affecting commerce.” (15 U.S.C. § 45(A))
• In January 2013, parties settled for $279,728 representing the total
amount of consumer injury defendants allegedly caused by
deceptively marketing auto loan relief to consumers.

22. U.S. v. Union Auto Sales
• In September 2013, the United States settled a lawsuit alleging that an
automobile dealership formerly doing business in Los Angeles violated the
Equal Credit Opportunity Act (ECOA) by charging non-Asian customers
higher interest rate markups than other customers for a period of at least
three years. Union Auto Sales agreed to pay $125,000 to resolve the
allegations against it.
• ECOA prohibits credit decisions on the basis of sex, marital
status, age, race, national origin, or public assistance benefits. (15 U.S.C. §
1691 et seq.)
• In the auto industry, it is common practice for banks and other lenders to
set a base interest rate or “buy rate” and then for the auto dealership to
“mark up” the interest rate to the final rate the customer pays on the
loan for the car. The complaint alleges that Union Auto Sales Inc., charged
higher interest rate markups to non-Asian customers from at least 2004 to
2006.

24. Student Loans

26. Sallie Mae, the top recipient of Department of Education contracts,
told investors in its latest quarterly report that the Consumer Financial
Protection Bureau last month launched an investigation into how the
company processes borrowers’ payments on student loans.
The CFPB joins the Federal Deposit Insurance Corp. and Department of
Justice in probing the company for alleged misdeeds that include
payment-processing issues, “unfair or deceptive” practices,
discriminatory lending and violating the Servicemembers Civil Relief
Act, a federal law intended to ease financial pressures on active-duty
members of the military.
…
The CFPB’s top student loan official, Rohit Chopra, said in an Oct. 16
report the agency had found widespread problems in how student
loan servicers process borrowers’ monthly payments. The report
stated that servicers commonly misallocate payments, maximizing late
fees and penalties and preventing borrowers from paying off loans
quickly. Chopra called the practices “troubling.”

27. Manny P. Alvarez
linkedin.com/in/manuelpalvarez