1 ALAN PHELPS 

Trial Attorney 

2 Office of Consumer Litigation U.S. Department of JustIce 

3 PO Box 386 

Washington, DC 20044-0386 

4 Telephone: 202-307-6154 

FacsImile: 202-514-8742 

5 E-mail: alan.phelps@usdoj.gov 

6 THOMAS P. O'BRIEN 

United States Attorney 

7 LEE WEIDMAN 

Chief, Civil Division 

8 GARY PLESSMAN 

Assistant United States Attorney 

9 Chief, Civil Fraud Section 

California State Bar No. 101233 

10 Room 7516, Federal Building 300 N. Los .An~eles St. 

11 Los Angeles, CA 90012 

Telephone: 213-894-2474 

12 FacsImile: 213-894-2380 

E-mail: gary.llessman@usdoj.gov 

13 Attorneys for laintiff 

14 

15 

IN THE UNITED STATES DISTRICT COURT 

FOR THE CENTRAL DISTRICT OF CALIFORNIA 

SOUTHERN DIVISION 

16 I----------------------------~ 

17 UNITED STATES OF AMERICA, 

18 

19 v. 

Plaintiff, 

20 METROPOLITAN HOME 

MORTGAGE, INC., 

21 a corporation 

also d/b/a WHOLESALE HOME 

22 LENDERS, 

Defendant. 

23 11-------------------------------1 

24 

Civil Action No. 

-< 

, 

I 

i 

I 

I 

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-{ ~>t; 

'''::1,-') 

COMPLAINT FOR CIVIL PENALTIES, PERMANENT INJUNCTION, 

25 AND OTHER EQUITABLE RELIEF 

26 Plaintiff, the United States of America, acting upon notification and 

27 authorization to the Attorney General by the Federal Trade Commission ("FTC" or 

28 "Commission"), for its Complaint alleges that: 

Complaint - Metropolitan 
1 1. Plaintiff brings this action under Sections 5(a), 13(b), and 16(a) of the 

2 Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a), 53(b), and 56(a), 

3 and the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§1681-1681x, to obtain 

4 monetary civil penalties and injunctive or other relief for Defendant's violations of 

5 the FTC Act and the FCRA. 

6 JURISDICTION AND VENUE 

7 2. This Court has subject matter jurisdiction over this matter under 28 

8 U.S.C. §§ 1331, 1337(a), 1345, and 1355, and under 15 U.S.C. §§ 45(a), 53(b), 

9 56(a), andl681s. 

10 3. Venue in the United States District Court for the Central District of 

11 California is proper under 15 U.S.C. § 53(b) and under 28 U.S.C. §§ 1391(b)-(c) 

12 and 1395(a). 

13 

14 4. 

DEFENDANT 

Defendant Metropolitan Home Mortgage, Inc. ("Metropolitan") is a 

15 for-profit corporation organized, existing, and doing business under the laws of 

16 the State of California. Metropolitan does business as Wholesale Home Lenders 

17 ("Wholesale"), with its principal place of business at 4 Park Plaza, Suite 800, 

18 Irvine, California 92614. At all times relevant to this complaint, Metropolitan has 

19 transacted business in this district. 

20 

21 5. 

THE FAIR CREDIT REPORTING ACT 

The FCRA was enacted in 1970, became effective on April 25, 1971, 

22 and has been in force since that date. 

23 6. Section 621 of the FCRA, 15 U.S.C. § 1681s, authorizes the 

24 Commission to use all of its functions and powers under the FTC Act to enforce 

25 compliance with the FCRA by all persons subject thereto except to the extent that 

26 enforcement specifically is committed to some other governmental agency, 

27 

28 Complaint - Metropolitan Page 2 of 8 
1 irrespective of whether the person is engaged in commerce or meets any other 

2 'urisdictional tests set forth by the FTC Act. 

3 7. Section 604 of the FCRA, 15 U.S.C. § 1681b, prohibits consumer 

4 reporting agencies ("CRAs") from providing consumer reports to third parties 

5 except for certain enumerated "permissible purposes." Section 604(c) of the 

6 FCRA, 15 U.S.C. § 1681b(c), grants a permissible purpose in connection with the 

7 making of a "firm offer of credit or insurance." That term, also known as a 

8 "prescreened offer," is defined in section 603(1) of the FCRA, 15 U.S.C. § 

9 1681a(1), as an offer that will be honored (subject to certain exceptions) if the 

10 consumer, based on information in his or her consumer report, is determined by 

11 the offeror to meet the specific criteria used to select the consumer for the offer. 

12 8. Section 604(e) of the FCRA, 15 U.S.C § 1681b(e), allows consumers 

13 to elect to be excluded ("opt out") from any lists of pres cree ned consumers 

14 provided by a CRA. Section 604(e)(5) of the FCRA, 15 U.S.C. § 1681b(e)(5), 

15 requires the nationwide CRAs to establish and maintain a joint notification system 

16 for consumers to opt out. 

