‘Harmful Message’

Ronald Rubin, a former enforcement lawyer with the consumer bureau, said that settling the case on unfavorable terms “would send a very harmful message of weakness” to defendants in other CFPB cases. Also, the delay created by such a settlement may not achieve much.

“The only way a delaying strategy makes sense for the CFPB is if they expect the NLRB decision to be reversed, or they expect a director to be confirmed before the courts can rule on the validity of Richard Cordray’s recess appointment,” Rubin, a partner with Hunton & Williams LLP in Washington, said in an e- mail. “Otherwise, it’s only a matter of time before another CFPB defendant has their day in court.”

The CFPB charged Gordon’s firm violated the Mortgage Assistance Relief Services rule, which was issued by the Federal Trade Commission in 2010 and subsequently taken over by the CFPB. The rule bans businesses from collecting fees until homeowners have acceptable written offers of a loan modification from their lenders.

Gordon’s firm, according to the CFPB’s July 17 complaint, sought to evade this prohibition since at least early 2010 by selling documents that aim to detail a lender’s misdeeds, and then offering free legal services to obtain a loan modification.

Up-Front Fees

In this case, the CFPB alleges that Gordon violated federal regulations against collecting up-front fees in exchange for promises to obtain mortgage modification for homeowners who couldn’t afford their payments. His firm encouraged people to stop paying their loans in order to hire his firm, leading some customers to lose their homes.

On Jan. 25, the CFPB filed with the court in the Gordon case a proposed settlement with Abraham Michael Pessar, who is also a defendant in the case, and two of Pessar’s companies.

In his own court filings, Gordon has defended his business, arguing that he achieved mortgage modifications for about 80 percent of the clients. He argues that he created “custom legal products as the CEO of a legal publishing company,” while providing free legal services.

“I have not been violating any law as it relates to collecting an upfront fee from distressed homeowners,” Gordon wrote in a July 27 court filing.