deceptive practices

December 10, 2024 By Leo Jennings III

An Athena Bitcoin cryptocurrency kiosk was the instrument criminals used to steal $39,000 from DannLaw client Karen Carew.

According to the Federal Trade Commission (FTC) and the FBI, Bitcoin ATM cryptocurrency kiosks (BTMs) play an essential role in “impersonation scams” that enable cybercriminals and scam artists to steal large sums of money from unsuspecting victims. Data from the FTC reveals that fraud losses at BTMs increased tenfold from 2020 to 2023 and that the amounts stolen via the kiosks are exceptionally high. But despite the well-documented rise in BTM-fueled fraud, companies like Athena Bitcoin, Inc. which operates hundreds of terminals across the U.S., have repeatedly refused to reduce or eliminate the extreme danger they pose to vulnerable populations, especially seniors.

The consumer protection team at Dann Law now represents one of those seniors: Karen Carew, a 74-year-old resident of Belmar, New Jersey. On September 4, 2024, a criminal impersonating a Microsoft tech support telephone agent convinced her to withdraw $39,000 from her bank account and deposit it into Athena BTMs located at two area convenience stores. Her money was immediately transferred into the untraceable online account or “wallet” of the scam artist. Both he and her money then vanished.

To hold Athena and the convenience stores accountable for their role in defrauding Ms. Carew and victims of similar scams, DannLaw attorneys Henry P. Wolfe, Javier Merino, and Andrew Wolfe recently filed a class action lawsuit in the Superior Court of New Jersey against the company, its CEO Matias Golenhorn, the owners of the stores where the kiosks used to facilitate the Carew scam were located, as well as other stores in New Jersey that have permitted Athena to locate and operate kiosks on site. The complaint and supporting exhibits may be viewed and downloaded here: 2024.11.25 Carew Complaint FILED

In the complaint the attorneys note that Athena openly acknowledges its kiosks are regularly used in impersonation scams as a page on the company website titled “Avoid these Bitcoin Scams” clearly illustrates:

Scammers are looking to say and do anything to convince you of an urgent need to pay through Bitcoin, and they will often “helpfully” point out nearby ATMs where you can follow their commands.

Scam artists like Bitcoin because transactions cannot be cancelled, reversed, or otherwise refunded once made.

Athena receives numerous reports of fraud per month…

The complaint also alleges that although Athena clearly recognizes the dangers posed by its BTMs it has refused to implement effective measures that would prevent or deter the use of its terminals in impersonation scams. Why? Because doing so would reduce the considerable profit realized from every dollar inserted into its BTMs by victims of those scams.

“BTMs are specifically designed to appeal to criminals, that’s why I consider them to be the AR 15s of the financial services industry,” DannLaw founder and former Ohio Attorney General Marc Dann commented. “They serve no purpose beyond enabling scam artists to wreak havoc and destruction on innocent victims and the complete and purposeful lack of safeguards enable them to inflict pain in rapid-fire fashion and disappear instantly. As Ms. Carew learned, that’s a formula for disaster.”

In addition to facilitating the impersonation scam, the complaint states that Athena refused to turn over the $39,000 Ms. Carew deposited into the BTMs after being notified of the theft even though the stolen cash was in their possession. Their refusal is based on the company’s position that all deposited into its terminals is “irreversibly” transferred as Bitcoin to the designated wallet, even if the wallet in question belongs to a criminal who has perpetrated an impersonation scam.

DannLaw contends that Athena’s position is misleading at best for two reasons: first, because Ms. Carew’s cash was still inside the company’s BTMs when they were made aware of the theft, and, second, because the hefty fee Athena charged to facilitate the crime, $10,060.04, was not transferred to the scam artist irreversibly or otherwise.

“In essence, Ms. Carew has been ripped off twice,” Dann said. “First by the criminal who robbed her and then by Athena which could, but refuses, to return her money. While their position is reprehensible, it is not surprising. Let’s face it, thieves like Athena rarely return stolen money to its rightful owners, especially if doing so would destroy their business model. It’s clear they have no intention of doing the right thing voluntarily, so we’re more than willing to use the civil justice system to both hold them accountable and educate the public about the dangers associated with Athena BTMs.”

The suit asserts four causes of action including possession of stolen property, violations of New Jersey’s RICO statute and Consumer Fraud Act, and gross negligence and seeks monetary damages for Ms. Carew and all class members

For more information, please contact Marc Dann at 330-651-3131.

March 26, 2024 By Marc Dann

DannLaw founder Marc Dann — Attorney Marc Dann

Spring is celebrated as a time for renewal. Here at DannLaw, we’re marking the beginning of the season by renewing our commitment to seeking and securing justice for consumers who have been ripped off by credit card companies, banks and retailers, homeowners abused by mortgage lenders and servicers, and victims of identity theft and other cybercrimes resulting from data breaches.

That commitment, along with our knowledge of the law, experience, expertise, and ability to develop and utilize highly effective, innovative legal strategies have made DannLaw a consumer protection powerhouse people trust to safeguard their families, their homes, and their family’s future.

