WILLARD K. TOM General Counsel GREGORY A. ASHE …...work. However, many families are struggling to...

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28 Complaint 1

WILLARD K. TOMGeneral Counsel

GREGORY A. ASHESTEPHANIE K. ROSENTHAL Federal Trade Commission600 Pennsylvania Ave., N.W.Washington, D.C. 20580Telephone: 202-326-3719 (Ashe)Telephone: 202-326-3332 (Rosenthal)Facsimile: 202-326-3768 (fax)Email: [email protected], [email protected]

Attorneys for Plaintiff

UNITED STATES DISTRICT COURTEASTERN DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

HOPE FOR CAR OWNERS, LLC,

and

PATRICK FREEMAN,

Defendants.

Case No.

COMPLAINT FOR PERMANENTINJUNCTION AND OTHEREQUITABLE RELIEF

Plaintiff, the Federal Trade Commission (“FTC”), for its complaint alleges:

1. The FTC brings this action under Section 13(b) of the Federal Trade Commission

Act (“FTC Act”), 15 U.S.C. § 53(b), to obtain temporary, preliminary, and permanent injunctive

relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement

of ill-gotten monies, and other equitable relief for Defendants’ acts or practices in violation of

Case 2:12-cv-00778-GEB-EFB Document 1 Filed 03/27/12 of 11

mailto:[email protected],

mailto:[email protected]

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28 Complaint 2

Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), in connection with the marketing and sale of

vehicle loan assistance relief services.

JURISDICTION AND VENUE

2. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a),

and 1345, and 15 U.S.C. §§ 45(a) and 53(b).

3. Venue is proper in this District under 28 U.S.C. § 1391(b) and (c), and 15 U.S.C.

§ 53(b).

PLAINTIFF

4. The FTC is an independent agency of the United States Government created by

statute. 15 U.S.C. §§ 41-58. The FTC enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a),

which prohibits unfair or deceptive acts or practices in or affecting commerce.

5. The FTC is authorized to initiate federal district court proceedings, by its own

attorneys, to enjoin violations of the FTC Act and to secure such equitable relief as may be

appropriate in each case, including rescission or reformation of contracts, restitution, the refund

of monies paid, and the disgorgement of ill-gotten monies. 15 U.S.C. §§ 53(b) and 56(a)(2)(A).

DEFENDANTS

6. Defendant Hope for Car Owners, LLC (“HCO”) is a California limited liability

company with its principal place of business at 13389 Folsom Boulevard, Suite 300-180,

Folsom, California. HCO also maintains an address at 1410 Rocky Ridge Drive, Suite 260,

Roseville, California. HCO transacts or has transacted business in this district and throughout

the United States. At all times material to this Complaint, acting alone or in concert with others,

HCO has advertised, marketed, distributed, or sold vehicle loan assistance relief services to

consumers throughout the United States.


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28 Complaint 3

7. Defendant Patrick Freeman is the sole manager of HCO and its registered agent.

He also has signatory authority over HCO’s bank accounts. At all times material to this

Complaint, acting alone or in concert with others, he has formulated, directed, controlled, had

the authority to control, or participated in the acts and practices set forth in this Complaint.

Defendant Freeman resides in this district and, in connection with the matters alleged herein,

transacts or has transacted business in this district and throughout the United States.

COMMERCE

8. At all times material to this Complaint, Defendants have maintained a substantial

course of trade in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act,

15 U.S.C. § 44.

BACKGROUND ON VEHICLE LOAN ASSISTANCE RELIEF SERVICES

9. A car is second only to a home as the most expensive purchase many consumers

make. As a result, most consumers finance the purchase of a new or used motor vehicle. For

many people, their vehicles are necessary for them to commute to their jobs so that they can

work. However, many families are struggling to make ends meet and the number of repossessed

cars continues to rise. As a result, many consumers seek vehicle loan assistance relief services

in an effort to make their monthly loan payments more affordable and to keep their vehicle.

DEFENDANTS’ BUSINESS ACTIVITIES

10. Since at least November 2008, Defendants have solicited consumers to seek

vehicle loan assistance relief services through the Internet and telemarketing. Defendants induce

consumers to purchase their services with representations that Defendants’ services will make

consumers’ vehicle loan payments substantially more affordable or Defendants will refund any

fees paid by consumers.


