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State Attorneys General Participate in Law Enforcement Sweeps

This month, state Attorneys General participated in two national law enforcement consumer protection initiatives focused on the economic downturn and the mortgage foreclosure crisis. The sweeps highlighted state and federal cooperation on law enforcement actions and included consumer education components to help consumers avoid becoming victims of these types of frauds and schemes.

Fourteen Attorneys General joined the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) in a July 1 law enforcement initiative dubbed Operation Short Change. The sweep targeted business scams that take advantage of the economic downturn to victimize consumers. The schemes include:

  • promising non-existent jobs;
  • promoting over-hyped get-rich-quick schemes, bogus government grants, and phony debt-reduction services; and
  • putting unauthorized charges on consumers’ credit or debit cards.

“For con artists, a bad economy is like a gold rush,” said NAAG President-Elect and North Carolina Attorney General Roy Cooper during the press conference, held in Washington, D.C. “We’re cracking down on scammers who use empty promises of jobs and debt relief to try to strike it rich at consumers’ expense.”

The sweep included 64 enforcement actions by the states against individuals and companies for allegedly defrauding consumers. It also included 15 FTC cases and 42 law enforcement actions by DOJ.

As part of the sweep, Attorney General Cooper announced actions he had taken against 19 companies, including Possibilities Unlimited, a company that made illegal robocalls to pitch lower credit card rates in exchange for a fee. Attorney General Cooper obtained a court order banning the company from making any calls to consumers in his state, and requiring it to pay more than $500,000 in fines.

Also as part of the sweep, Texas Attorney General Greg Abbott charged four debt settlement companies with orchestrating fraudulent debt settlement schemes. The companies allegedly promised that they could eliminate their customers’ unsecured debts – such as credit card accounts – in as little as three years. The suits seek restitution for consumers, civil penalties, and attorneys’ fees and costs.

Other state Attorneys General offices participating in Operation Short Change were from California, District of Columbia, Florida, Illinois, Iowa, Louisiana, Missouri, Nebraska, North Dakota, Ohio, Pennsylvania, and Wisconsin. More information about the cases included in the sweep can be found at http://www.ftc.gov/.

Eighteen state Attorneys General joined the FTC on July 15 in Operation Loan Lies, a coordinated national law enforcement effort to stop mortgage modification scams. During the press conference, California Attorney General Edmund G. Brown, Jr. and FTC Chairman Jon Leibowitz announced 189 actions by 25 federal and state agencies against defendants that deceptively marketed foreclosure rescue and mortgage modification services.

Attorney General Brown announced his enforcement actions against 21 individuals and 14 companies that defrauded thousands of homeowners desperately seeking mortgage relief. The suits seek millions in civil penalties, restitution for victims, and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

As part of the sweep, Idaho Attorney General Lawrence Wasden announced a settlement agreement with Steven Curtis Lux, vice president of Coeur d’Alene-based Apply 2 Save. Lux was suspected of engaging in unlawful and unlicensed mortgage modification activities. The settlement prohibits Lux from engaging in mortgage modification and loan broker activities, and requires him to pay $45,000 in restitution and $5,000 in attorneys’ fees and costs. Attorney General Wasden’s suit against Apply 2 Save and its owner continues.

Other state Attorneys General offices participating in Operation Loan Lies were from Arizona, Colorado, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, North Carolina, Ohio, Oregon, and Texas. More information about this sweep can be found at http://www.ftc.gov/.

U.S. Senate Testimony on Fraud

On a related matter, Missouri Attorney General Chris Koster testified July 14 before the U.S. Senate Commerce Committee during a hearing entitled, “The Economy and Fraud: Protecting Consumers During Downward Economic Times.”

Attorney General Koster focused his testimony on companies and individuals who specialize in servicing, some might say preying on, consumers who have significant credit card debt, and/or an unsustainable mortgage.

Attorney General Koster said, “The Complaint Unit in my office has seen a sharply increasing volume of complaints regarding foreclosure rescue scams: from 16 complaints in 2007 to 9 complaints in 2008 to 84 complaints thus far in 2009.

For debt settlement, there has been a similar spike: from 78 complaints in 2007 to 109 complaints in 2008 to 105 complaints thus far in 2009.”

“Missouri polices all manner of fraud, but financial fraud has become a priority,” Attorney General Koster said.

In addition to describing how he enforces state law and the public education efforts underway to help consumers, Attorney General Koster urged the Senate committee to consider any additional enforcement measures at the federal level to make people using these fraudulent tactics think twice, and to give Attorneys General as strong of tools as possible to go after them once they have perpetrated their scams.

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NAAG President-Elect and North Carolina Attorney General Roy Cooper at July 1 press conference.
NAAG President-Elect and North Carolina Attorney General Roy Cooper at July 1 press conference.
Texas Attorney General Greg Abbott.
Texas Attorney General Greg Abbott