Nearly 28,000 First Alliance Borrowers Will Share an Initial Redress Pool of Almost $45 Million; Additional Redress of At Least $15 Million Expected
Nearly 28,000 borrowers will start receiving compensation checks this week from an initial redress pool of almost $45 million that resulted from an FTC settlement with home mortgage lender First Alliance Mortgage Company and its chief executive officer. Some 20,000 borrowers who obtained home mortgage loans through First Alliance will receive a portion of the loan origination fees charged them by the company, while about 8,000 borrowers who previously released their rights against First Alliance in a separate action will receive $500 each.
According to the settlement, reached as part of a joint effort by the FTC, state agencies, AARP, and private plaintiffs, the consumer redress pool will receive additional funds as certain legal proceedings involving First Alliance are resolved. The 20,000 consumers receiving an initial refund this week can expect additional compensation in 2003 once those funds are received. The additional funds are expected to bring total consumer redress to about $60 million.
First Alliance, headquartered in Irvine, California, offered home loans, usually secured by first mortgages, in eighteen states and the District of Columbia. The company marketed its loans to the "subprime" market, which includes homeowners with poor credit ratings who may not be able to qualify for conventional loans. Brian Chisick founded First Alliance and served as its CEO, Chairman of the Board and President.
The FTC sued First Alliance in October 2000, charging that the company violated federal and state laws by deceptively offering home mortgage loans to consumers, and later added Brian Chisick as a defendant and his wife Sarah as a relief defendant. In May 2001, the United States Federal District Court for the Central District of California consolidated the FTC's action with complaints against First Alliance that were previously filed by various states, AARP, and certain private parties The complaints were filed as part of the FTC's, states', and AARP's continuing effort to combat unlawful practices in the lending industry.
In March 2002, First Alliance and the Chisicks agreed to settle the charges. The settlement was approved by the federal district court on September 9, 2002. The checks being mailed beginning today implement the consumer redress provisions of the settlement.
The FTC maintains a Web site with details about the settlement at www.ftc.gov/famco. Consumers who want more information also can call the FTC's toll-free hotline at 1-877-862-0886.
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