CIVIL LEGAL AID SUPPORTS FEDERAL EFFORTS TO HELP

PROTECT CONSUMERS

CASE STUDY: PROTECT CONSUMERS

WHITE HOUSE LEGAL AID INTERAGENCY ROUNDTABLE ▪ http://www.justice.gov/lair ▪ May 2015

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THE NEED

Each year, approximately 25 million adults are victims of consumer fraud. Victims include the poor, the 

elderly, and other vulnerable populations. In the worst cases, fraud can lead to homelessness and 

bankruptcy. The shame of being defrauded inhibits some victims from reporting scams and seeking help.

Fraud takes many different forms, and perpetrators use a variety of approaches. Although anyone may be 

susceptible to abusive practices, the most vulnerable among us are often the target of mortgage scams, 

Ponzi schemes, identity theft and predatory lending schemes. The Government Accountability Office 

(GAO) reports that financial exploitation of the elderly has reached epidemic proportions. Older adults are 

targeted for their retirement savings and accumulated home equity, and because they also are more likely 

to experience cognitive decline, they can be more susceptible to financial scams.

Identity theft also threatens consumers. Using someone else’s personal information to fraudulently obtain 

goods or services was the number one complaint to the Federal Trade Commission’s (FTC) Consumer 

Sentinel database, and the third most common credit card complaint made to the Consumer Financial 

Protection Bureau (CFPB). There are 16.6 million new victims annually, with devastating consequences, 

including tax problems, lowered credit ratings, lawsuits, and garnishment. Children are also victims. A 

study of 40,000 children found that about 10% had someone else using their Social Security Number.

EXAMPLES OF THE FEDERAL RESPONSE

Following the financial crisis in 2008, as well as the increasing number of scams arising from constantly 

changing technologies, several federal agencies came together to combat fraudulent practices targeting 

Americans. In 2009, President Obama launched the Financial Fraud Task Force. With more than 20 

federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it represents the broadest 

coalition of law enforcement, investigatory and regulatory agencies ever assembled to prevent fraud. The 

Task Force’s Stopfraud.gov website also allows victims to report fraud, and it provides education and 

prevention materials to consumers.

In 2010, CFPB was established to help consumer financial markets work by making rules more effective, 

by consistently and fairly enforcing those rules, and by empowering consumers to take more control over 

their economic lives. CFPB’s Office of Financial Empowerment focuses on low-income and other 

economically vulnerable consumers. The Office developed Your Money, Your Goals for legal aid 

organizations, a financial empowerment training and toolkit initiative to help legal aid staff identify clients’ 

financial challenges and get them resources and tools to help them achieve their goals. CFPB also 

reaches consumers directly through interactive, user-friendly tools. For example, “Ask CFPB” is a tool that 

provides consumers with answers to common financial questions in plain language to help enable sound 

financial decisionmaking. 

The FTC vigorously pursues frauds that target every community, such as mortgage foreclosure relief 

scams, job scams, offers of phony health insurance, imposters who claim to be part of government, and 

phantom debt collection to name a few. It also enforces federal laws to prevent abusive debt collection 

practices, and runs Consumer.gov, which presents easy-to-use information through text, videos, 

presentations, and worksheets. FTC regularly partners with legal aid programs to help consumers. The 

FTC recently launched IdentityTheft.gov, a new resource that makes it easier for identity theft victims to 

report and recover from identity theft. Also available in Spanish at Robodeidentidad.gov, the new website 

provides an interactive checklist, sample letters, and other resources. 

At the Department of Justice, the Civil Division’s Consumer Protection Branch protects the health, safety, 

and economic security of consumers. The Branch brings civil and criminal enforcement actions focusing 

on financial and health care fraud, tainted food, hazardous and unsafe consumer products, unfair and 

deceptive advertising practices, unfair consumer credit and debt collection practices, and other unlawful 

practices that target vulnerable consumer populations. The Branch also meets with consumer groups as 

part of its continuing efforts to prevent consumer fraud through education, outreach, and enforcement.
CASE STUDY: PROTECT CONSUMERS

WHITE HOUSE LEGAL AID INTERAGENCY ROUNDTABLE ▪ http://www.justice.gov/lair ▪ May 2015

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We know that LEGAL AID ATTORNEYS serve as FIRST RESPONDERS when it 

comes to ENSURING FINANCIAL SECURITY of American families. 

-Richard Cordray, Director, Consumer Financial Protection Bureau

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Legal Aid Helps

• Assert consumer rights when businesses, lenders, or debt collectors have not followed the law.

• Create awareness through outreach by educating consumers about federal and state laws and 

how to spot and avoid abusive tactics.

• Provide debt collection information on their websites, linking to free legal hotlines for 

individuals to ask questions about their rights. 

• Prevent unnecessary foreclosure or repossession by defending or asserting claims against 

brokers and lenders who violate laws, negotiating loan modifications to reduce debt and interest 

rates, and representing victims in civil proceedings. 

• Identify predatory loans so that consumers can avoid improper or illegal lending terms and 

practices. 

• Correct harm caused by identity theft or credit reporting errors by providing forms and 

letters to fix credit discrepancies and by aiding victims to report theft to the proper federal and 

local authorities.

• Report complaints about financial and other consumer harms to appropriate government 

entities.

Standing up for Victims of Mortgage Fraud FTC-Legal Aid Collaboration Halts 

Deceptive Practices

A home repair contractor approached “Sadie,” an 85-

year-old African American woman who has owned her 

home for forty years, promising to perform home 

improvements under a "free government program" for 

seniors. Sadie did not understand the papers she 

signed, and did not realize that the contractor had 

taken $122,000 from a reverse mortgage on her home 

even before any work was done. He eventually 

remodeled two bathrooms, but the work was sloppy 

and defective. No other home improvements were 

performed. Legal Assistance Foundation of Chicago 

(LAF), a federally-funded Legal Services Corporation 

grantee, filed a lawsuit to void the loan and recover 

money damages from the contractor's company, 

ultimately settling for $110,000. LAF continues to 

represent other mostly elderly and minority victims of 

this reverse mortgage scheme.

While investigating mortgage loan modification 

companies, the FTC identified a company that 

appeared to target Spanish-speakers with fake 

mortgage assistance relief. To investigate further, 

the FTC needed to locate the targeted consumers. 

Because obtaining information from these 

consumers can prove difficult—some do not speak 

English fluently and may be reluctant to speak with 

federal law enforcement—the FTC contacted an 

attorney at Texas RioGrande Legal Aid who had 

filed complaints on behalf of her client, a consumer 

victimized by the company. The attorney helped 

the FTC obtain a sworn statement about how the 

company deceived consumers, which was critical 

to the FTC's law enforcement action against the 

mortgage company. Ultimately, a court halted the 

company’s deceptive practices.

Third-party debt collectors (acting on behalf of or in the place of the original creditor) bring at 

least half of all small claims cases in Maine. The debt collectors – represented by counsel --

prevail because for a variety of reasons consumers do not appear in court on the hearing 

date. Over a three-year period, Pine Tree Legal Assistance legal aid lawyers:

• represented 550 low-income consumers 

(which collectively involved $1.86 million in alleged debt) 

• won all but 2 of those cases by showing that the debt collectors did not have sufficient 

evidence to establish the debt under Maine law.