Court Opinion

ID: 4706106
Source: CourtListenerOpinion
Date Created: 2021-07-23 18:00:50.569674+00
Date Added: 2024-06-11T08:06:34.503676
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
No. 19-3396
CONSUMER FINANCIAL PROTECTION BUREAU,
                                                  Plaintiff-Appellee,
                                v.

CONSUMER FIRST LEGAL GROUP, LLC, et al.,
                                    Defendants-Appellants.
                    ____________________

        Appeal from the United States District Court for the
                   Western District of Wisconsin.
        No. 3:14-cv-00513-wmc — William M. Conley, Judge.
                    ____________________

     ARGUED JANUARY 12, 2021 — DECIDED JULY 23, 2021
                ____________________

   Before EASTERBROOK, WOOD, and ST. EVE, Circuit Judges.
   WOOD, Circuit Judge. The ﬁnancial crisis of 2007–2008 sent
shock waves throughout the national economy. Perhaps no-
where were the eﬀects felt harder than in the residential mort-
gage sector. According to one source, more than seven million
homes entered foreclosure between 2007 and 2010. See S. Rep.
No. 111-176, at 39 (2010). This appeal concerns the rules that
apply to mortgage-assistance relief services. The question is
whether the Consumer Financial Protection Bureau (“the
2                                                    No. 19-3396

Bureau”) correctly declined to treat two high-volume, na-
tional law practices under the rules governing lawyers, and
thus whether the stiﬀ penalties that were imposed on the
ﬁrms (and their principals) can stand. We conclude that the
Bureau’s decision that the ﬁrms and lawyers were not en-
gaged in the practice of law was supported by the record, but
that further proceedings are necessary on the issue of reme-
dies.
                                I
    As desperate people faced the imminent loss of their
homes, many for-proﬁt mortgage-assistance relief services
(MARS), which promised to obtain loan modiﬁcations that
would stave oﬀ foreclosure, sprang up. The more dubious
among these businesses charged consumers thousands of dol-
lars in up-front fees and induced signups through deceptive
statements about the quality of their services. Mortgage As-
sistance Relief Services, 75 Fed. Reg. 75092, 75095–96 (Dec. 1,
2010). The money often bought little to nothing. Once a per-
son enrolled, many MARS providers “fail[ed] to perform even
the most basic promised services or achieve any beneﬁcial re-
sults.” Id. at 75097. This was doubly unfortunate because, at
the same time, many nonproﬁts and government agencies of-
fered similar services at no cost. Id. at 75093–94 & nn.29–35.
    Congress quickly identiﬁed mortgage-relief scams as a
glaring problem, and it directed the Federal Trade Commis-
sion to issue rules relating to “unfair or deceptive acts or prac-
tices involving loan modiﬁcation and foreclosure rescue ser-
vices.” Credit Card Accountability, Responsibility, and Dis-
closure Act of 2009, Pub. L. No. 111-24, § 511(a), 123 Stat. 1734,
1764; see also Omnibus Appropriations Act of 2009, Pub. L.
No. 111-8, § 626(a), 123 Stat. 524, 678 (instructing the FTC to
No. 19-3396                                                      3

“initiate a rulemaking proceeding with respect to mortgage
loans”).
    The FTC did so, issuing its ﬁnal rule on December 1, 2010.
See 75 Fed. Reg. 75092 (then-codiﬁed at 16 C.F.R. pt. 322, now
at 12 C.F.R. pt. 1015). The rule focused on the “widespread”
“unfair or deceptive practices of MARS providers” and the
harm these actors had inﬂicted on consumers. Id. at 75096.
Among other things, the rule prohibited MARS providers
from charging upfront fees, telling consumers not to talk to
their lenders, and misrepresenting material aspects of their
services. See 12 C.F.R. §§ 1015.3, 1015.5.
    The rule also addressed the role of attorneys. It acknowl-
edged that many attorneys and law ﬁrms that represent ﬁnan-
cially distressed persons oﬀer mortgage-relief services in con-
nection with their legal practice. Id. at 75095. Recognizing the
traditional role that the states play in regulating the attorney-
client relationship, the ﬁnal rule exempted attorneys from
most MARS regulations so long as they (1) “provide[] mort-
gage assistance relief service as part of the practice of law,” (2)
are “licensed to practice law in the state in which the[ir] con-
sumer … resides,” and (3) “compl[y] with state laws and reg-
ulations that cover the same type of conduct the rule re-
quires.” See 12 C.F.R. § 1015.7(a).
    While the FTC’s rulemaking was underway, Congress was
also busy. It overhauled the federal consumer protection ap-
paratus as part of the Dodd-Frank Wall Street Reform and
Consumer Financial Protection Act of 2010, Pub. L. No. 111-
203, 124 Stat. 1376. Title X of Dodd-Frank, known as the Con-
sumer Financial Protection Act (“the Act”), established the
Bureau as the federal government’s primary consumer pro-
tection agency when it comes to ﬁnancial matters. 12 U.S.C.
4                                                   No. 19-3396

§ 5511(a)–(b). The Act also transferred responsibility over nu-
merous consumer protection areas formerly overseen by
other agencies to the Bureau. One such area was the FTC’s au-
thority over mortgage practices. See 124 Stat. at 2036–37,
2102–03. This transfer took eﬀect on July 21, 2011, several
months after the FTC issued its ﬁnal rule. See 12 U.S.C. § 5582;
75 Fed. Reg. 57252 (Sept. 20, 2010). Shortly after the baton was
passed, the Bureau reissued the FTC’s MARS rule as Regula-
tion O. See 76 Fed. Reg. 78130 (Dec. 16, 2011) (promulgating
12 C.F.R. pt. 1015). Finally, cognizant of the role attorneys may
play in the provision of consumer ﬁnancial services, as well
as the traditional role that states play in regulating attorney
conduct, Congress stripped the Bureau of “supervisory or en-
forcement authority with respect to an activity engaged in by
an attorney as part of the practice of law under the laws of a
State in which the attorney is licensed to practice.” See 12
U.S.C. § 5517(e)(1).

