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United States Court of Appeals for the Seventh Circuit
January 12, 2021, Argued; July 23, 2021, Decided
[*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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6 F.4th 694 *; 2021 U.S. App. LEXIS 21907 **; 2021 WL 3123735
CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff-Appellee, v. CONSUMER FIRST LEGAL GROUP, LLC, et al., Defendants-Appellants.
Subsequent History: Rehearing denied by, En banc, Rehearing denied by Consumer Fin. Prot. Bureau v. Consumer First Legal Grp., LLC, 2021 U.S. App. LEXIS 35225 (7th Cir. Wis., Nov. 29, 2021)
Prior History: [**1] Appeal from the United States District Court for the Western District of Wisconsin. No. 3:14-cv-00513-wmc — William M. Conley, Judge.
Consumer Fin. Prot. Bureau v. Mortgage Law Grp., LLP, 366 F. Supp. 3d 1039, 2018 U.S. Dist. LEXIS 194828, 2018 WL 6002906 (W.D. Wis., Nov. 15, 2018)Consumer Fin. Prot. Bureau v. Mortgage Law Grp., LLP, 420 F. Supp. 3d 848, 2019 U.S. Dist. LEXIS 190720, 2019 WL 5698701 (W.D. Wis., Nov. 4, 2019)Consumer Fin. Prot. Bureau v. Mortgage Law Group, LLP, 196 F. Supp. 3d 920, 2016 U.S. Dist. LEXIS 94417, 2016 WL 3951226 (W.D. Wis., July 20, 2016)
Consumer, customers, Regulation, exemption, practice of law, district court, Mortgage, violations, restitution, local attorney, firms, enrollments, headquarters, modification, injunction, civil penalty, mortgage-relief, recklessness, intake, summary judgment, communicate, transferred, Providers, practices, servicers, licensed, lenders, The Act, loan-modification, documents
Civil Procedure, Trials, Bench Trials, Appeals, Standards of Review, Clearly Erroneous Review, De Novo Review, Banking Law, Business & Corporate Compliance, Banking & Finance, Consumer Protection, Legal Ethics, Client Relations, Judicial Officers, Judges, Discretionary Powers, Reviewability of Lower Court Decisions, Preservation for Review, Questions of Fact & Law, Unauthorized Practice of Law, Evidence, Burdens of Proof, Allocation, Preliminary Considerations, Equity, Relief, Contracts Law, Remedies, Restitution, Securities Law, Securities Exchange Act of 1934 Actions, Insider Trading, Disgorgement of Profits, Civil Liability Considerations, Equitable Relief, Injunctions