July 16, 2009 in Business

Apply 2 Save faces FTC lawsuit

Federal action follows Idaho suit in April; part of Operation Loan Lies
By The Spokesman-Review
 
Associated Press photo

Federal Trade Commission Chairman Jon Leibowitz points to a display of an advertisement that appears to be a government agency, but is actually a scam, as he announces lawsuits to shut down large-scale loan modification scams in Los Angeles and Orange counties, at a news conference in Los Angeles on Wednesday.
(Full-size photo)

The Federal Trade Commission has sued Apply 2 Save Inc., and on Wednesday filed an injunction in U.S. District Court in Coeur d’Alene barring the company and President Derek Oberholtzer from engaging in any mortgage loan or foreclosure relief activity.

Another Oberholtzer-controlled company, Sleeping Giant Media Works Inc., is also subject to the agreement negotiated with the FTC.

The lawsuit is one of several announced Wednesday by FTC Chairman Jon Leibowitz and California Attorney General Jerry Brown. The action is one of 189 taken by federal and state authorities against individuals and companies that peddled mortgage-relief services to consumers, then did little or nothing to help them save their homes.

“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” Leibowitz said. “They throw them an anchor instead of a lifeline.”

The crackdown is part of Operation Loan Lies undertaken with several other federal agencies.

The lawsuits seek millions of dollars in civil penalties, restitution for victims and a permanent injunction to keep the companies and the defendants from offering mortgage-relief services.

Leibowitz said the FTC was working on rules that would prohibit a mortgage modification service from accepting upfront payments. He said he hoped to have the regulations in place by the end of this year.

In the meantime, officials urged borrowers having trouble making mortgage payments to avoid foreclosure counselors that demand upfront fees. Homeowners should never redirect mortgage payments to consultants who promise to pass the money on to lenders, the officials said.

The FTC announced the release of “Real People. Real Stories,” a video featuring scam victims and tips on how distressed homeowners can avoid foreclosure.

Idaho Attorney General Lawrence Wasden sued Apply 2 Save April 20 in Kootenai County District Court alleging many of the same consumer abuses contained in the federal complaint.

On Wednesday, Wasden announced a settlement with former company Vice President Steven Curtis Lux that prohibits him from engaging in mortgage modification, or acting as a loan broker. Lux paid the state $50,000, of which $45,000 will be dedicated to compensating Apply 2 Save victims. The rest will cover state costs.

More than 400 consumers filed complaints with Wasden’s office, but that was but a fraction of the thousands with claims against Apply 2 Save, which filed bankruptcy June 9. Oberholtzer filed a personal bankruptcy last week.

In Seattle, Washington Attorney General Rob McKenna announced lawsuits and enforcement actions against several companies and individuals, bringing the total since 2007 to nine. Demands for information were sent to four other companies, and letters were sent to 138 businesses advising them of state laws governing mortgage- or loan-modification services.

“We’ve seen a new crop of deceptive business practices and operators looking to make an easy buck,” McKenna said.


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email