                               II
    This case arises out of a civil enforcement action brought
by the Bureau against two ﬁrms—The Mortgage Law Group,
LLP (“the Mortgage Group”), and Consumer First Legal
Group, LLC (“Consumer First”)—and four lawyers associ-
ated with them—Thomas Macey, Jeﬀrey Aleman, Jason
Searns, and Harold Staﬀord (collectively, “the Providers”).
The Bureau alleges that while providing mortgage-assistance
relief services to more than 6,000 customers across 39 states,
the defendants violated Regulation O by making misrepre-
sentations about their services, failing to make mandatory
disclosures, and collecting unlawful advance fees.
No. 19-3396                                                  5

    Macey, Aleman, and Searns formed the Mortgage Group
in 2011. Staﬀord founded Consumer First in January 2012. Af-
ter six months of operation, Staﬀord sold 95% of Consumer
First to Macey, Aleman, and Searns, who operated the ﬁrm
similarly to the Mortgage Group. (Since Consumer First oper-
ated diﬀerently before and after the sale, we distinguish the
ﬁrm’s two ownership periods by referring to it as Consumer
First I or Consumer First II where appropriate.)
    The ﬁrms’ business model focused on oﬀering mortgage
modiﬁcation services to distressed homeowners. They di-
rectly employed four to ﬁve attorneys at their headquarters in
Chicago and associated themselves with local attorneys in the
various states in which they conducted business. The bulk of
the ﬁrms’ actual work, however, was performed by 30 to 40
nonattorneys (called “client intake specialists”), who enrolled
customers, gathered the necessary documents for modiﬁca-
tion applications, reviewed those documents, answered con-
sumer questions, and submitted loan-modiﬁcation applica-
tions to lenders.
    The intake specialists operated out of a centralized call
center and worked oﬀ a standardized script. If a consumer ex-
pressed interest in mortgage-relief services, the specialist
transferred her to an attorney at company headquarters. This
attorney also worked oﬀ a script, which contained prepared
statements about the program and fees. After each statement,
the attorney asked the prospective customer whether he or
she understood. If the customer answered “yes” each time,
the attorney transferred her back to the intake specialist to
sign a retainer agreement for services.
   The ﬁrms charged each customer an initial retainer fee of
$1,000 to $2,000, followed by recurring monthly fees of $500
6                                                 No. 19-3396

to $1,000 until services were ended. On average, the ﬁrms
ended up collecting $3,375 per client. Critically, under the
terms of the retainer agreement, these fees covered only the
ﬁrms’ loan-modiﬁcation services. If a customer asked the
ﬁrms to perform additional work beyond the submission of
the initial loan-modiﬁcation application—for example, legal
representation in a foreclosure proceeding or bankruptcy pro-
ceeding—those services had to be negotiated and paid for
separately.
   Intake specialists gathered from customers the ﬁnancial
documents needed to submit a loan-modiﬁcation application
on the customer’s behalf. Once these documents were in
hand, the intake specialist signaled in an internal ﬁrm system
that the customer’s packet was ready for “attorney review.”
An attorney at headquarters would review the customer’s ﬁle
and then pass it along to a local attorney in the customer’s
home state for additional review.
    The ﬁrms had aﬃliations with local attorneys in most
states in which they accepted customers. The ﬁrms classiﬁed
these arrangements as “Class B” memberships or partner-
ships. But that label was misleading: the local attorneys did
not share in the ﬁrms’ proﬁts or losses, nor did they supervise
or control the ﬁrms’ staﬀ or operations. Instead, they were
paid low, ﬂat-rate fees ($25 to $40) for each task they com-
pleted.
    Local attorney reviews were perfunctory: the attorneys’
primary responsibility was to make sure that all the required
documents were present for a loan modiﬁcation application.
Most reviews took between ﬁve and ten minutes. Rarely
would a local attorney recommend that a customer be de-
clined or send a loan-modiﬁcation application back because
No. 19-3396                                                  7

of problems. Local attorneys almost never communicated di-
rectly with customers. After a customer’s ﬁle was approved,
an intake specialist—not an attorney—sent the loan-modiﬁca-
tion application to the customer’s loan servicer.
    The Mortgage Group and Consumer First operated for
about two years. During that time, the Mortgage Group ob-
tained loan modiﬁcations for 26% of its customers (1,369 out
of 5,265) and Consumer First II obtained loan modiﬁcations
for 17% of its customers (190 out of 1,116). The Mortgage
Group ceased operations by the third quarter of 2013. Con-
sumer First II stopped taking new clients in November 2012
and stopped serving existing clients in the second quarter of
2013.
    The Bureau initiated this lawsuit in 2014. The case was
originally assigned to Judge Crabb, who handled most of the
pretrial proceedings. On the Bureau’s motion for summary
judgment, Judge Crabb partially invalidated sections
1015.7(a)(3) & (b) of Regulation O’s attorney exemption as in-
consistent with the Act, but her order left intact the heart of
Regulation O’s exemption, sections 1015.7(a)(1)–(2). In addi-
tion, Judge Crabb granted summary judgment against the
Providers on the following ﬁve issues:
   (1) charging unlawful advance fees, in violation of 12
       C.F.R. § 1015.5(a);
   (2) failing to make disclosures required by 12 C.F.R.
       § 1015.4;
   (3) implying in their welcome letter to customers that the
       customer should not communicate with lenders, in vi-
       olation of 12 C.F.R. § 1015.3;
8                                                  No. 19-3396

