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Consumer Protection Agency's First Lawsuit Targets Law Firm

The Consumer Financial Protection Bureau quietly filed its first ever civil enforcement action in federal court — and its target is a Los Angeles law firm.

The complaint, which was unsealed on July 23, said lawyer Chance Gordon and his law firm lured distressed homeowners with promises of loan modifications, took an upfront fee and then did “little or nothing” to help them.

The complaint also names his business partner, Abraham Pessar, and two of Mr. Pessar’s companies, Division One Investment and Loan Inc. and Processing Division LLC.

Messrs. Gordon and Pessar “used consumers’ last dollars to fund a lavish lifestyle, including expensive cars, dinners, and nightclubs,” the bureau said in court documents. The bureau was created in 2010 as part of the Dodd-Frank Act and opened for business last year.

A lawyer for Mr. Gordon and his firm, The Gordon Law Firm PC,  said he denies the charges, which include alleged violations of the Consumer Financial Protection Act and Regulation O. A lawyer for Mr. Pessar couldn’t be immediately reached.

Kent Markus, the bureau’s assistant director for enforcement, said the network of buinesses run by Messrs. Gordon and Pessar ”has been unlawfully preying on vulnerable homeowners in multiple states,” based on an initial investigation.

A federal district judge in California has frozen the partners’ assets and appointed a temporary receiver, at the request of the bureau.

The businesses started advertising mortgage-assistance relief services as early as 2010. The bureau’s complaint said they falsely claimed an affiliation with the U.S. government in mailed advertisements and sales calls, to earn consumer confidence.

Some homeowners suffered more than the loss of  a $2,500 to $4,500 fee, according to the bureau. The network directed customers to stop making payments to their lenders, which subsequently foreclosed on them.

According to court documents, the California state bar has received 62 complaints about Mr. Gordon since 2010. State agencies in North Carolina, Pennsylvania, Connecticut and Florida have also received and investigated complaints about Mr. Gordon’s loan-modification services.

Gary Kurtz, Mr. Gordon’s lawyer, said his client has serviced 2,000 clients since 2010 and has helped more than 90% modify their loans so they could keep their homes.

“His programs are designed to be consistent with the current state of legislation and we will vigorously defend against any suggestion to the contrary,” he said.

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