Building upon that and assisting more clients than ever before are our primary goals for 2024. Here’s a look on how we plan to achieve them…

DannLaw’s Forced Arbitration Practice Group battles for consumers trapped in an unfair system

Fueled by a series of Supreme Court decisions handed down over the past 40 years, forced arbitration clauses have been adopted by tens of thousands of companies that provide a seemingly limitless array of goods and services.

This has not exactly been a positive development for consumers. Shennan Kavanagh, the director of litigation at the National Consumer Law Center (NCLC) explains why:

“Forced arbitration robs consumers of their basic Seventh Amendment right to access the courts. These fine print traps allow predatory lenders, fraudsters, unscrupulous banks, and other repeat offenders to escape accountability by depriving consumers of choice and forcing disputes into closed-door, biased proceedings where consumers rarely win.”

By the way, “rarely” is an understatement. According to NCLC attorney Lauren Saunders, consumers who take on companies alone lose 96% of the time.

To make matters worse, a recent study released by NCLC revealed that the vast majority of Americans have no idea what a forced arbitration clause is or does or that they unwittingly agreed to clauses buried in the fine print of contracts they clicked “yes” to online or physically signed.

That lack of knowledge can have an extremely high price tag, a fact that doesn’t hit consumers until they become embroiled in a dispute with a company and discover they have no path to justice or reasonable opportunity to recover what they are owed.

The inequities in the system cry out for reform. That is why DannLaw has joined the NCLC and other consumer advocates in calling on Congress and the Consumer Financial Protection Bureau (CFPB) to end the forced arbitration reign of terror. To date, both have refused to act.

In reaction to their inexcusable inaction, DannLaw has formed a Forced Arbitration Practice Group led by attorneys Alisa Adams and Kurt Jones who have extensive experience pursuing and winning forced arbitration claims. Alissa, Kurt, and the Group’s talented paralegals are ready, willing, and more than able to take on banks, financial services firms, and any company that is using forced arbitration to prey upon, rip off, or exploit their customers.

If you or someone you know is a victim of forced arbitration, click here to arrange a free consultation with our Forced Arbitration team.

We are also available to co-counsel with attorneys who now represent clients with forced arbitration claims. To learn more about collaborating with us or to refer a client to us, please click here.

The companies and industries that have been inducted into the DannLaw Forced Arbitration Hall of Shame are among the worst abusers of the process, but they are not alone. As we noted above, thousands of other providers of goods and services use it to exploit consumers. We are prepared to battle them all.

Consumer Class Action Cases

In addition to helping our clients win forced arbitration cases, DannLaw regularly files suit on behalf of individual and groups of consumers whose claims are not subject to the unfair process.

We are currently litigating a number of class action suits in courts across the nation, and we will continue to seek justice and just compensation via the courts when that is the appropriate course of action. Here is a brief overview of some of the most interesting and consequential cases we are currently pursuing:

Financial Services Wells Fargo

It should come as no surprise to anyone that we have once again filed class action suits against Wells Fargo. Despite having paid more than $27 billion in fines since 2000, Wells remains a serious serial abuser of its customers and other consumers. \The cases against Wells involve:

Mortgage Discrimination. We allege that during the time interest rates were low, Wells denied loans to applicants who were members of minority groups at a much higher rate than other lenders.

Adding services to customer accounts without authorization. We have filed a series of class action suits alleging that Wells made millions of dollars by adding services including credit protection, supplemental hospital insurance, life and disability Insurance and others to consumers’ accounts without authorization or permission. If you recently received a letter from Wells apologizing for this conduct, we would like to hear from you. Please click here to arrange a free consultation that will enable us to determine if you are entitled to financial compensation from the company.

Financial Services: Bank of America

We recently filed suit in North Carolina alleging that Bank of America opened unauthorized consumer accounts. If BOA opened an account in your name without your consent or permission, please click here to share your story with us. Like people who have been victimized by Wells, you may be eligible for financial compensation.

Retailers: Dollar General

Despite being exposed in media reports like this one featuring DannLaw founder Marc Dann, Dollar General continues to charge higher prices at the register than are posted on shelves. We are now pursuing cases in New York, New Jersey and Oklahoma, but believe the company is engaging in the practice in other states. If this has happened to you at Dollar General or another store click here to tell us your story

Retailers: Walmart

We are investigating reports that Walmart is treating customers who use two forms of payment unfairly when they are due a refund. If this has happened to you, please let us k now.

Data Breaches

Data breaches that enable cyberthieves to steal and misuse victims’ sensitive and confidential information is a growing problem in the U.S. That is why we are expanding our Data Privacy and Security Practice Group and working with the legal community to develop strategies that will ensure we can pursue and secure justice and just compensation for those put at risk when corporations, government agencies, and other entities fail to protect the personal data in their possession. As part of that effort, I am pleased to report that I was recently invited to serve on the prestigious Sedona Conference Data and Privacy Liability Working Group which is working to address challenging questions related to legal liability and damages.

You should be aware that health care companies and insurers have become a prime target for hackers and cyber criminals, a fact underscored by the class action suits we recently filed against Merch Health and Optimum Health.

If you have been or are ever notified that your personal data including but not limited to your driver’s license, social security, credit card and other account numbers, confidential health or medical records, or other identifying information has been hacked, stolen, or compromised, please contact our data privacy team. immediately so we can begin protecting you, your family, and your future. Do not delay, every moment your data is exposed increases the chances it will be misused.