    (4) implying that consumers current on mortgages should
        stop making payments, in violation of 12 C.F.R.
        § 1015.3(b)(4); and
    (5) misrepresenting the performance of nonproﬁt alterna-
        tive services, in violation of 12 C.F.R. § 1015.3(b)(9).
Judge Crabb also held that individual defendants Aleman,
Searns, and Macey could be held personally liable for the
Mortgage Group and Consumer First II, and that the appro-
priate measure for restitution would be the ﬁrms’ net revenue
(i.e., fees collected minus refunds given).
    Shortly thereafter, the case was transferred to Judge Con-
ley, who held a bench trial to resolve the remaining factual
issues in the case, including whether the Providers qualiﬁed
for the attorney exemption in the Act and Regulation O. On
November 11, 2018, Judge Conley issued a posttrial order in
which he concluded that the Providers were not exempt from
Regulation O, because the tasks completed by the ﬁrms’ attor-
neys did not amount to the “practice of law.” Judge Conley
also determined that Consumer First II, Aleman, and Searns
were liable for (1) misleading customers into thinking that
they would receive legal representation and (2) for advising
customers during intake calls not to communicate with their
lenders. He concluded that Consumer First II, Macey, Ale-
man, and Searns would be subject to civil penalties under a
recklessness standard, but that Consumer First I and Staﬀord
would be subject to the lower civil penalties that apply to of-
fenses that fall under the strict-liability standard. (The Mort-
gage Group ﬁled for bankruptcy during the pendency of this
action; the Bureau and the trustee agreed to a consent order,
which the district court entered as amended in November
No. 19-3396                                                   9

2018. The Mortgage Group is therefore not a party to this ap-
peal.)
   The court issued its remedies decision on November 4,
2019. In accordance with Judge Crabb’s earlier rulings, it or-
dered restitution in the amount of $21,709,021. It then as-
sessed the following civil penalties: $11,350,000 for Macey;
$14,785,000 for Aleman; $8,002,500 for Searns; $32,250 for Staf-
ford, and $3,121,500 for Consumer First II. Finally, the court
permanently enjoined Macey, Aleman, and Searns from
providing “debt relief services.”

                              III
    Consumer First II, Macey, Aleman, and Searns (“Appel-
lants”) challenge the district court’s judgment on ﬁve
grounds. First and foremost, they maintain that they are ex-
empt from liability because they were practicing law. If, how-
ever, that exemption does not cover them, Appellants argue
in the alternative that the evidence did not support three vio-
lations for which they were found liable. Finally, Appellants
identify three problems with the district court’s remedy: its
use of net proﬁts rather than net revenues for purposes of res-
titution; the ﬁnding of recklessness for the civil penalties, as
well as the periods to which those penalties applied; and over-
breadth of the injunction.
                               A
    We begin with Appellants’ primary contention: that the
Bureau lacks the authority to bring this action because as at-
torneys they are exempt from liability under Regulation O
and the Act. The language of the statute is critical, and so we
set it out in full:
10                                                     No. 19-3396

     (1) In general
     Except as provided under paragraph (2), the Bureau
     may not exercise any supervisory or enforcement au-
     thority with respect to an activity engaged in by an at-
     torney as part of the practice of law under the laws of
     the State in which the attorney is licensed to practice law.
     (2) Rule of construction
     Paragraph (1) shall not be construed so as to limit the
     exercise of the Bureau of any supervisory, enforce-
     ment, or other authority regarding the oﬀering or pro-
     vision of a consumer ﬁnancial product or service …
        (A) that is not oﬀered or provided as part of, or in-
        cidental to, the practice of law, occurring exclu-
        sively within the scope of the attorney-client rela-
        tionship; or
        (B) that is otherwise oﬀered or provided by the at-
        torney in question with respect to any consumer
        who is not receiving legal advice or services from
        the attorney in connection with such ﬁnancial prod-
        uct or service.
     (3) Existing authority
     Paragraph (1) shall not be construed so as to limit the
     authority of the Bureau with respect to any attorney, to
     the extent that such attorney is otherwise subject to any
     of the enumerated consumer laws or authorities trans-
     ferred under subtitle F or H [of the Dodd-Frank Wall
     Street Reform and Consumer Financial Protection Act
     of 2010].
12 U.S.C. § 5517(e) (emphasis added).
No. 19-3396                                                        11

   Regulation O’s exemption is worded diﬀerently. It pro-
vides:
   (a) An attorney is exempt from this part, with the ex-
   ception of § 1015.5, if the attorney:
       (1) Provides mortgage assistance relief services as
       part of the practice of law;
       (2) Is licensed to practice law in the state in which the
       consumer for whom the attorney is providing mort-
       gage assistance relief services resides or in which the
       consumer’s dwelling is located; and
       (3) Complies with state laws and regulations that
       cover the same type of conduct the rule requires.
   (b) An attorney who is exempt pursuant to paragraph
   (a) of this section is also exempt from § 1015.5 if the at-
   torney:
       (1) Deposits any funds received from the consumer
       prior to performing legal services in a client trust
       account; and
       (2) Complies with all state laws and regulations, in-
       cluding licensing regulations, applicable to client
       trust accounts.
12 C.F.R. § 1015.7 (emphasis added).
    Before trial, the district court assigned Appellants the bur-
den of proving their eligibility for the attorney exemption. Af-
ter trial, the court held that they failed to meet that burden,
because they did not show that the attorneys associated with
the ﬁrm were engaged in the “practice of law” as deﬁned by
any of the states in which they did business. As this was a
bench trial, we review the court’s factual ﬁndings for clear
12                                                   No. 19-3396