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28 Complaint 4

Defendants’ Internet Marketing Activities

11. Defendants have solicited consumers who seek vehicle loan assistance relief

services through a number of Internet websites. Since at least November 2008, Defendants have

operated several websites, including but not limited to the following: carloanmod.com,

hopeforcarowners.com, hope4carowners.com, and hope4carowners.org. Defendant Freeman is

the registrant as well as administrative contact, technical, and billing contact for Defendants’

Internet websites. The domain registration and hosting fees for Defendants’ Internet website are

paid for with Defendant Freeman’s personal credit card.

12. Defendants’ websites make the following statements regarding their ability to

lower the monthly payments on consumers’ vehicle loans:

a. To date, our assistance efforts have reduced many of our clients’ monthlypayments an average of 30% - 40% on a monthly basis . . . .

b. We have solutions for every consumer in every conceivable situation so even ifyou feel as if you can’t be helped, YOU CAN.

c. Success through Compassionate Communications, Effective Negotiations &Equitable ResolutionsTo date, our team of trained professionals at Hope for Car Owners has assistedthousands of vehicle owners in seemingly every possible financial situation . . . Innearly every instance our negotiations have allowed vehicle owners to keep theirvehicles out of repossession . . . .

d. To date, our team of trained professionals has assisted thousands of vehicleowners in seemingly every possible financial situation.

e. In nearly every instance our negotiations have allowed or [sic] clients to keeptheir vehicles AND reduce their monthly payment and/or principal balance. It isNECESSARY and it is EFFECTIVE!

f. No matter your particular situation, we have the solution. We have nearly a 99%success rate which means in almost every situation we have been able to achievea positive financial result . . . .

g. Consumer Stimulus & Bailout ASSISTANCE!


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28 Complaint 5

h. Join the thousands who have already SAVED!

i. Reduce Your STRESS & start Immediately saving!

j. Stop overpaying for a depreciating LIABILITY!

13. Defendants’ websites contain frequently asked questions (or “FAQ’s”) webpages

that make statements such as:

a. Can I do this myself?

. . . .

Our research has shown that approximately 94% of consumers who attempt towork directly with their lender are unsuccessful as they are usually met withresistance and/or denial and usually go away frustrated after one or two attempts.

. . . .

In our experience, the only time a lender is willing to extend an offer of assistanceis after we have submitted a client’s file for review.

. . . .

We have reviewed many resolutions offered by lenders to client’s [sic] who hadpreviously chosen to work directly with their lender and we have found that, onaverage, the savings offered by the lender is approximately 8% of the originalpayment. The average savings for a client who receives a successful resolutionthrough our process is 41%. That is a difference of $33 out of every $100 of yourpayment.

b. What if I am not satisfied with my result?Prior to enrollment (as well as within your enrollment package) you will be askedwhat new (reasonable) payment you will be comfortable with going forward. Provided the payment request is a reasonable amount, we are 95% successful inhitting our payment goal. Our average payment reduction is roughly 41% of theoriginal payment and we are adding to that number with every successfulresolution achieved.

14. Defendants tout their experience to further their claim that they will obtain

promised loan modifications. For example, Defendants’ carloanmod.com website refers to

Defendants as a “team of professionals.” Defendants’ websites further state:


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28 Complaint 6

a. Our staff possesses the knowledge and we have developed and retain [sic] thenecessary relationships within the industry to assist in every situation imaginable.

b. We have aligned ourselves with like minded business partners who stand at theready with teams of highly trained and experienced professionals dedicated toassisting every aspect of your financial circumstance.

c. Hope for Car Owners has the knowledge and expertise to step in and negotiate onyour behalf.

d. The professionals at Hope for Car Owners are here to inform and educate ourclients as to their options and alternatives.

e. If you were charged with a crime, you would have a much higher chance ofsuccess if you hired a professional (attorney) to help with your defense. If youtransfer and apply that theory to negotiating with your lender, then it makesperfect sense to hire a professional to negotiate on your behalf. We do this everyday for thousands of clients and it is through our comprehensive analysis,innovative processes, industry relationships and leveraged positions whichprovide us with the ability to offer you the highest chance of successfulresolution.

15. Defendants’ websites also contain numerous purported customer testimonials

touting Defendants’ ability to arrange vehicle loan modifications and/or stop repossessions. The

testimonials include the following statements:

a. I was 4 months late and on the verge of losing my car to the repo man. Hope 4Car Owners stepped in an not only stopped the repossession, but they negotiatedto reduce my payments from $1200 a month to $548!!

b. Hope 4 Car Owners works magic . . . I saved over $1500 per month with theassistance of Hope 4 Car Owners.

c. I was $11,000 upside down on my truck and was ready to give it back because Icould no longer afford the payments. Hope 4 Car Owners negotiated a newpayment plan that cut my payments in HALF!!

d. We were $22,000 upside down in our car . . . Instead of losing our car, weenrolled with Hope 4 Car Owners and were able to work out a new payment planwith our lender.


