On December 20, 2023, the CFPB and the DOJ sued Colony Ridge, a Texas-based developer and lender, for operating an illegal land sales scheme and targeting tens of thousands of Hispanic borrowers with false statements and predatory loans. The lawsuit alleges that Colony Ridge sells unsuspecting families flood-prone land without water, sewer, or electrical infrastructure, and that the company sets borrowers up to fail with loans they cannot afford.
The CFPB and DOJ found that Colony Ridge has lured tens of thousands of Hispanic consumers into their predatory loan products. In particular, the complaint filed by the agencies alleges that Colony Ridge:
Misleads borrowers about infrastructure on the lots it sells. Colony Ridge deceived buyers of Terrenos Houston lots by falsely claiming that water, sewer, and electrical infrastructure were included. The complaint includes various ads, including TikTok videos, where Colony Ridge declares that "Terrenos Houston has all city services for each lot." However, the truth is revealed only after applicants pay a non-refundable deposit, and Colony Ridge discloses in English that the properties may not actually have those services.
Sells lots that flood with rain and raw sewage. Colony Ridge employees reportedly conceal past floods from borrowers, potentially leading to raw sewage damage and loss of personal belongings.
Churns through borrowers in a cycle of foreclosure. Colony Ridge resells foreclosed properties, often at higher prices. Records indicate they flipped 40% of all their properties sold between Sep. 2019 and Sep. 2022. They sold approximately 8,237 properties twice, 3,267 properties three times, and 2,067 properties four or more times in three years.
Targets Hispanic consumers with predatory loans. Colony Ridge targets Hispanic consumers using direct-to-consumer marketing, social media, and telemarketing. They exploit language barriers and use high-pressure sales tactics to quickly sell their exorbitantly high-interest loans. Compared to standard loans, Colony Ridge's interest rates between 2017 and 2021 were significantly higher, ranging from 10.9% to 12.9%. Additionally, Colony Ridge and Loan Originator Services did not assess applicants' ability to afford the loan during the application process.
Exploits language barriers at borrowers’ expense. Colony Ridge mainly markets in Spanish, but provides crucial documents in English for transactions. Neglecting to offer accurate translations of contracts, deeds, and other documents in the sales language and taking advantage of borrowers' limited English proficiency breaks federal law.
The CFPB claims discrimination based on race or national origin in credit applications in violation of the Equal Credit Opportunity Act. The CFPB also alleges deception and violation of regulations regarding land sales. The Justice Department supports the CFPB's allegation of ECOA violations and separately accuses Colony Ridge of Fair Housing Act violations.
The complaint aims to halt Colony Ridge's supposed illegal actions, compensate affected consumers, and impose a civil penalty that goes to the CFPB victims relief fund. If the defendants are found liable, the exact amount of compensation will be decided in the federal court case
Read the CFPB’s press release here.
The complaint can be found here.