Consumer Fin. Prot. Bureau v. Consumer First Legal Grp., LLC

Consumer Fin. Prot. Bureau v. Consumer First Legal Grp., LLC

Opinion

 [*699]  Wood, Circuit Judge. The financial crisis of 2007-2008 sent shock waves throughout the national economy. Perhaps nowhere were the effects felt harder than in the residential mortgage sector. According to one source, more than seven million homes entered foreclosure between 2007 and 2010. See S. Rep. No. 111-176, at 39 (2010). This appeal concerns the rules that apply to mortgage-assistance relief services. The question is whether the Consumer Financial Protection Bureau ("the Bureau") correctly declined to treat two high-volume, national law practices under the rules governing lawyers, and thus whether the stiff penalties that were imposed on the firms (and their principals) can stand. We conclude that the Bureau's decision that the firms and lawyers were not engaged in the practice of law was supported by the record, but that further proceedings are necessary on the issue of remedies.

As desperate people faced the imminent loss of their homes, many for-profit mortgage-assistance relief services [**2]  (MARS), which promised to obtain loan modifications that would stave off foreclosure, sprang up. The more dubious among these businesses charged consumers thousands of dollars in upfront fees and induced signups through deceptive statements about the quality of their services. Mortgage  [*700]  Assistance Relief Services, 75 Fed. Reg. 75092, 75095-96 (Dec. 1, 2010). The money often bought little to nothing. Once a person enrolled, many MARS providers "fail[ed] to perform even the most basic promised services or achieve any beneficial results." Id. at 75097. This was doubly unfortunate because, at the same time, many nonprofits and government agencies offered similar services at no cost. Id. at 75093-94 & nn.29-35.

Congress quickly identified mortgage-relief scams as a glaring problem, and it directed the Federal Trade Commission to issue rules relating to "unfair or deceptive acts or practices involving loan modification and foreclosure rescue services." Credit Card Accountability, Responsibility, and Disclosure Act of 2009, Pub. L. No. 111-24, § 511(a), 123 Stat. 1734, 1764; see also Omnibus Appropriations Act of 2009, Pub. L. No. 111-8, § 626(a), 123 Stat. 524, 678 (instructing the FTC to "initiate a rulemaking proceeding with respect to mortgage loans"). The FTC did so, issuing its final rule on December 1, 2010. See 75 Fed. Reg. 75092 (then-codified at 16 C.F.R. pt. 322, now at 12 C.F.R. pt. 1015). The rule focused on the "widespread" "unfair or deceptive practices [**3]  of MARS providers" and the harm these actors had inflicted on consumers. Id. at 75096. Among other things, the rule prohibited MARS providers from charging upfront fees, telling consumers not to talk to their lenders, and misrepresenting material aspects of their services. See 12 C.F.R. §§ 1015.3, 1015.5.

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