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28 Complaint 7

e. We could no longer afford the payments on our Motor Home and it was $44,000upside down . . . but Hope 4 Car Owners stepped in and negotiated a new dealwith our lender that saved our future!

f. I owed $37,000 more on my boat than what it was worth and instead of losing itto repossession and destroying my credit, Hope 4 Car Owners worked out a newarrangement with my lender which helped me keep my boat and reduce myconsiderable stress.

16. Defendants’ websites make a “Confidence Guarantee” that “We are so confident

in our programs and services that we offer a “No Dispute” Money Back Guarantee in the event

we are unable to provide a successful resolution.”

17. Defendants’ websites invite consumers to call Defendants on their toll-free

number, “866-237-HOPE (4673).”

Defendants’ Telemarketing Activities

18. Defendants maintain a toll-free number, 866-237-4673, on which consumers

seeking vehicle loan assistance relief services can call for more information. Defendant

Freeman is the contact for the long distance service provider. The long distance fees are billed

to Defendant Freeman’s personal credit card.

19. Consumers speak with Defendants’ representatives when they call the toll-free

numbers in response to Defendants’ Internet advertising or when Defendants call consumers who

submitted information on Defendants’ websites.

20. During the sales calls, Defendants’ representatives collect information from

consumers, including details about consumers’ vehicle loan and income. Defendants’

representatives typically promise consumers that Defendants can lower the monthly payment on

consumers’ vehicle loans by 25% to 50%, sometimes within a few weeks.


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28 Complaint 8

21. Defendants’ representatives inform consumers that they must pay Defendants an

enrollment fee up-front, ranging from $199 - $500. In numerous instances, Defendants’

representatives assure consumers that they would get a refund of the fee if Defendants are not

able to obtain the promised loan modification.

22. In numerous instances, Defendants fail to obtain the promised vehicle loan

modifications that will make consumers’ monthly loan payments more affordable. In numerous

instances, consumers learn from their lenders that Defendants have not even contacted the lender

or that Defendants have made only minimal, non-substantive contacts with the lender. In

numerous instances, when Defendants fail to obtain a vehicle loan modification as promised,

Defendants deny refund requests from consumers.

VIOLATIONS OF THE FTC ACT

23. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits “unfair or deceptive acts

or practices in or affecting commerce.”

24. Misrepresentations or deceptive omissions of material fact constitute deceptive

acts or practices prohibited by Section 5(a) of the FTC Act.

Count I

25. In numerous instances, in connection with the advertising, marketing, promotion,

offering for sale, or sale of vehicle loan assistance relief services, Defendants have represented,

directly or indirectly, expressly or by implication, that they generally will obtain for consumers a

renegotiation, settlement, modification, or other alteration of the terms of consumers’ vehicle

loans that will make consumers’ vehicle loan payments substantially more affordable.

26. In truth and in fact, the material representation set forth in paragraph 25 is false or

was not substantiated at the time the representation was made.


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28 Complaint 9

27. Therefore, Defendants’ representation as set forth in Paragraph 25 is false and

misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act,

15 U.S. C. § 45(a).

Count II

28. In numerous instances, in connection with the advertising, marketing, promotion,

offering for sale, or sale of vehicle loan assistance relief services, Defendants have represented,

expressly or by implication, that Defendants will give refunds to consumers if Defendants fail to

obtain for consumers a renegotiation, settlement, modification, or other alteration of the terms of

consumers’ vehicle loans that will make consumers’ vehicle loan payments substantially more

affordable.

29. In truth and in fact, in numerous instances, Defendants do not give refunds to

consumers when Defendants fail to obtain for consumers a renegotiation, settlement,

modification, or other alteration of the terms of consumers’ vehicle loans that will make

consumers’ vehicle loan payments substantially more affordable.

30. Therefore, Defendants’ representation as set forth in Paragraph 28 is false and

misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act,

15 U.S. C. § 45(a).

CONSUMER INJURY

31. Consumers have suffered and will continue to suffer substantial injury as a result

of Defendants’ violations of the FTC Act. In addition, Defendants have been unjustly enriched

as a result of their unlawful acts or practices. Absent injunctive relief by this Court, Defendants

are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.