Automobile and Motorcycle dealerships:

We regularly file class action suits against car, truck, and motorcycle dealers that add unauthorized products or services to vehicles, misrepresent the amount of the sale, and/or add hidden and opaque charges like “Documentary Fees” to sales agreements.

We have secured multiple multi-million-dollar awards for classes of auto purchasers and we will continue to actively and aggressively pursue claims on behalf of consumers who have been cheated or abused. If you are troubled or suspicious about something related to your vehcile purchase contact us today to arrange a no-cost, no-obligation consultation.

Foreclosure Defense and Mortgage Servicing Litigation Update

DannLaw began by representing borrowers and homeowners who were in or about to be in foreclosure. Today, after helping thousands of people save their homes and their financial futures, stopping foreclosures and negotiating loan modifications continue to be a primary focus of our practice—and needed as much as ever.

That is because Ohio and New Jersey lead the nation in foreclosures, due in part to a surge in attempts by debt buyers to collect “zombie mortgages”— debts that homeowners thought were forgiven or satisfied long ago but still exist.

The key to our ability to save a home is timing: the earlier we get involved, the more we can do to battle mortgage lenders and servicers who engage in unethical or illegal activities like dual tracking—promising to modify a loan while moving ahead with a foreclosure action.

If you are in or are facing the threat of foreclosure DannLaw will utilize the tested, highly effective legal strategy that has helped thousands of families just like yours.

First, our experienced foreclosure defense team will aggressively defend and foreclosure action that has been filed,

Second, we will identify, document, and pursue claims you may have against your mortgage servicer for dual tracking, misapplying payments, failing to pay taxes or insurances, and other abuses, and,

Third, the members of our talented mortgage modification team will use their expertise to work out an agreement with your mortgage company that will enable you to stay in your home.

Remember, time is of the essence. Every minute you wait brings you one step closer to losing your home, do don’t delay, click here to contact DannLaw’s Foreclosure Defense team today.

Thanks for taking the time to read our Spring 2024 update and, as always, DannLaw is here to help you.

Marc

January 19, 2024 By Marc Dann

Complicated and impenetrable arbitration agreements like this one from Wells Fargo cost consumers millions each year. DannLaw’s Consumer Arbitration Team helps attorneys and families fight back.

In a recent article posted on Columbia Law School’s Blue Sky Blog, Jeff Sovern argues that businesses should not be able to use the Federal Arbitration Act (FAA) to harm consumers. We agree. This flaw in the law costs American families tens of millions of dollars each year. That’s why DannLaw has been fighting for real reform of the FAA including urging the Consumer Financial Protection Bureau to issue a new rule that would block the use of arbitration clauses in consumer financial contracts. Unfortunately, until the CFPB or Congress acts, consumers will continue to be victimized by greedy corporations.

But that doesn’t mean consumers are defenseless. That’s because the experienced, dedicated attorneys and staff at DannLaw’s Consumer Arbitration Practice Group are here to help. We work with consumers and attorneys across the nation to file, pursue, and win arbitration cases against the biggest players in the consumer financial game.

Whether you’re an attorney battling on behalf of clients or a consumer who has been ripped off by a mortgage lender, credit card company, or retailer, contact the consumer arbitration experts at DannLaw. We’re ready to help you fight and win. To learn more complete our contact form or call 330-294-3226.

We’ve posted Mr. Sovern’s CLS Blue Sky blog post below. To read a version with footnotes click here.

Consumer protection laws face a fundamental enforcement issue: Because consumer claims are typically for small amounts, and litigation is expensive, it rarely makes economic sense for consumers to litigate their claims individually. Partly to deal with this problem, lawmakers created class actions so the cost of litigation could be shared among many claims. But businesses have used the Federal Arbitration Act against consumers, inserting into agreements arbitration clauses that block consumer class actions. The U. S. Supreme Court has ruled these clauses are valid.[1] As a result, few consumers assert claims subject to these contracts unless a substantial amount of money is at issue.

This leads to two unfortunate outcomes. First, in many situations, merchants employing arbitration clauses need not fear that they will face private enforcement of consumer protection laws and so are insufficiently deterred from engaging in misconduct that might otherwise lead to liability. Second, consumers lack an effective means to secure compensation unless they suffer huge losses. The problem is worsened by the fact that consumers cannot understand arbitration clauses and so surrender their rights to litigate in court without realizing that they are doing so.

In a new book chapter, I argue that Congress should amend the FAA to exclude consumer claims from the FAA’s coverage until a dispute has arisen. Otherwise, the Consumer Financial Protection Bureau (“CFPB”) should use its rule-making power to limit the use of arbitration clauses in consumer financial contracts.

