First Alliance Borrowers to Receive Another Round of Checks, Bringing Total Consumer Redress to $65 Million
Nearly 20,000 borrowers will receive a second compensation check this week from a redress fund that resulted from the FTC’s settlement with home mortgage lender First Alliance Mortgage Company and its chief executive officer. First Alliance borrowers, who obtained home mortgage loans through the company, previously received compensation for the loan origination fees the company deceptively charged them in a round of checks mailed out in December 2002. The additional money comes as the parties continue to implement the terms of the settlement.
According to the settlement, reached as part of a joint effort by the FTC, state agencies, AARP, and private plaintiffs, the initial consumer redress pool of almost $45 million was slated to receive additional funds as First Alliance was liquidated in bankruptcy. The initial redress pool was augmented as various legal proceedings were resolved. These additional funds bring total consumer redress to $65 million.
First Alliance, headquartered in Irvine, California, formerly offered home loans, usually secured by first mortgages, in 18 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 not only as its CEO, but also as its chairman of the board and president.
The FTC sued First Alliance in October 2000, chargingthat the company violated federal and state laws in making home mortgage loans to consumers through deceptive means, and later added Brian Chisick as a defendant and his wife Sarah as a relief defendant. In May 2001, the United States 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, the 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 mailed this week probably will be the final distribution from the settlement. About 8,000 borrowers who previously released their rights against First Alliance in a separate California action already have received $500 each and will not receive additional compensation.
The redress fund administrator maintains a Web site with details about the settlement at www.famcosettlement.com. Consumers who need information about their payment also can call the redress fund administrator at 1-866-233-0125.
Copies of the complaint and settlement documents are available from the FTC’s Web site at http://www.ftc.gov/famco and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
Copies of the legal documents associated with this case 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. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(Civil Action No.: SACV 00-964 DOC (MLGx)) (FTC File No.: X010029)
Claudia Bourne Farrell,
Office of Public Affairs