17 9. Section 615(d)(1) of the FCRA, 15 U.S.C. § 1681m(d)(1), imposes 

18 certain disclosure obligations on persons making firm offers of credit or insurance. 

19 Specifically, any written such offer must disclose, clearly and conspicuously, to 

20 the consumer that: 

21 

22 

23 

24 

25 

26 

27 

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• Information contained in the consumer's consumer report was used 

in connection with the transaction; 

• The consumer received the offer of credit or insurance because the 

consumer satisfied the criteria for credit worthiness or insurability under which the consumer was selected for the offer; 

• If applicable, the credit or insurance may not be extended if, after the 

consumer responds to the offer, the consumer does not meet the 

criteria used to select the consumer for the offer or any applicable criteria bearing on credit worthiness or insurability, or does not 

furnish any required collateral; and 

• The consumer has a right to prohibit the information contained in the 

consumer's file with any consumer reporting agency from being used 

Complaint - Metropolitan Page 3 of 8 
1 

2 

3 

4 

in connection with any credit or insurance transaction that is not 

initiated by the consumer (i.e., to opt out.). 

10. Section 615(d)(2)(B) of the FCRA, 15 U.S.C. § 1681m(d)(2)(B), 

provides that the disclosures mandated by section 615( d) (1 ), among other things, 

"be presented in such format and in such type size and manner as to be simple and 

5 

6 

7 

easy to understand." This section directs the Commission to establish the format 

and type size of such disclosures by rule. The Commission promulgated the 

Prescreen Opt-Out Notice Rule ("Prescreen Rule" or "Rule") pursuant to that 

8 

directive, which became effective on August 1,2005. 16 C.F.R. Part 642. 

9 

THE PRESCREEN RULE 

10 

11. The Prescreen Rule requires that each written prescreened solicitation 

11 

12 

13 

14 

15 

contain both a short and a long notice. Section 642.3(a) of the Rule sets forth the 

required content, form, and location of the short notice. It requires that the short 

notice appear on the front side of the first page of the principal promotional 

document in the solicitation, in a type style that is distinct from the principal type 

style used on the same page, and in a type size that is larger than the type size of 

16 

17 

18 

the principal text on the same page, but in no event smaller than 12-point type. 

Section 642.3(a) also requires that the short notice contain a specific statement 

that consumers may opt out of receiving prescreened solicitations, how consumers 

19 

can exercise their opt-out right, and where consumers can find the long notice. 

20 

12. Section 642.3(b) of the Rule sets forth the content, form, and location 

21 

of the long notice. Specifically, section 642.3(b)(ii)(C) requires that the long 

22 

notice begin with a heading identifying it as the "PRESCREEN & OPT -OUT 

23 

24 

25 

OTICE" and contain all information required by section 615(d) of the FCRA. 

Section 642.3(b) also specifies that the type size of the notice be no smaller than 

the type size of the principal text on the same page, and in no event smaller than 8-

26 

27 

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point type; that the type style of the notice be distinct from the principal type style 

used on the same page, such as bolded, italicized, underlined, and/or in a color that 

Complaint - Metropolitan Page 4 of 8 
1 contrasts with the other color of the principal text; and that the notice be set apart 

2 from other text on the page, such as by including a blank line above and below the 

3 statement or by indenting both the left and right margins of the text. In addition, 

4 section 642.3(b) prohibits inclusion of any other information with the notice that 

5 interferes with, detracts from, contradicts, or otherwise undermines the purpose of 

6 the notice. 

7 

8 

9 

COUNT I - Violations of Section 615~d)(2) of the FCRA and 

the Pre screen Ru e 

13. Defendant markets mortgage products by making firm offers of credit 

through solicitations sent to consumers who have been prescreened. 

10 

11 

14. From at least January 2006 to January 2008, the prescreened 

solicitations sent by Defendant to consumers did not comply with the Rule in one. 

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13 

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15 

16 

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18 

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20 

21 

22 

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or more of the following respects: 

a. the solicitations did not contain a short notice on the front page 

of the solicitation, in violation of section 642.3(a)(2)(ii) of the 

Rule; 

b. the solicitations contained information on the front page of the 

solicitation about how a consumer can opt-out from receiving 

prescreened solicitations, but that information was not in a type 

style distinct from the principal type style used on the same 

page, or in a type size that is larger than the type size of the 

principal text on the same page in violation of section 

642.3(a)(2)(i) of the Rule; 

c. the solicitations contained a long notice that (a) was in a type 

size smaller than the type size of the principal text on the same 

page, (b) was in a type style that was not distinct from the 

principal type style used on the same page, (c) was not set apart 

from other text on the page, and/or (d) did not include the 

Complaint - Metropolitan Page 5 of .8 
1 prescribed heading, in violation of section 642.3(b )(2)(iii) of 

2 the Rule. 