Arbitration and Claim Suppression

Multiple studies show that few consumers commence arbitration claims unless substantial sums are at issue. [2]Arbitration clauses’ claim-suppression effect was illustrated colorfully by one advocacy group when it observed that in many years more American consumers are struck by lightning than win a monetary award in arbitration.[3]

Consumer products and services companies are keenly aware that arbitration clauses insulate them from liability. One lawyer defending against class actions described arbitration clauses as a “silver bullet” for defeating consumer cases,[4] while another acknowledged that a “claim that is $162 – an individual claim – is not one that any rational litigant would litigate.”[5] In Judge Richard Posner’s words: “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”[6]

Arbitration and Consent

Arbitration derives its legitimacy from consent. As the Supreme Court has noted, “[a]rbitration under the [FAA] is a matter of consent . . . .”[7] But whether consumers genuinely agree to arbitration is debatable.

Research demonstrates that consumers cannot understand arbitration clauses or their impact. Thus, an empirical study of consumer understanding of an arbitration clause in a credit card contract found that less than 9 percent of the respondents realized both that the contract included an arbitration clause and that it blocked them from suing in court.[8] Despite that contract’s class action waiver, four times as many respondents thought they could still participate in a class action as recognized that by agreeing to the contract they would surrender their right to join a class action. Even when respondents were told to assume they had agreed to a contract barring them from joining in a class action, less than a third realized they were foreclosed from doing so. Just one respondent in 16 realized both that (1) the contract they had been shown would prevent them from joining a class action, and (2) as a general matter, class action waivers block participation in class actions. When consumers can neither recognize that they are waiving the right to participate in a class action nor that such a waiver would be given effect, it is difficult to justify the claim that they have consented.

A CFPB telephone survey found that a majority of its respondents believed they could join a class action despite having agreed to a contract that included a class action waiver.[9] Similarly, only one consumer in 14 understood that an arbitration clause would block them from proceeding in court. And a more recent study also found consumers do not understand arbitration clauses.[10]

At the end of the day, if consent – the source of arbitration’s legitimacy – means no more than signing a contract that consumers cannot understand, it is hard to see arbitration as legitimate.

Efforts to Carve Out Consumer Claims From the FAA

Members of Congress have repeatedly but unsuccessfully introduced bills to amend the FAA to eliminate consumer disputes from its coverage. In the 2010 Dodd-Frank Act, Congress authorized the CFPB to regulate arbitration.[11] The CFPB issued a rule which would have barred the use of class action waivers in arbitration clauses in consumer financial contracts.[12] But Congress invoked the Congressional Review Act (“CRA”)[13] to block the CFPB’s rule from going into effect.

The CFPB should issue a different arbitration rule. The Congressional Review Act bars administrative agencies from issuing “a new rule that is substantially the same” as the rule Congress struck down.[14] That bars the bureau from producing a rule banning class action waivers. Nevertheless, that still leaves the bureau options. Indeed, consumer protection advocacy groups recently petitioned the bureau to promulgate a new rule blocking the use of arbitration clauses in consumer financial contracts. The petition differs from the CFPB’s blocked rule because the regulation it calls for would not be limited to class action waivers and because the proposed regulation would be based on lack of consumer comprehension of arbitration clauses rather than the claim-suppression effect of class action waivers.

Conclusion

Arbitration clauses have become common in consumer contracts as a device to block the filing of consumer class actions against businesses catering to consumers. Consequently, it no longer makes economic sense to assert many consumer claims, and therefore companies are insufficiently deterred from violating some consumer protection laws. Using arbitration clauses to preclude class actions lacks legitimacy because consumers do not knowingly consent to arbitration. Congress should amend the FAA to exclude consumer claims from its coverage, or, failing that, the CFPB should use its authority under the Dodd-Frank Act to protect consumers against the use of arbitration clauses in consumer financial contracts.

November 24, 2023 By Marc Dann

US Veterans Got a Mortgage Break. Now They’re Losing Their Homes

A Covid-era program gave borrowers a year without mortgage payments. Some are finding their lenders would rather foreclose than let them pick up where they left off.

By Caleb Melby, Polly Mosendz, and Ann Choi

November 9, 2023 at 12:01 AM EST

Sharelle Rosado didn’t give a lot of thought to the legal solicitations piling up at her front door earlier this year. She’d recently gotten a speeding ticket and figured lawyers were offering their services. It wasn’t until she began opening the letters that she realized the mail was much more serious: Her house was in foreclosure.

Rosado is savvy about homeownership. She’s a licensed real estate agent and the one-time star of the Netflix show Selling Tampa, which tracked the staff of her all-female, all-Black brokerage. Her clients count on her expertise. Yet she was bewildered that her lender was moving to take her four-bedroom house outside Tampa.

It turned out to have everything to do with a Covid-era mortgage program that allowed borrowers with federally backed loans to postpone payments for a year or longer and then, at the end of this forbearance period, apply to pay the arrears over time. About 8.5 million homeowners availed themselves of the program, including about 445,000 military veterans such as Rosado, a former Army paratrooper whose loan was backed by the US Department of Veterans Affairs.

In March 2022, after her 12-month forbearance ended, Rosado filled out what’s known as a loss-mitigation application—essentially a report on her financial status, used to determine her eligibility for a repayment plan—and sent it to her lender, United Wholesale Mortgage. UWM approved her application and sent her a loan-modification agreement, under which she would resume her monthly payments and the payments she’d skipped would be due when the mortgage was paid off.