error and its legal conclusions de novo. Morisch v. United States,
653 F.3d 522, 528 (7th Cir. 2011). Clear error review also ap-
plies to the court’s applications of law to facts in this setting.
                                1
    We begin with the relation between the Act and Regula-
tion O. We do so because, if and to the extent that Regula-
tion O strays beyond the statutory boundaries, we cannot rely
on it. This problem arises because (as we highlighted above)
the attorney exemption is expressed diﬀerently in the Act and
the Regulation. Appellants pointed this out before trial. They
argued that the Act establishes the outer bounds of the Bu-
reau’s authority over attorneys, and that the Bureau cannot
expand its authority by imposing in a regulation additional
requirements attorneys must meet to be exempt from liability.
Since sections 1015.7(a)(3) and (b) of Regulation O do exactly
that, Appellants contended, they must be set aside as contrary
to the Bureau’s statutory authority. See 5 U.S.C. § 706(2)(C).
    The Bureau did not deny that Regulation O exempts a nar-
rower category of attorneys from liability than section
5517(e)(1) of the Act describes. Instead, it maintained that the
Regulation O attorney exemption is a valid exercise of the au-
thority conferred by the saving clause of section 5517(e)(3).
Subsection (e)(3) says that the attorney exemption in section
5517(e)(1) does not limit the Bureau’s authority over any at-
torneys “otherwise subject to any of the enumerated con-
sumer laws or authorities transferred under subtitle F or H [of
the Dodd-Frank Act.]” In the Bureau’s view, Regulation O is
one of those “authorities transferred under subtitle F or H,”
because it originally was authorized and promulgated as an
FTC rule pursuant to section 626 of the Omnibus Appropria-
tions Act of 2009. The Dodd-Frank Act later transferred that
No. 19-3396                                                  13

authority to the Bureau. Thus, the Board argued, section
5517(e)(1) of the Act does not constrain the scope of the attor-
ney exemption in Regulation O.
    The district court found that Appellants had the better of
this argument. It invalidated sections 1015.7(a)(3) and (b) of
Regulation O, concluding that they were in “direct conﬂict”
with the attorney exemption in the Act. The court rejected the
Bureau’s use of the saving clause, because it failed to explain
why “Congress would prohibit [the Bureau] from regulating
attorneys engaged in the practice of law” in subsection (e)(1)
“and then create an exception that swallows the general pro-
hibition.” It left undisturbed the other provisions of Regula-
tion O’s attorney exemption, see 12 C.F.R. § 1015.7(a)(1)–(2),
because Appellants did not argue that they exceeded the Bu-
reau’s rulemaking authority.
    On appeal, the Bureau asserts that the district court erred
in its legal assessment of sections 1015.7(a)(3) and (b). Appel-
lants defend the court’s ruling and argue—for the ﬁrst time
on appeal—that it should have gone further. Their new focus
is on section 1015.7(a)(2), which requires an attorney to be li-
censed in the same state as the consumer-client in order to be
exempt.
    We can be brief about sections 1015.7(a)(3) and (b) of the
regulation. They exceed the Act’s grant of authority to the Bu-
reau and so must be set aside. See 5 U.S.C. § 706(2)(C). We also
reject the idea that section 5517(e)(3) furnishes the necessary
authority to add extra conditions that an attorney must meet
to qualify for exemption. On the latter point, we agree with
the district court that the Bureau’s reading of section
5517(e)(3) would eﬀectively render subsection (e)(1) a nullity.
That is not a sensible way to read a statute. Subsection (e)(3)
14                                                    No. 19-3396

performs a clarifying function: it conﬁrms that an attorney
who otherwise is subject to liability for violating consumer
laws in his personal capacity—that is, outside the context of
an attorney-client relationship—cannot escape liability
simply by virtue of being an attorney. Two aspects of section
5517(e) conﬁrm this reading. First, subsection (e)(3) begins
with the words “Paragraph (1) shall not be construed so as to
…”—indicating that subsection (e)(3) clariﬁes subsection
(e)(1)’s meaning but does not make a substantive change to it.
Second, subsection (e)(1) itself purports to be limited only by
subsection (e)(2), but not (e)(3), since it begins: “Except as pro-
vided under paragraph (2), the Bureau may not exercise any su-
pervisory or enforcement authority with respect to an activity
engaged in by an attorney as part of the practice of law … .”
(Emphasis added.)
    While we aﬃrm this aspect of the district court’s order, we
agree with Appellants that section 1015.7(a)(2) of Regula-
tion O exceeds the statutory boundaries. We acknowledge
that they did not present this argument to the district court.
We have discretion, however, to address pure questions of
law for the ﬁrst time on appeal. See, e.g., Hively v. Ivy Tech
Cmty. Coll. of Ind., 853 F.3d 339, 351 (7th Cir. 2017) (en banc);
Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746, 750 (7th Cir.
1993). We exercise that discretion here in the interest of judi-
cial economy and because the resolution of this issue is im-
portant to the coherence and continued functioning of the reg-
ulatory scheme.
    An easy way to illustrate the problem with section
1015.7(a)(2) is by considering the nature of national law ﬁrms.
Lawyers licensed in and operating out of one state (“national
attorneys”) are entitled to advise clients in other states in
No. 19-3396                                                    15