3 15. By and through the acts and practices described in paragraph 14 

4 above, Defendant has violated section 615(d)(2) of the FCRA, 15 U.S.C. 

5 §1681m(d)(2), and section 642.3 of the Prescreen Rule, 16 C.F.R. Part 642.3. 

6 16. Pursuant to section 621(a)(1) of the FCRA, 15 U.S.C. §1681s(a)(1), 

7 the acts and practices alleged herein also constitute unfair or deceptive acts or 

8 practices in violation of section 5(a) of the FTC Act, 15 U.S.C. §45(a). 

9 THIS COURT'S POWER TO GRANT RELIEF 

10 17. Section 621 (a)(2)(A) of the FCRA, 15 U.S.C. § 1681s(a)(2)(A), 

11 authorizes the Court to award monetary civil penalties of not more than $2,500 per 

12 violation of the FCRA in the event of a knowing violation, which constitutes a 

13 pattern or practice of violations. Defendant's violations of the FCRA and the 

14 Prescreen Rule, as alleged in this Complaint, were knowing and constituted a 

15 pattern or practice of violations. 

16 18. Each instance in which Defendant has failed to comply with the 

17 FCRA or the Prescreen Rule constitutes a separate violation of the FCRA for the 

18 purposes of assessing monetary civil penalties under section 621 of the FCRA, 15 

19 U.S.C. § 1681s. Plaintiff seeks monetary civil penalties for every separate 

20 violation of the FCRA. 

21 19. Under section 621(a) of the FCRA, 15 U.S.C. § 1681(a), and section 

22 13(b) of the FTC Act, 15 U.S.C. §53(b), this Court is authorized to issue a 

23 permanent injunction prohibiting Defendant from violating the FTC Act and the 

24 FCRA. 

25 PRAYER FOR RELIEF 

26 WHEREFORE, Plaintiff respectfully requests that this Court, pursuant to 15 

27 U.S.C. §§ 45(a), 53(b), 1681s, and 1691c, and pursuant to this Court's own 

28 equitable powers: 

Complaint - Metropolitan Page 6 of 8 
1 (1) Enter judgment against Defendant and in favor of Plaintiff for each 

2 law violation alleged in this Complaint; 

3 (2) Enter a permanent injunction to prevent future violations of the 

4 FCRA, the Prescreen Rule; and the FTC Act by Defendant; 

5 (3) A ward Plaintiff monetary civil penalties from Defendant for each 

6 violation of the FCRA or the Prescreen Rule as alleged in this 

7 Complaint; 

8 (4) Order Defendant to pay the costs of this action; and 

9 (5) A ward Plaintiff such additional relief as the Court deems just and 

10 

proper. 

11 Of Counsel 

12 JESSICA RICH 

Acting Associate Director 

13 DivisIOn of Privacy and Identity Protection 

14 REBECCA E. KUEHN 

Assistant Director 

15 Division of Privacy and Identity Protection 

16 KATHERINE ARMSTRONG 

Attorney 

17 Division of Privacy and Identity Protection 

Federal Trade Commission 

18 601 New Jersey Avenue, NW 

Suite NJ-3158 

19 Washington, D.C. 20001 

Tel: (202) 326-2252 

20 Fax: (202) 326-3768 

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Complaint - Metropolitan Page 7 of 8 
1 FOR THE PLAINTIFF 

UNITED STATES OF AMERICA: 

2 

TONY WEST 

3 Assistant Attorney General 

Civil Division 

4 United States Department of Justice 

5 THOMAS P. O'BRIEN 

6 

United States Attornefi 

Central District of Ca ifornia 

7 LEE WEIDMAN 

8 

Assistant United States Attorney Chief, Civil Division 

9 

10 

G SSMAN 

11 A . ant United States Attorney Chief, Civil Frauds Section 

12 California State Bar No. 101233 

Room 7516, Federal Building 

13 300 North Los Anlceles Street 

Los Angeles, Cali ornia 90012 

14 Telephone: (:213] 894-2474 

FacsImile: 213 894-2380 

15 E-mail: gary.plesslnan(w'usdoj . gov 

16 

EUGENE M. THIROLF 

17 Director 

Office of Consumer Litigation 

18 

KENNETH L. JOST 

19 DeEuty Director 

Of Ice of Consumer Litigation 

20 

21 

22 

./ 

ALAlN ~\ PHELPS 

Trial Attorney ... 23 Office of Consumer LItIgatIOn U.S. Department of JustIce 

24 PO Box 386 

Washington, D.C. 20044 

25 Telephone: 202-307-6154 

FacsImile: 202-514-8742 

26 E-mail: alan.phelps@usdoj.gov 

27 

28 

Complaint - Metropolitan Page 8 of 8