Rosado and her home outside Tampa. Photographer: Mike Adno for Bloomberg Businessweek

There was one problem: Rosado was recently divorced, and UWM wanted her ex-husband to sign the document, too. She and UWM came to an agreement, she says, that her ex didn’t need to co-sign the modification if he would instead sign a quitclaim deed, a document confirming he no longer had an ownership stake in the house. After some delay, he signed, and in August of that year, Rosado sent her signed agreement along with the quitclaim. The next month her mortgage payment of $1,282.77 was posted to her account, which she took as proof that the matter had been resolved. Not so: She was told there were still paperwork problems with her modification. She says she sent the quitclaim again.

Rosado says she had no idea the company intended to seize her home until the legal solicitations arrived on her doorstep in March. After a final failed attempt to get her loan modification approved, she faced two unappealing choices: immediately pay more than $45,000 in arrears and fees or lose her house. “I was pissed,” Rosado says. “This is embarrassing. I’m not about to lose my house.” She paid.

In a written statement, a UWM spokeswoman said the company “works hard to assist borrowers, even distressed borrowers, in servicing their loans,” but that Rosado’s account was incomplete. She said the signed agreement Rosado sent in August 2022 was an old version, and under the VA’s requirements she needed to submit a divorce decree in addition to the quitclaim. The company said it had “attempted telephone contact” with her 35 times last year and 43 times this year. Rosado says that UWM didn’t ask her for a divorce decree prior to foreclosing and that she didn’t receive any voicemails saying her file was incomplete.

At first, it looked as if the entire episode was an expensive fluke. But Rosado began hearing from friends she’d met while serving at Fort Bragg (now Fort Liberty) in North Carolina who were having their own troubles getting their loans modified. They had some things in common, including signs of financial vulnerability, such as disability, unemployment or divorce. The lenders had things in common, too: Most were nonbank companies, which issued more than 80% of the 746,000 VA loans written last year. Over the past decade, as traditional banks have retreated from the $12 trillion US mortgage market, these lenders, which mostly operate online and outside the scrutiny of bank regulators, have stepped into the void.

The mortgage forbearance program was a feature of the 2020 Coronavirus Aid, Relief and Economic Security Act, known as the Cares Act. It covered a large majority of the mortgages in the US, because most mortgages are backed by federal programs. Loan-modification agreements typically offered one of two options: The arrears would be added to the mortgage, extending the repayment period while keeping the monthly cost affordable; or, as in Rosado’s case, the arrears would be lumped into a balloon payment due when the mortgage was paid off. But the government didn’t require lenders and servicers (companies that buy and manage loans) to approve those agreements. Or to make the process straightforward and easy.

Across the US, about 4,000 veterans whose mortgages had been in the forbearance program had lost their homes as of mid-October, according to ICE Mortgage Technology Inc. Some 6,000 more are in foreclosure; 34,000 others are marked delinquent. Not all the foreclosure actions were the result of loan-modification denials. But the figures don’t include thousands of borrowers, like Rosado, who paid a lump sum, sometimes under duress.

The problem isn’t limited to veterans. Other homeowners who took part in the forbearance program have faced similar difficulties. About a half-million of them are delinquent or facing foreclosure, and an additional 87,000 have lost their homes. But the actions against veterans are notable given the lengths policymakers and regulators have gone to get them into homes and keep them there.

“If I didn’t have that money, I’d be with some of those other people, losing everything”

The Cares Act, a $2.2 trillion economic stimulus bill, was rolled out within weeks of the pandemic’s onset. The mortgage forbearance element in the act was broad and homeowner-friendly: Borrowers didn’t have to prove they were hard up, and mortgage companies couldn’t say no. So lenders and servicers lost a huge chunk of their primary revenue stream, and the legislation contained no bailout for them. Many were unhappy. “It’s frankly frustrating and ridiculous that we do not have a solution in place,” Jay Bray, chief executive officer of the lender Mr. Cooper Group Inc., formerly Nationstar Mortgage, told CNBC in April 2020. “There is going to be complete chaos.” His company had a strong balance sheet, Bray said, but others in the industry would “start seeing problems soon.” (Instead, interest rates fell, millions of people refinanced their mortgages, and lenders made a lot of money.)

As borrowers began to exit forbearance, in early 2021, the mortgage companies needed to help them craft repayment plans, which involved more people, more paperwork and more cost. The rollout of those plans was rocky at best. Some borrowers encountered insurmountable roadblocks, with their homes on the line. Conventional wisdom has long held that lenders prefer what are called workouts, such as loan modifications, rather than foreclosing on homeowners, which can be time-consuming and expensive. But home prices were skyrocketing, the product of a Covid-inspired desire for more space, historically low interest rates and a flood of government money. “Right now, because of the property values, they don’t mind foreclosing,” Safora Nowrouzi, a lawyer in California who handles foreclosure cases, says of lenders. “And that’s why denials are much higher.”

Borrowers, lawyers and advocates describe a rudimentary playbook: requests for documents that have already been submitted, assurances that an application is complete only for it suddenly to be reopened, envelopes that don’t contain promised documents, loans transferred to different lenders and other paper-shuffling moves that force borrowers into delinquency, increase the size of their arrears and narrow their options. Borrowers are “lulled into inaction, because they’re led to believe that the lender is working something out,” Nowrouzi says.

