The U.S. District Court for the Central District of California has approved a proposed FTC settlement with First Alliance Mortgage Company (First Alliance) and its chief executive officer, under which approximately 20,000 borrowers will receive payments from a redress fund estimated at $60 million or more.
The settlement resolves a complaint filed by the Commission on October 3, 2000, alleging that First Alliance and its California and Minnesota subsidiaries, the First Alliance Mortgage Companies, violated federal law by misleading consumers about the existence and amount of loan origination fees, and the interest rate and monthly payments on adjustable rate mortgage loans, which led consumers to believe they were borrowing less money at lower interest rates than they actually were. On March 21, 2002, the FTC and its federal and state law enforcement and non-governmental partners announced a proposed settlement of the complaint that would create a consumer redress fund consisting of all the remaining assets of First Alliance, after payments to certain creditors, as well as a payment of $20 million from the companies' chief executive officer, defendant Brian Chisick, and his spouse Sarah Chisick, a relief defendant.
Under the terms of the court-approved settlement, First Alliance, which is headquartered in Irvine, California, will be liquidated pursuant to a confirmed bankruptcy plan, and the company and its principals will be subject to injunctive relief sought by the FTC and the State Attorneys General. At the September 9 hearing, the court also entered an order preventing third parties from pursuing further actions against the defendants, approved the FTC's proposed plan for consumer redress, awarded attorney's fees to state and private counsel, and approved a special award of $1 million for six California-based plaintiffs. The FTC will administer the redress fund and will notify consumers of any actions they need to take to receive redress. (FTC File No.: X010029; Civ. No. SACV 00-964 DOC (MLGx); staff contact is Joel C. Winston, FTC Bureau of Consumer Protection, 202-326-3153; see press releases dated October 4, 2000; June 29 and August 10, 2001; and March 21, 2002.)
The U.S. District Court for the Western District of Washington in Seattle has entered a default judgment and order in the court matter filed against Brake Guard Products, Inc.; Brake Guard Limited Liability Company; and Kimberly Bennett in her capacity as representative of the estate of Ed F. Jones. The judgment, which was issued on July 29, 2002 against three of the four defendants in the matter, concerns a complaint filed by the U.S. Department of Justice on the Commission's behalf on May 11, 2001, seeking civil penalties and a permanent injunction against the defendants for allegedly violating a 1997 consent order. Under the terms of the 1997 order, the defendants were ordered to stop making false claims (as well as to stop using the term "ABS") in the advertising for their after-market brake products.
Through the default judgment, the defendants are permanently barred from: 1) advertising for, selling, or distributing the Brake Guard Safety System, Brake Guard ABS, or any substantially similar product; 2) making false representations regarding these products' attributes, efficacy, performance, safety, or benefits; and 3) violating any terms of the Commission's order in the future. The defendants also must provide a copy of the order to specified relevant parties and individuals for five years and are required to meet stringent monitoring and compliance requirements regarding their sales personnel. Finally, they are subject to record-keeping requirements, must shut down their Web site, and must file a written report with the Commission 180 days after entry of the judgment and order certifying their compliance with its terms. The case against Lawrence H. Jones remains in litigation. (Civ. No. C01-686P; staff contact is James Reilly Dolan, FTC Bureau of Consumer Protection, 202-326-3292; see press releases dated October 2, 1995; May 9 and March 11, 1997; January 23, 1998; and May 31, 2001.)
Copies of the documents mentioned in this release are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Call toll-free: 1-877-FTC-HELP.