which they are not licensed, so long as they aﬃliate them-
selves with local counsel. See, e.g., MODEL RULES OF PRO.
CONDUCT r. 5.5(c) (AM. BAR ASS’N 2019). This arrangement is
permitted under the legal-practice rules of every state. Section
1015.7(a)(2) sits uneasily with this rule. It purports to exempt
from the Act only those attorneys who are “licensed to prac-
tice law in the state in which the[ir] consumer … resides.” In
other words, it allows the Bureau to regulate a “national at-
torney” who provides legal services to a client living in a state
where the attorney is not licensed.
    The Act, by contrast, exempts such an attorney from regu-
lation so long as she is engaged in the practice of law as de-
ﬁned by the state in which she is licensed. The Act does not
care about the state where the client lives. It follows that sec-
tion 1015.7(a)(2), like sections 1015.7(a)(3) and (b), impermis-
sibly broadens the class of attorneys who are subject to Regu-
lation O, in direct conﬂict with the Act. This conﬂict is unam-
biguous, and so our inquiry stops there. See Chevron U.S.A.
Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984);
City of Arlington v. FCC, 569 U.S. 290, 296–97 (2013) (applying
Chevron to agency interpretations concerning the scope of
their statutory authority). Section 1015.7(a)(2) is contrary to
the Bureau’s statutory authority and cannot stand. See 5
U.S.C. 706(2)(C).
                                2
    With this much established, we are ready to turn to the
merits of the appeal. Under the Act and the remaining provi-
sion of Regulation O, the Bureau is authorized to bring its ac-
tion against Appellants so long as the attorneys associated
with the ﬁrms did not provide mortgage relief services “as
part of the practice of law.” 12 U.S.C. § 5517(e)(1); 12 C.F.R.
16                                                   No. 19-3396

§ 1015.7(a)(1). The district court made just that ﬁnding after
the bench trial.
    In an eﬀort to simplify its task, the district court surveyed
the practice-of-law deﬁnitions of the 39 states in which Appel-
lants serviced clients. Based on this review, it distilled the in-
quiry down to the following question, common to all:
whether the attorney’s conduct involved “[t]he application of
legal principles and judgment to a particular set of facts.” (The
court noted that it had been guided in this respect by ABA
Model Rule of Professional Conduct 5.5.) It invited the parties
to explain why it could not analyze practice-of-law in each
state according to this common inquiry. Neither side re-
sponded.
    Having settled on a test common to all states, the district
court proceeded to analyze the activities of the ﬁrms’ attor-
neys. It focused on the ﬁrms’ local attorneys—that is, the peo-
ple who the ﬁrms represented to customers would be provid-
ing them with legal representation. The court determined as
a factual matter that “local counsel’s involvement consisted
primarily, and in most cases exclusively, of pro forma docu-
ment review” and that “the role of the local attorney was by
design almost always perfunctory, rather than substantive.”
As a result, the court concluded that the ﬁrms’ local attorneys
did not apply “legal principles and judgment to a particular
set of facts” and so were not engaged in the “legitimate prac-
tice of law.”
   While some might have seen the facts the other way, we
see no clear error in this conclusion. The record at trial
showed that, in the normal course of the ﬁrms’ provision of
mortgage-relief services, attorneys conducted brief reviews to
be sure that a few basic pieces of ﬁnancial information
No. 19-3396                                                   17

(already reviewed and approved by nonattorney intake spe-
cialists) were in the ﬁle. They were not checking these docu-
ments for substance. At trial, two local attorneys testiﬁed that
nothing they did during their “review” involved the applica-
tion of legal principles or use of legal knowledge. Apart from
a few rare exceptions, local attorneys did not meet with con-
sumers, email consumers, or exchange information with con-
sumers. Nor did they negotiate with or even contact lenders
or servicers—that work was undertaken by the ﬁrms’ nonat-
torney staﬀ. When customers received modiﬁcations from
their loan servicers, the ﬁrms’ attorneys did not review or ad-
vise consumers on their terms.
    Defendants maintain that the ﬁrms’ local attorneys prac-
ticed law because they sometimes provided legal services
such as a foreclosure defense. But these services were per-
formed for only a tiny number of customers. These isolated
instances do not undermine the court’s conclusion. As sec-
tion 5517(e)(2)(B) of the Act makes clear, the Bureau is author-
ized to regulate services performed for customers who do not
receive any legal advice or services in connection with those
services. That is the case here.
    Appellants raise two further objections to the district
court’s “practice of law” holding, both for the ﬁrst time on ap-
peal. First, they complain that the district court committed le-
gal error by selecting a common deﬁnition of “practice of law”
for all the states in which the ﬁrms did business. They criticize
the court for failing to ﬁnd that its common inquiry was a nec-
essary condition for the practice of law in each state, and now,
on appeal, they point to examples of states that use a broader
deﬁnition than the one the court adopted. (They identify
Texas, Minnesota, and South Carolina as examples.)
18                                                  No. 19-3396

    That may be, but we consider this argument to be waived
and without merit in any event. The court said that its deﬁni-
tion was a “fundamental inquiry” in all relevant states—a sine
qua non for the practice of law in each of the relevant jurisdic-
tions. The court did not force this deﬁnition on anyone. To the
contrary, it expressly invited the parties to explain why the
test it had selected would not work for every state. Appellants
passed up this opportunity. If they now are unsatisﬁed with
the test the district court selected, they have only themselves
to blame.
    Appellants’ second objection concerns the burden of
proof. For purposes of summary judgment, the district court
determined that they had the burden of proving that they
qualify for the attorney exemption. See NLRB v. Kentucky
River Cmty. Care, Inc., 532 U.S. 706, 711 (2001) (“[T]he burden
of proving justiﬁcation or exemption under a special exemp-
tion to prohibitions of a statute generally rests on one who
claims its beneﬁts.”); see United States v. An Article of Device,
731 F.2d 1253, 1260–62 (7th Cir. 1984) (applying the same prin-
ciple to a regulatory exemption).
    Appellants now argue, once again for the ﬁrst time on ap-
peal, that the burden should have been placed on the Bureau,
because it is the Bureau that is claiming the beneﬁt of an ex-
emption, not them. Appellants reason that section 5517(e)(1)
of the Act creates a baseline rule under which the Bureau can-
not enforce regulations against any attorneys engaged in the
practice of law. Section 5517(e)(2) then carves out an excep-
tion to that rule for attorneys who provide mortgage-relief
services separate from the practice of law. It is through this
“exemption-within-an-exemption,” Appellants conclude,
No. 19-3396                                                    19