The Consumer Financial Protection Bureau, which monitors lending practices, says it’s unable to track how many loss-mitigation and loan-modification applications go awry, or how many are denied. But complaints from service members prompted the agency and the US Department of Justice to issue a warning in December 2021 to lenders and mortgage servicers citing borrowers who had “suffered negative impacts.” The letter described “incorrect or confusing communications” and mandatory lump sum payments as things that could run afoul of protections in the Cares Act. Borrowers with government-backed loans, the warning letter said, “generally cannot be required to repay their forbearance amount in a lump sum payment if they indicate that they cannot afford to do so when exiting forbearance.”

The letter doesn’t appear to have had the desired effect. In a report that covered transactions through March 2023, the agency again made clear that something was amiss. It said it had identified lenders that delayed homeowners’ applications and that “borrowers could not reasonably avoid injury because servicers controlled the processing of applications, and borrowers reasonably expected servicers to enroll them in the options they applied for.” The report didn’t identify any lenders by name, and no enforcement actions were taken. But the agency said the unnamed companies had “ceased the practice and developed improved policies and procedures.”

That hasn’t been the experience of veterans and advocates who spoke to Bloomberg Businessweek. “Instead of bringing attention to the damage inflicted, it conceals it,” Roberto Rivera, a consultant in New Jersey who works with attorneys whose clients are going through the loan-modification process, says of the agency’s reports. A spokesperson for the CFPB says it doesn’t make supervisory interactions with companies public.

Even after everything, Rosado considers herself lucky. Her circumstances had changed since she bought her home in 2020—the Netflix show plus a recent engagement to former Cincinnati Bengals wide receiver Chad “Ochocinco” Johnson—and she could afford the one-time payment. “If I didn’t have that money, I’d be with some of those other people, losing everything,” she says.

One of those other people is Monica Rosario, a retired Army captain. When it came time to modify the loan on her three-bedroom townhouse in Fayetteville, North Carolina, she was going through a divorce and between jobs. The divorce proceedings put her taxes in disarray, so Rosario, a colon cancer survivor, sent bank statements to her lender, Freedom Mortgage Corp., showing that she was still receiving disability benefits from the Army and was able to make monthly payments. She says the documentation never seemed to stay in her file. Freedom denied her loan-modification application and told her earlier this year that she had to pay $15,000 or lose her home, she says. She didn’t have that much money on hand and forfeited the house in a short sale in July.

Her home was listed for sale at 53% more than the price she paid. Rosario, who now rents across town, says she’s so wracked with depression that she’ll go days without stepping outside. “I still don’t understand how I was expected to pay that money so suddenly and continue on with my life,” she says. “It doesn’t make any sense.” A spokesperson for Freedom, one of the largest originators of VA loans last year, declined to comment.

“The risk of being sued and the risk of being dinged by the CFPB is baked into their business model”

Someone who last bought a home a decade ago would scarcely recognize the mortgage market today. The changes began with the 2008 global financial crisis, which was triggered by risky mortgage lending practices. In the aftermath, down payments once again became standard for most conventional mortgages, variable-interest-rate loans fell out of favor with both lenders and borrowers and income-verification standards were tightened.

Those reforms also made the business of writing mortgages less profitable for banks, which at the time underwrote the majority of home loans. Borrowers with higher credit scores and larger down payments can still count on bank loans; they’re desirable customers who, in addition to being unlikely to default, can be sold on more lucrative services, such as wealth management. For other clients, a new generation of companies sprouted up. Nonbanks, sometimes called shadow banks, don’t take deposits and are subject to much less regulation. They figured out they could make a profit lending to not-quite-prime homebuyers. Of course, the nonbanks need money to run their businesses. They often get it in the form of credit lines from many of the same banks that pulled back from the messy business of underwriting.

Last year, nonbanks accounted for 60% of all US home loans. The two biggest, Rocket Cos. and United Wholesale Mortgage, originated more than $255 billion of mortgage debt—more than Wells Fargo, JPMorgan Chase and US Bancorp, the top three bank lenders in 2022, combined.

John Bell, who manages the VA’s home-loan program, praises the role nonbank lenders have played in the VA mortgage business. “Thank goodness we had some of these nonbanks that raised their hand and were wanting to get into the business when banks backed out,” he says.

Many mortgage companies love VA loans. They’re backed by the government, the VA doesn’t set minimum credit score requirements, and down payments often aren’t necessary. Even closing costs can be borrowed, sending loan-to-value ratios as high as 103.3%. The result: VA borrowers often begin homeownership owing more than their home is worth, creating a long earnings runway for lenders.

Nonetheless, veterans who’d been waved through when they applied for their mortgage found their lenders weren’t going to make things easy when it came time to modify their agreements. Lawyers and housing advocates say that, depending on the state, trying to beat lenders in a he-said, she-said battle over who dropped the ball in a loan modification can be almost impossible. Those who succeed say borrowers must rigorously document their cases if they have any hope of winning. And there’s a growing sense that federal agencies, far from preventing abuses, may be making things worse with complex rules that befuddle lenders as well as borrowers. “The misinformation they’re giving on those phone calls is so sickening,” says Rivera, the consultant, of calls that customers have with their lenders. “There’s nobody there who has read the guidelines. It’s absurd.”