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28 Complaint 10

THIS COURT’S POWER TO GRANT RELIEF

32. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant

injunctive and such other relief as the Court may deem appropriate to halt and redress violations

of any provision of law enforced by the FTC. The Court, in the exercise of its equitable

jurisdiction, may award ancillary relief, including rescission or reformation of contracts,

restitution, the refund of monies paid, and the disgorgement of ill-gotten monies, to prevent and

remedy any violation of any provision of law enforced by the FTC.

PRAYER FOR RELIEF

Wherefore, Plaintiff Federal Trade Commission, pursuant to Section 13(b) of the FTC

Act, 15 U.S.C. § 53(b) and the Court’s own equitable powers, requests that the Court:

A. Award Plaintiff such preliminary injunctive and ancillary relief as may be

necessary to avert the likelihood of consumer injury during the pendency of this action and to

preserve the possibility of effective final relief, including but not limited to, temporary and

preliminary injunctions.

B. Enter a permanent injunction to prevent future violations of the FTC Act by

Defendants.

C. Award such relief as the Court finds necessary to redress injury to consumers

resulting from Defendants’ violations of the FTC Act, including but not limited to, rescission or

reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-

gotten monies.


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28 Complaint 11

D. Award Plaintiff the costs of bringing this action, as well as such other and

additional relief as the Court may determine to be just and proper.

Dated: March 27, 2012 Respectfully submitted,

WILLARD K. TOMGeneral Counsel

/s/Gregory A. Ashe GREGORY A. ASHESTEPHANIE K. ROSENTHALFederal Trade Commission600 Pennsylvania Ave., N.W.Washington, D.C. 20580202-326-3719 (Ashe)202-326-3332 (Rosenthal)202-326-3768 (fax)[email protected]@ftc.gov

Attorneys for Plaintiff


Case 2:12-cv-00778-GEB-EFB Document 1-1 Filed 03/27/12 Page 1 of 1

F

~s 44 (Rev. 12107) CIVIL COVER SHEET The JS 44 civil cover sheet and the infonnation contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as provided by local rules of court. This fonn, approved by the Judicia[ Conference of the United States in September [974, is required for the use of the Clerk of Court for the purpose ofmitiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

I. (a) PLAINTIFFS DEFENDANTS

ederal Trade Commission Hope for Car Owners, LLC and Patrick Freeman

(b) County of Residence of First Listed Plaintiff County of Residence of First Listed Defendant Sacramento (EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAt"D CONDEMNATION CASES, USE THE LOCATION OF THE

LAND INVOLVED.

(c) A ttorney's (Firm Name, Address, and Telephone Number) Attorneys (IfK.nown)

regory Ashe, Federal Trade Commission, 600 Pennsylvania Ave G N W, Room NJ 3158, Washinaton, DC 20580, 202-326-3719 n

II. BASIS OF JURISDICTION (Placc an "X" in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(PI"", "X" i, On, B,""PI,i"iff (For Diversity Cases Only) and One Box for Defendant)

0(1 U.S. Government 03 Federal Question PTF DEF PTF DEF Plaintiff (U.S. Government Not a Party) Citizen of This Slate 0 1 0 1 Incorporated or Principal Place 0 4 04

of Business In This State

02 U.S. Government 04 Diversity Citizen of Another State o 2 0 2 Incorporated and Principal Place 0 S 0 S Defendant

(Indicate Citizenship of Parties in Item Ill) of Business In Another State

Citizen or Subject of a o 3 0 3 Foreign Nation 0 6 0 6 Foreion Countrv

IV. NATURE OF SUIT {Place an "X" in One Bo:o.: Onlv' CON1Rt\ 1 TORTS FORFRITUREIPENAL IT BANKR lPTCY OrnER STATUTES

o 110 Insurance PERSONAL INJURY PERSONAL INJURY o 610Agriculrure o 422 Appeal 28 USC 158 0 400 State Reapportionment o 120 Marine 0 310 Airplane 0 362 Personal Injury- o 620 Other Food & Drug o 423 Withdrawal 0 410 Antitrust 0 130 Miller Act 0 315 Airplane Product Med. Malpractice o 625 Drug Related Seizure 28USC 157 0 430 Banks and Banking 0 140 Negotiable Instrument Liability 0 365 Personal Injury - ofPropeny21 U5C881 0 450 Commerce 0 150 Recovery of Overpayment 0 320 Assault, Libel & Product Liability o 630 Liquor Laws PROPERT\:" RI HTS 0 460 Deportation

