On September 19, 2022, the Federal Trade Commission (FTC) and the California Department of Financial Protection and Innovation (DFPI) filed their first joint lawsuit in California federal court against several companies, and their alleged owners, for operating an allegedly illegal mortgage relief operation. In FTC v. Green Equitable Solutions, et al., Case No. 2:22-cv-06499 (C.D. Cal. 2022), the FTC and DFPI allege that the companies charged consumers thousands of dollars with false promises that they would negotiate with consumers’ mortgage lenders to alter their loans, at times even representing they were affiliated with government COVID-19 relief programs.
This is the first case in which the FTC has partnered with the DFPI to enforce federal and California consumer protection laws. The complaint relies in part on the enforcement powers of the California Consumer Financial Protection Law (CCFPL), enacted in 2020.
This is just the tip of the spear. After the United States Supreme Court eliminated the FTC’s ability to seek equitable monetary relief in AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021), the FTC has changed course and is going to team up with state agencies in order to avoid constitutional and statutory limits on its own authority under Section 13(b) of the FTC Act. The state agency, by agreeing to this approach, has waived its 11th Amendment right for the hope of having bigger impacts in joint cases. Lenders and other businesses regulated by the DFPI can expect such coordinated actions to increase in the future.
In addition to filing the complaint, the FTC and DFPI obtained a temporary restraining order and asset freeze of all the named defendants. The FTC and DFPI are ultimately seeking a permanent injunction, restitution, and monetary damages for alleged violations of the California Consumer Financial Protection Law, the FTC Act, the FTC’s Mortgage Assistance Relief Services Rule (the MARS Rule or Regulation O), the Telemarketing Sales Rule, and the COVID-19 Consumer Protection Act. The hearing on the preliminary injunction is currently scheduled for September 28, 2022.