that the Bureau obtains the authority to enforce Regulation O
against a subset of attorneys.
    In the abstract, this may not be a bad point, but it runs up
against the statute’s own characterization of these subsec-
tions. The Act labels subsection (e)(2) as a “rule of construc-
tion”—not an exception—and then explains that the general
rule in subsection (e)(1) “shall not be construed so as to limit”
the Bureau’s authority over mortgage services provided sep-
arately from the practice of law. This indicates that subsection
(e)(2) is part of the general prohibition, not an exception to it.
Moreover, section 5517(e) is titled “Exclusion for practice of
law,” which suggests that the entire section operates as an ex-
ception to the Bureau’s general authority to regulate “unfair,
deceptive, or abusive” practices. 12 U.S.C. § 5511(b)(2).
    We need not conclusively resolve this matter, because Ap-
pellants forfeited their argument by failing to raise it before
the district court. See, e.g., Scheidler v. Indiana, 914 F.3d 535,
540 (7th Cir. 2019). When the court considered where to place
the burden of proof, the only consideration Appellants raised
related to the diﬃculty of proving some of the criteria im-
posed by Regulation O (e.g., 12 C.F.R. § 1015.7(a)(3)’s require-
ment that ﬁrm attorneys comply with “state laws and regula-
tions”). They did not contend that the burden should be
placed on the Bureau because section 5517(e) was an author-
ity-stripping provision rather than an exemption. It is too late
now to raise that argument.
   That leaves one ﬁnal matter for us to address before we
proceed to the district court’s ﬁndings on liability. The district
court’s practice-of-law analysis predominantly focused on
whether the attorney exemption in Regulation O applied to
Appellants’ conduct. But its analysis depended on its view
20                                                    No. 19-3396

that section 1015.7(a)(2) was valid. This caused it to limit itself
to the work done by “attorney[s] licensed in the state in which
the consumer … resides.” In other words, its focus was on the
local attorneys, not the handful of headquarters attorneys.
This omission is potentially signiﬁcant, because the Act’s at-
torney exemption removes enforcement authority from the
Bureau if any attorney who provides mortgage-relief services
to a customer does so as part of the practice of law (not just
the “local attorneys” licensed in the state in which the cus-
tomer resides). If the ﬁrms’ headquarters attorneys were en-
gaged in the practice of law, then we can assume that Appel-
lants would be exempt from liability.
    Although the apparent lack of discussion about the head-
quarters attorneys seems troublesome at ﬁrst glance—it is the
district court’s job, not ours, to ﬁnd facts—upon closer exam-
ination we see that the problem is more one of labels and
opinion organization than it is of omitted ﬁndings. The dis-
trict court found as a matter of fact that the headquarters at-
torneys’ involvement with any given customer was limited to
two things: (1) performing a brief, redundant review of ﬁnan-
cial documents (just as the local attorneys were doing), and
(2) reading through an enrollment script with “prepared con-
sumer statements about the program and fees” when a cus-
tomer ﬁrst signed up. Under the common deﬁnition of prac-
tice of law that the court employed in this case, these activities
do not amount to legal practice. The district court took into
account the work that headquarters attorneys performed
when it considered whether Appellants had misrepresented
to customers that they would receive legal services. It con-
cluded that the headquarters attorneys’ role did nothing to
cure that misrepresentation. These ﬁndings, while perhaps
No. 19-3396                                                    21

somewhat misﬁled, show that the role of the headquarters at-
torney cannot save Appellants here.

                                B
    The Bureau had to show more than the Appellants’ ineli-
gibility for the legal-services exemption. It had to establish a
substantive violation. Some of the practices on which the
court based its liability ﬁndings are, at this point, uncontested:
collecting upfront fees, 12 C.F.R. § 1015.5(a); misrepresenting
to consumers that they would receive legal representation, id.
§ 1015.3(b)(8); and failing to provide required disclosures, id.
§ 1015.4(b). Appellants do, however, still contest their liability
on three other counts:
   (1) advising customers not to communicate with their loan
   servicers in their welcome letter and during sales calls, id.
   § 1015.3(a);
   (2) telling consumers to stop making payments to their
   lenders, id. § 1015.3(b)(4); and
   (3) misrepresenting the performance of free alternatives to
   their services, id. § 1015.3(b)(9).
    Judge Crabb found that Appellants had engaged in the
second and third of these practices in her summary judgment
ruling; Judge Conley found the ﬁrst after trial.
    Although two diﬀerent standards of review apply (de novo
for items 2 and 3, clear error for item 1), in the end we ﬁnd no
cause for reversal. The ﬁrst ﬁnding is strongly supported by
Appellants’ “welcome letter.” It advised customers that
speaking to loan servicers was “risky” and could lead to cus-
tomers being “hurt by deceptive practices,” implying that
they should avoid contacting their servicers. Even though the
22                                                No. 19-3396

letter was prefaced by a seemingly contrary statement
(“While we will not tell you not to speak to your servicer
… .”), the court was entitled as trier of fact to conclude that
this preface did not do enough to dispel the message found in
the letter’s body. Appellants counter that the information they
communicated was true, and that based on experience they in
fact believed that communicating with servicers was risky.
But the Regulation takes the opposite view, and no one has
challenged section 1015.3(a). Judge Conley also found, based
on unrebutted evidence at trial, that Appellants’ customers
were told on sales calls not to contact their loan servicers.
There was ample evidence to support the ﬁrst point above.
    Appellants also fail to persuade us that we should reverse
their liability on the second point—improperly telling con-
sumers to stop making payments to their lenders. See 12
C.F.R. § 1015.3(b)(4). At summary judgment, Judge Crabb de-
termined that certain statements in the sales scripts commu-
nicated to customers that they should cease making payments
to their lenders. These included informing customers that
mortgage-relief programs are “hardship based,” and that a
“person who is a year behind is much more helpful than
some[one] who is current”—a statement that was followed up
with the question “[w]ill you be helpful during this process
… ?” The record also indicated that staﬀ routinely told con-
sumers to stop making payments, which they called “strate-
gically falling behind.” Appellants point to other parts of the
script that seem contradictory, such as advice to salespeople
not to “tell a client … to stop paying a mortgage,” and they
note that the typical customer was already behind on her
mortgage. Neither of these points undermines summary
judgment. Unrebutted evidence in the summary judgment
record showed that the salespeople routinely made these
No. 19-3396                                                     23

