WASHINGTON—The Consumer Financial Protection Bureau has filed a proposed stipulated final judgment that imposes an $18 million fine.
The fine is to resolve allegations in its lawsuit against California mortgage lender Chou Team Realty, LLC, which does business as Monster Loans, and several individuals and related companies, including Thomas Chou and Sean Cowell.
The Bureau alleges that Chou and Cowell were among the leaders of a scheme to use Monster Loans’ account with a major credit bureau to unlawfully obtain consumer reports for their associated student loan debt-relief companies, which in turn used the consumer reports to deceptively market their services nationwide and then charged consumers illegal fees.
The proposed settlement would impose an $18-million redress judgment against Monster Loans, ban Monster Loans, Chou, and Cowell from the debt-relief industry, and impose a total $450,001 civil money penalty against them.
The Allegations
The Bureau’s lawsuit alleges that between 2015 and 2017, Monster Loans violated the Fair Credit Reporting Act (FCRA) by obtaining consumer-report information for over seven million consumers with student loan debt from a major credit bureau based on the false representation that the company would use the information to offer mortgage loans to consumers.
“Monster Loans allegedly provided the reports to several associated student loan debt-relief companies to use in marketing their services. The Bureau also alleges that in 2017 Monster Loans helped create a sham entity called Lend Tech Loans to perpetuate the scheme to unlawfully obtain consumer reports: Lend Tech Loans purported to be a mortgage brokerage, but in fact has only ever been used to unlawfully obtain consumer report information,” the Bureau said.
As alleged in the complaint, because of Monster Loans’ assistance, Lend Tech Loans was able to wrongfully obtain consumer reports for over 12 million additional consumers between 2017 and 2019. The Bureau further alleges that with Monster Loans’ assistance, the student loan debt-relief companies violated the Consumer Financial Protection Act (CFPA) and the Telemarketing Sales Rule (TSR) by making several deceptive representations about the companies’ services and violated the TSR by unlawfully collecting advance fees for debt relief services.
Sham Entity
Chou and Cowell were officers of Monster Loans, investors in the student-loan debt relief companies, and allegedly helped create the sham entity Lend Tech Loans. The Bureau alleges that they participated in the FCRA violations and then received purported profits from the student-loan debt-relief companies.
“As alleged in the complaint, in reality, those profits represented funds that were wrongfully taken from consumers through unlawful conduct,” the agency said.
If the court approves the proposed settlement, Monster Loans, Chou, and Cowell will be permanently banned from the debt-relief services industry and subject to limits on using or obtaining consumer reports, including a ban from using or obtaining prescreened consumer reports.
If entered by the court, the proposed settlement will also impose a judgment for redress of $18 million against Monster Loans.
A copy of the complaint is available here.
Settlement With Mortgage Loan Servicer
Separately, the CFPB has settled with Specialized Loan Servicing, LLC (SLS), a mortgage-loan servicer in Colorado.
As of Feb. 29, 2020, the CFPB said SLS serviced a portfolio of mortgage loans worth about $112.69 billion. The consent order requires SLS to pay $1.275 million in monetary relief to consumers in the form of redress and waiver of borrower deficiencies, pay a $250,000 civil money penalty, which will be paid to the Bureau and deposited into the Bureau’s Civil Penalty Fund, and implement procedures to ensure compliance with the Real Estate Settlement Procedures Act (RESPA) and its implementing regulation, Regulation X, the agency said.
According to the Bureau, its investigation found that since January 2014, SLS violated RESPA and Regulation X by taking prohibited foreclosure actions against mortgage borrowers who were entitled to protection from foreclosure, and by failing to send or to timely send evaluation notices to mortgage borrowers who were entitled to them.
The Bureau said the violations also constitute violations of the Consumer Financial Protection Act of 2010. In some cases, SLS’s violations of Regulation X short-circuited the protections against foreclosure for consumers whose homes were ultimately foreclosed upon.
$775,000 in Restitution
Under the settlement, the CFPB said SLS will pay $775,000 in restitution to affected consumers according to a redress plan that the Bureau will approve. SLS will also pay a $250,000 civil money penalty to the Bureau, and will waive $500,000 in borrower deficiencies.
The settlement further requires SLS to implement policies and procedures that will ensure that borrowers receive the protections from foreclosure to which they are entitled under RESPA and Regulation X, including preventing SLS from improperly making first filings, from improperly moving for foreclosure judgments or orders of sale, and from conducting foreclosure sales against borrowers who have submitted timely and facially complete or complete loss-mitigation applications. SLS must also monitor its foreclosure activity to ensure that it complies with the policies and procedures that it must implement, the agency said.
A copy of the consent order filed with the Bureau is available here.