Absurd could describe Rosie Bennett’s situation. She got forbearance for the mortgage on her home in Coeur d’Alene, Idaho, in July 2020, the month before the death of her husband, who served as a Navy medic in the 1950s. The reprieve gave Bennett, who’s 79 and has multiple sclerosis, time to settle her affairs.

In January 2022 her mortgage servicer, Dovenmuehle Mortgage Inc., mailed her an envelope that she expected to contain her loan-modification agreement. But the envelope was empty, according to a lawsuit she filed against Dovenmuehle in federal court in Idaho. Bennett says she contacted the company several times to ask for the agreement and was told it would be sent. She continued making monthly payments, but the paperwork never came. In May 2022 the company sent a notice saying Bennett would be foreclosed on if she didn’t pay $33,529 within a month.

Rosie Bennett and her Coeur d’Alene home. Photographer: Amy Osborne for Bloomberg Businessweek

Dovenmuehle started foreclosure proceedings in June. In October the company transferred Bennett’s loan to PHH Mortgage Corp. She says she reached a modification agreement with PHH, only to have it rescinded this January. She was told she “needed to have her deceased husband execute and record” a document transferring his ownership in the house to her and was again threatened with foreclosure, according to the lawsuit, which also names PHH as a defendant.

Spokespeople for Dovenmuehle and PHH say they complied with all applicable laws and guidelines. The PHH spokesperson says, however, that the company no longer intends to foreclose. Bennett is pursuing her lawsuit anyway. The two-year saga has rattled her. “I’m just such a nervous wreck right now,” she says. “My whole body is just shaking all the time.”

One possible takeaway: Choose your lender carefully. But Bennett hadn’t contracted with Dovenmuehle or PHH. She and her husband had gotten their mortgage from Federal Savings Bank, based in New York. There are no rules preventing banks from selling mortgages or hiring nonbanks to service them. “This is the one consumer contract where you don’t get to pick who you do business with,” says Marc Dann, Bennett’s lawyer and a former Ohio attorney general, who now specializes in consumer lending cases. “She can’t say ‘Oh, I don’t like Dovenmuehle. I’m going to go down the street to Wells Fargo.’ She can’t do that.”

Settlements from cases such as Bennett’s tend to be small, and there’s little disincentive to avoid abusing borrowers, Dann says. “The risk of being sued and the risk of getting dinged by the CFPB is baked into their business model,” he says. “We could really use another 1,000 law firms doing the work that I do. At that point, maybe we would have an impact on the behavior of these companies.”

Lewis Rutherford’s maddening journey to a foreclosure notice began more than a year ago. A 63-year-old truck driver who played keyboards in bands at US Army bases across Europe in the 1980s, Rutherford hadn’t always paid his mortgage on time. After exiting forbearance, he thought he could avoid future problems by sending money in advance to his lender, Caliber Home Loans Inc. But when he sent $3,333 in August 2022 to cover three months of payments for his home in New Castle, Delaware, about $2,500 appeared to go missing.

Rutherford was irate and refused to make additional payments until the matter was resolved. In March, before he could get to the bottom of it, Caliber sold his loan to Shellpoint Mortgage Servicing. Rutherford says a Shellpoint representative told him the company had no record of his advance payments. With his money still missing, Rutherford insisted he wasn’t going to make any additional payments until the matter was straightened out. That’s a risky strategy for any borrower in a fight with a lender. In May, Shellpoint moved to foreclose.

What Rutherford didn’t know was that Caliber and Shellpoint were owned by the same company, Rithm Capital Corp. The paperwork Shellpoint said it couldn’t find existed within the same corporate family. As he fought to keep his home, “Rithm had one of its best quarters ever,” its CEO told investors in August. The company, which has been rolling up finance businesses for years, is now closing in on an acquisition of Sculptor Capital Management, a $33 billion hedge fund.

“Something ain’t right with these people,” Rutherford says. “If they see an opportunity to snatch a house, they will.”

He says that in June, after he told Shellpoint he’d spoken to Businessweek, the company said it didn’t need to foreclose on him after all. Court records show the company withdrew its foreclosure case a week later. A spokesman for Rithm’s mortgage division says the company made an error in how it applied Rutherford’s advance payments. “We have since corrected this error and are actively addressing any potential credit reporting impact caused by this issue,” the spokesman said. “In addition, we are ensuring that no other borrowers were negatively affected by this issue.”

In Charlotte, Makeda Young, a major in the National Guard who’s studying to be a physician assistant, took matters into her own hands. She says she paid more than $19,000 to clear her forbearance arrears after delays by her lender, Mr. Cooper, pushed her into default. Records show her application for a modification was accepted three times, followed by demands for documentation that Young says she’d already provided, ultimately leading to a foreclosure warning and her credit score dropping by 111 points.

Makeda Young and her Charlotte home. Photographer: Mike Adno for Bloomberg Businessweek

Not all borrowers are meticulous record keepers, but Young is. She compiled a dossier of all documents and emails and pulled her phone records to show how many hours she’d spent dealing with the company. In June she took her case to the consumer protection unit of the North Carolina Department of Justice, which contacted Mr. Cooper. In a letter, the company told the agency it had tried to reach Young on several occasions and that she hadn’t responded. But Young sent her phone logs to state officials in an email describing Mr. Cooper’s description of events as “misleading and inaccurate.”