misleading statements, perhaps confusing matters even fur-
ther with contradictions. And even though many clients were
in arrears, it still could have been possible for them to keep
current with their payments.
    We also aﬃrm Appellants’ liability on the third point—
misrepresenting the performance of alternatives to for-proﬁt
MARS providers. See 12 C.F.R. § 1015.3(b)(9). Judge Crabb
grounded her summary judgment ruling on certain state-
ments in the sales script that advised customers that free
MARS alternatives only provide “a document checklist,” “tell
you what paper work you’ll need to gather to submit to your
bank to attempt a modiﬁcation,” and won’t “get the results
you’re really after, which is mortgage relief.” A salesperson
testiﬁed that intake specialists discouraged customers on the
phone from using free loan-modiﬁcation services. At sum-
mary judgment, defendants’ sole response was that they dis-
closed in their retainer agreement that free services were
available. But disclosure of services does nothing to correct
misrepresentations about the quality of nonproﬁt alterna-
tives. Appellants now assert that summary judgment was in-
appropriate because there was no evidence in the record that
their statements were wrong. But by not raising this argument
in the district court, they have forfeited it. See Nichols v. Mich.
City Plant Planning Dep’t, 755 F.3d 594, 600 (7th Cir. 2014). In
any event, this argument is not persuasive because the mis-
representation Appellants made was not solely about the rel-
ative eﬀectiveness of for-proﬁt and nonproﬁt mortgage assis-
tance services. Appellants insinuated that nonproﬁt alterna-
tives would not get consumers any relief. No evidence existed
that would have permitted a trier of fact to ﬁnd that Appel-
lants were not engaged in that behavior, and indeed, the
24                                                  No. 19-3396

record indicated that Appellants’ success rate was not materi-
ally diﬀerent from that of the nonproﬁts.
                               IV
    That brings us to remedies. As we noted earlier, the overall
monetary judgment was very large. The district court based
its order of restitution on the ﬁrms’ net revenues; this came to
$21,709,021. It then assessed the following civil penalties:
$11,350,000 for Macey; $14,785,000 for Aleman; $8,002,500 for
Searns; $32,250 for Staﬀord, and $3,121,500 for Consumer
First. Finally, the court permanently enjoined Macey, Aleman,
and Searns from providing “debt relief services” in the future.
   Appellants urge us to vacate all aspects of the remedial or-
der. They argue that the restitution order was legally errone-
ous because it exceeded the ﬁrms’ net proﬁts. They also con-
tend that the court’s civil penalties were excessive because
they were based on a miscalculation of the penalty period and
on an erroneous ﬁnding that Appellants acted recklessly. Fi-
nally, they assert that the district court’s injunction was over-
broad. We agree with Appellants on all three points.
                               A
   We ﬁrst address the district court’s restitution award. The
Act permits a court to grant “any appropriate legal or equita-
ble relief,” including restitution. See 12 U.S.C. § 5565(a). At
summary judgment, Judge Crabb deﬁned the appropriate
level of damages in this case as “net revenues”—that is, gross
receipts minus any refunds issued. This total came out to
$21,709,021.
    After the court issued its restitution award, however, the
Supreme Court handed down its decision in Liu v. SEC, 140 S.
Ct. 1936 (2020). In Liu, which dealt with the scope of equitable
No. 19-3396                                                     25

relief available in an SEC civil enforcement action, the Court
held that a disgorgement award may not exceed a ﬁrm’s net
proﬁts. Id. at 1946. The question is whether Liu compels us to
vacate the restitution award here and remand for re-calcula-
tion based on net proﬁts. We are persuaded that it does.
    The Bureau disagrees with this position. It points out that
Liu concerned disgorgement, whereas the district court here
ordered restitution. But we ﬁnd this to be too narrow a read-
ing of Liu. Liu’s reasoning is not limited to disgorgement; in-
stead, the opinion purports to set forth a rule applicable to all
categories of equitable relief, including restitution. Id. at 1945–
46.
    The Bureau’s argument also founders because it assumes
that equitable restitution and disgorgement are two diﬀerent
animals. The Court, however, expressed doubts on this point
in Liu. See id. at 1942–43 (observing that the deﬁnition of the
equitable remedy of disgorgement is unclear and has gone by
several labels over time, including restitution). The district
court seemed unsure whether there was a diﬀerence between
the two terms: its order interchangeably uses the words resti-
tution and disgorgement to describe its remedy.
    Finally, the Bureau suggests that Liu is inapplicable be-
cause the statute at issue in Liu authorized only “equitable re-
lief,” whereas the Act in our case authorizes courts to award
equitable and legal relief. Compare 15 U.S.C. § 78u(d)(5), with
12 U.S.C. § 5565(a). Accordingly, the Bureau urges us to up-
hold the court’s order as an award of legal restitution. We re-
ject this argument also. The district court understood itself to
be awarding equitable relief, which is why it cited equitable
restitution cases in support of its order. See, e.g., FTC v. Febre,
128 F.3d 530, 536 (7th Cir. 1997).
26                                                   No. 19-3396