& Enforcementof Judgment Slander 0 368 Asbestos Personal o 640 R.R. & Truck 0 820 Copyrights 0 470 Racketecr Influenced and 0 lSI Medicare ACI 0 330 Federal Employers' Injury Product o 650 Air line Regs. o 830 Patcnt Corrupt Organizations 0 152 Recovery of Defaulted Liability Liabil ity o 660 Occupational o 840 Trademark 0 480 Consumer Credit

Student Loans 0 340 Marine PERSONAL PROPERTY Safety'Health 0 490 Cablc/Sat TV (Exc!. Veterans) 0 345 Marine Product 0 370 Other Fraud o 6900lher 0 810 Selective Service

0153 Recovery of Overpayment Liability 0 37 1 Truth in Lending AB R I SE RITV 0 850 Securities/Commoditics! of Veteran's Benefits 0 350 Motor Vehicle 0 380 Other Personal o 710 Fair Labor Standards o 861 HIA (139511) Exchange

0 160 Stockholders' Suits 0 ]55 Motor Vehicle Propeny Damage A<t o 862 Black Lung (923) 0 875 Customer Challenge 0 190 Other Contract Product Liabi lity 0 385 Propeny Damage o 720 LaborlMgmt. Relations o 863 DlWCJDIWW (405(g» 12 USC 3410 0 195 Contract Product Liability 0 360 Other Personal Product Liability o 730 LaborlMgmt.Reporting o 864 ssm Title XVI !II 890 Other Statutory Actions 0 196 Franchise Iniurv & Disclosure Act o 865 RSI (405(.R» 0 891 Agriculcural Acts

REAL PROPER rv CIVIL RIGHTS PRJSU NER PETITIONS o 740 Railway Labor Act FEDERAL TAX SUITS 0 892 Economic Stabilization Act o 210 Land Condemnation 0 441 Voting 0 510 Motions to Vacate o 790 Other Labor Litigation o 870 Taxes (U.S. Plaintiff 0 893 Environmental Mailers o 220 Foreclosure 0 442 Employment Senlence o 791 EmpJ. ReI. loc. or Defendant) 0 894 Energy Allocation Act o 230 Rent Lease & Ejectment 0 443 Housing!

~ Habeas Corpus: Security Act 0 871 IRS-Third Pany 0 895 Freedom of Information

o 240 Torts to Land Accommodations 530 General 26 USC 7609 A<t o 245 Tort Product Liability 0 444 Welfare 535 Death Penalty II\'fMI GRA rION 0 900Appeal of Fee Determination o 290 All Other Real Propeny 0 445 Amer. wlDisabilities- 0 540 Mandamus & Other o 462 Naturalization Application Under Equal Access

Employment 0 550 Civil Ri8htS o 463 Habeas Corpus - (0 Justice 0 446 Amer. ,,'Disabilities - 0 555 Prison Condition Alien Detainee 0 950 Constitutionality of

Other o 465 Other Immigration State Statutes 0 440 Other Civil Rights Actions

V. ORIGIN lSI 1 Original

Proceeding

(Place an "X" in One BOl( Only)

o 2 Removed from 0 3 Remanded from Appellate Court

o 4 Reinstated or 0 5 Transferr~d from 0 6 Muitidistrici Reopened anoth.er dlstnct Litigation

s ectf

o 7

Appeal 10 D istrict Judge from Magistrate State Court Jud men!

C\tsl'ij .'S~(£ig~~fi~~ ~er which you are filing (Do nol cite jurisd ictional statutes unless diversity):

VI. CAUSE OF ACTION j.....:.~.:.::.:..::.:...~---------------------------Brief description of cause: violations 01 the ~ I C Act in connection with the marKeting 01 auto loan modil ication services

VII. REQUESTED IN COMPLAINT:

VIII. RELATED CASE(S) IF ANY

DATE

03/27/20 12 FOR OFFICE USE ONL.Y

o C HECK IF THIS IS A CLASS ACTION DEMAND S CHECK YES o nly if demanded in complaint:

UNDER F.R.C.P. 23 JURY DEMAND: 0 Yes ~ No

(See instructions): JUDGE DOCKET NUMBER

RECEIPT# _____ AMOUNT _______ _ APPLYING IFP ______ _ lUDGE _____ _ MAG. lUDGE ________ _

WILLARD K. TOM General Counsel GREGORY A. ASHE …...work. However, many families are struggling to...

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