It worked. In a new letter, Mr. Cooper described Young’s efforts to get her loan modified and erased its claims that she’d been delinquent, which restored her credit score. A spokeswoman for Mr. Cooper says Young’s application ultimately was denied after all documentation had been received. The company “is committed to finding solutions to keep our customers in their homes” the spokeswoman said.

“I’m going to make sure they investigate every single case,” Young says. She’s been documenting her efforts on Facebook. One post highlights the portions of Mr. Cooper’s letter that portrayed her as a nonresponsive customer and an amended letter showing she had in fact been in frequent contact with them. And there’s a tearful video after Mr. Cooper relented.

The replies show how common the problem has become. “Dealing with this RIGHT NOW!!!” wrote one borrower. “This just HAPPENED TO ME!!!!” posted another. “My folks in NC whom are Veterans are going thru the almost same scenario real time. Thank you Sista! ARMY STRONG!”

September 25, 2023 By Marc Dann

If you received a postcard regarding the Madyda v. BMV case, it is because you are one of the people who paid a fee to have your driver’s licensed laminated by a deputy registrar between 2018 and 2020, even though the deputy registrars were not performing the service.

That makes you a member of the class of plaintiffs in the lawsuit DannLaw has filed against the BMV and the state of Ohio. If you would like to remain in the class and receive a portion of any funds or other compensation we recover on behalf of the plaintiffs you do not need to do anything. If you prefer to bring your own claim against the BMV, the postcard contains instructions for opting out.

Again, you do not need to do anything if you want to continue to be a member of the class. DannLaw will provide regular updates as the case proceeds.

Here is a detailed description of the case:

DannLaw files class action suit against Ohio Bureau of Motor vehicles to recover $3 million in bogus fees charged by deputy registrars

March 28, 2019 By Marc Dann (Edit)

Since July 2, 2018, the Ohio Bureau of Motor Vehicles (BMV) has allowed the state’s 200 deputy registrars to charge people obtaining or renewing driver’s licenses or state-issued I.D.s a $1.50 lamination fee even though the registrars were no longer producing—or laminating—the cards on site. As a result, an estimated two million Ohioans have been charged $3 million for a service that was not performed.

Catherine Turcer, executive director of Common Cause Ohio, told the Columbus Dispatch the registrars should not be pocketing the fee. “Clearly, the registrars should not be charging for something they are not providing … that’s not fair. Many of us don’t think about a buck fifty, it’s not a big deal. But it is a big deal when you think about being charged extra fees for no reason. We want to spend our money on what we expected.”

Attorney Marc Dann, founder of the Cleveland-based consumer protection law firm DannLaw agrees with Ms. Turcer. And, if the messages that have been pouring into the firm’s Facebook page are any indication, so do people who paid the bogus fee. “We posted an item on our Facebook page asking anyone who has renewed their license or state I.D. since last July to contact us,” the former Ohio attorney general said. “The response was overwhelming. Those who paid the fee were outraged. They want their money back and they want the state to stop ripping people off.”

Today the legal team at DannLaw took the first step toward recovering the unwarranted fees by filing a class action suit against the BMV in the Ohio Court of Claims. The suit asks the Court to award anyone who paid the lamination fee $1.50 plus interest. The complaint may be read/downloaded here:Madyda Alexander 2019 03 19 Complaint – Lamination Fee INITIAL DRAFT (002)

“While the dollar amount on a per-person basis may be small, there’s nothing trivial about the BMV allowing the registrars to pocket $3 million for doing nothing,” Atty. Dann said. “If everyone shrugs their shoulders and says ‘it’s only a buck fifty’ does that mean it’s ok for the state to grab five dollars or ten dollars from its citizens? Where do you draw the line? At its core, this case isn’t about the $1.50, it’s about holding government officials accountable for their actions. That’s the best way to ensure that something like this doesn’t happen again.”

According to Atty. Joe Romano of Bay Village, Ohio who is serving as co-counsel on the case the overcharges stem from the fact that in order to comply with federal regulations the BMV itself rather than the registrars began producing and mailing the licenses and I.D. cards last July. “Apparently, and this is something we hope to learn more about as the case progresses, neither the deputy registrars nor the staff at the BMV noticed that people were still being charged the $1.50 lamination fee even though the registrars weren’t laminating a darn thing,” he said.

August 2, 2023 By Leo Jennings III

I am pleased to announce that attorneys Kurt Jones, Alisa Adams and Andy Engel as well as paralegals Maureen Dial, Madellyn Brown, and Ivona Gates who were formerly associated with Advocate Attorneys LLP have joined DannLaw and will now represent their consumer arbitration clients as members of our outstanding legal team.

The seamless transition of the Advocate staff to DannLaw will ensure that clients continue to work with the attorneys and support staff they know and trust and that cases will proceed without undue disruption or delay.

We welcome our new colleagues, and we look forward to providing their clients with exceptional level of professional service that has made DannLaw one of the nation’s leading consumer protection and class action litigation law firms.