                                B
    Appellants next ask us to vacate the court’s civil penalties.
The Act authorizes courts to assess such penalties against de-
fendants who violate federal consumer ﬁnancial laws. It es-
tablishes three tiers of culpability: strict-liability violations,
which carry penalties of $5,000 per day; reckless violations, at
$25,000 per day; and knowing violations, at $1,000,000 per
day. 12 U.S.C. § 5565(c)(2). We generally review an award of
civil penalties for an abuse of discretion. See, e.g., SEC v. Wil-
liky, 942 F.3d 389, 393 (7th Cir. 2019).
    The district court concluded that Macey, Aleman, and
Stearns acted recklessly with respect to their violations; that
Staﬀord was liable for his violations only under a strict liabil-
ity theory; that Consumer First I committed strict-liability vi-
olations; and that Consumer First II committed reckless viola-
tions.
    Appellants take issue with the district court’s conclusion
that Macey, Aleman, Searns, and Consumer First II recklessly
violated the Act. A defendant acts recklessly when his con-
duct involves “an unjustiﬁably high risk of harm that is either
known or so obvious that it should be known.” Safeco Ins. Co.
of Am. v. Burr, 551 U.S. 47, 68–69 (2007). (There was some un-
certainty below as to whether the Bureau was required to
prove recklessness only with respect to the facts constituting
an oﬀense, or with respect to the illegality of that conduct. We
agree with the district court that the latter test is the correct
one, since the conduct at issue here is not obviously wrongful,
dangerous, or illegal on its face. See Liparota v. United States,
471 U.S. 419, 433 (1985).)
No. 19-3396                                                  27

    Appellants insist that they were not aware of a risk that
their conduct was illegal, nor should they have been, because
Regulation O prohibits conduct that is commonplace for law-
yers, such as requiring advance retainer payments and
providing advice not to communicate with opposing parties.
They also maintain that because Regulation O is a compli-
cated regulatory regime, their violations were more a product
of misapprehending the regulation’s applicability than of
recklessness. Finally, they point to a legal opinion they re-
ceived; that opinion informed them that their structure quali-
ﬁed as a national law ﬁrm. They contend that this opinion led
them to believe they would be exempt from Regulation O.
    Appellants have a point. Although we have found that
they were not engaged in the practice of law, the question was
a legitimate one. We consider it a step too far to say that they
were reckless—that is, that they should have been aware of an
unjustiﬁably high or obvious risk of violating Regulation O. We
thus vacate the district court’s recklessness ﬁnding with re-
spect to Macey, Aleman, Searns, and Consumer First II. On
remand, the district court must apply the penalty structure for
strict-liability violations.
    Appellants’ next challenge is to the period that each pen-
alty covers. The Act assigns a monetary penalty for each day
a violation persists. See 12 U.S.C. § 5565(c)(2). The district
court calculated a diﬀerent penalty period for each category
of violations. One of these related to enrollment violations.
The district court measured these periods by selecting the last
day each ﬁrm enrolled a customer as the end of its period of
“enrollment violations.” It selected January 2, 2013, for the
Mortgage Group and January 4, 2013, for Consumer First II.
Appellants contend that the record does not support those
28                                                 No. 19-3396

dates. Instead, it shows that the Mortgage Group and Con-
sumer First II stopped accepting new clients on October 30,
2012, and November 30, 2012, respectively. Appellants ar-
gued, though did not prove conclusively, that the January
2013 data entries were coding errors. But even if the January
outliers were true enrollments, Appellants contend that it was
error for the district court to include all the days between Oc-
tober 30, 2012, and January 2, 2013, for the Mortgage Group
and all the days between November 30, 2012, and January 4,
2013, for Consumer First II, when no enrollments happened
between those dates.
    Once again, we think that Appellants have the better of the
debate. Although they failed to prove their data-entry-error
theory, they should not have been accountable for all the days
between their second-to-last enrollments in Fall 2012 and
their last enrollments in January 2013. Instead, the court
should have ended the ﬁrms’ enrollment violations penalty
periods on October 30, 2012, and November 30, 2012, and (if
it so wished) tacked on one extra day of violations to account
for the January 2013 enrollments. We therefore vacate this
portion of the court’s order and remand for recalculation.
                               C
   Finally, Appellants object to the breadth of the injunction,
which permanently banned Macey, Aleman, and Searns from
providing “debt relief services,” as that term is deﬁned in 12
C.F.R. § 310.2(o). They argue that the record does not support
such a broad injunction and complain that it would create un-
due hardship for the individual defendants, who are career
bankruptcy attorneys and so would be banned from practic-
ing law in their chosen ﬁeld.
No. 19-3396                                                    29

   The scope of an injunction generally is committed to the
discretion of the district court. Russian Media Grp., LLC v. Cable
Am., Inc., 598 F.3d 302, 307 (7th Cir. 2010). “[An] injunction
must … be broad enough to be eﬀective,” id.; but it cannot be
“more burdensome to the defendant than necessary to accord
complete relief to the plaintiﬀs,” Califano v. Yamasaki, 442 U.S.
682, 702 (1979).
   This injunction needs some tailoring. A few considerations
lead us to this conclusion. First, the violations at issue here
concerned mortgage-relief services, not debt-relief services as
a whole. Moreover, we have found that Appellants’ violations
were not knowing or reckless, and so an injunction of this
breadth is not necessary to protect the public against future
harm. Finally, we think it signiﬁcant that Appellants’ mort-
gage-relief operations, though undoubtedly ﬂawed in many
respects, were not a complete scam: at the end of the day, the
Mortgage Group and Consumer First did in fact obtain loan
modiﬁcations for hundreds of customers during their roughly
two years of operation. Those ﬁrms have long since gone out
of business, and so the injunction need only ensure that the
individual defendants do not stray beyond the scope of the
Act and its implementing regulations.
                                V
    The judgment of the district court is AFFIRMED IN PART and
VACATED IN PART. We VACATE the district court’s restitution
award, civil penalties, and injunction, and REMAND the case
for further proceedings consistent with this opinion.