On November 2, the New York Attorney General (AG) announced a $1.6 million settlement with a debt settlement company and its principal, resolving allegations that the company violated New York’s deceptive and unlawful practices law by engaging in fraudulent, deceptive, and illegal business practices in connection with loan modification and audit services.

According to the AG, the company induced consumers to pay an upfront fee of $2,850, followed by recurring monthly payments, by misrepresenting the likelihood of obtaining a loan modification or other debt relief.  The company promoted the use of forensic and securitization audits to assist in foreclosure efforts, even though the services purportedly failed to materially assist borrowers.  The company also encouraged consumers to cease interactions with (or payments to) their mortgage servicers, and failed to include required disclosures in its advertisements.  Neither the company nor its principal admitted any wrongdoing as part of the settlement agreement.

Pursuant to the consent order entered in New York state court, the company agreed to pay a $1.6 million judgment, and an $8,400,000 suspended judgment.  The settlement authorizes the AG in his discretion to apply this judgment to restitution, penalties, or enforcement costs.  The company was also prohibited from providing any debt relief product or service for three years, collecting advance fees, or making misrepresentations in connection with such services.