People who paid for loan mod services in violation of the Mortgage Assistance Relief Services Act will receive a total of more than $1.2 million, the FTC said. Each of the 6,261 consumers will receive a $201.34 check.

The commission became able to distribute the money in the wake of a legal battle in which a Supreme Court decision came into play, according to FTC documents.

The story of that legal fight shows it can be challenging but possible to at least partially recoup funds when distressed borrowers get defrauded, something the commission has identified as a large source of losses in the past.

The litigation goes back to a 2018 complaint the FTC filed against Consumer Defense, which also did business under names like Preferred Law and American Home Loan Counselors, according to the commission.

By 2019, the U.S. District Court in Nevada had found in the FTC's favor in the case, but defendants appealed. 

An appellate court then upheld the ruling in 2022. But the question of the monetary award went back to the district court due to a separate development in the legal system during 2021. That year, the Supreme Court ruled that there are certain restrictions on the FTC's ability to seek monetary relief.

As a result, the appeals court "sent the case back to the district court to re-enter the monetary judgment pursuant to Section 19 of the FTC Act," according to the commission. 

The payments will serve as partial recompense given that the FTC said in its complaint that "defendants typically charged homeowners unlawful upfront fees in monthly installments of $650, falsely promising expert legal assistance.

"In many instances, consumers paid hundreds or thousands of dollars only to learn that the defendants had not obtained the promised loan modifications, and in some cases had never even contacted the lenders," the commission said.