Herring holds Virginia Beach-based foreclosure rescue lender accountable
Attorney General Mark R. Herring is holding ANE Investments LLC and its Managing Member Richard A. Maxino accountable for violations of Virginia’s consumer finance statutes.
This follows a lawsuit he filed against ANE and Maxino in December 2020. The suit followed a complaint referral from the State Corporation Commission’s Bureau of Financial Institutions.
Herring’s lawsuit alleged that ANE and Maxino made loans to distressed homeowners and charged interest or other compensation greatly exceeding an effective annual interest rate of 12%, without being licensed as a consumer finance company, or coming within another exemption to Virginia’s usury laws.
Instead of charging traditional interest, ANE and Maxino sought compensation for certain loans through an above-market real estate listing and sales commission, or, alternatively, through a below-market option sale and purchase price.
“I will not tolerate any lenders who take advantage of Virginians who are in financial distress, especially particularly vulnerable homeowners who are trying to avoid potential foreclosure of their homes,” Herring said. “My Consumer Protection Section and I remain committed to protecting Virginians from abusive practices and we will continue to go after predatory lenders who prey on vulnerable individuals.”
The Complaint provided details concerning a loan that ANE and Maxino made in 2019 to a Virginia Beach homeowner. As alleged, while in the parking lot of her bank, a representative of ANE presented the homeowner with an Agreement to sign late in the afternoon of June 3, 2019 before the foreclosure of her Virginia Beach home that was scheduled for the next day.
The Agreement required the homeowner, in exchange for the $4,000 she needed to stop the foreclosure, to agree to: (1) allow Maxino and his then real estate agency employer to list and sell a separate piece of Virginia Beach real estate that the homeowner owned at the significantly above-market real estate commission rate of 21% (where 6% is more standard), and, alternatively, (2) if sale of the separate property did not occur for any reason, give ANE the option to purchase the separate Virginia Beach property at the significantly below-market price of $200,000. As further alleged, the separate property was appraised in April 2019 with a value of $430,000, which was known to ANE and Maxino.
After the homeowner signed the Agreement, Maxino and his employer listed the separate property for sale and the property ultimately sold for the price of $420,000, with a closing that occurred around August 29, 2019. ANE and Maxino claimed in a separate lawsuit that the homeowner owed Maxino a real estate commission of $88,200 on the sale of the property pursuant to the Agreement.
The Virginia consumer finance statutes prohibit any person from making loans to individuals and imposing charges greater than an annual rate of 12%, without having received a license from the State Corporation Commission, or coming within another exemption to Virginia’s usury laws.
As alleged in the Complaint, the consumer finance statutes make clear that they are intended to cover any person who seeks to evade their application by any “device, subterfuge, or pretense.” One example provided in the statute is “[t]he use of collateral or related sales or purchases of goods or services, or agreements to sell or purchase, whether real or pretended ….”
In his complaint, Herring alleged that the extra amounts Maxino contracted to receive from the Virginia Beach homeowner in the form of an above-market real estate commission, or the below-market option sales price that ANE contracted to potentially receive for purchase of the separate Virginia Beach property, constituted “loan interest, charges, compensation, consideration, or expense” for purposes of the effective interest rate limitations imposed by the consumer finance statutes.
As further alleged, if the homeowner had repaid $88,200 (or $84,200 beyond the principal amount loaned) to ANE and/or Maxino on August 29, 2019 (the day of the closing), the $4,000 loan to the homeowner would have had an effective interest rate of 8,831%. Alternatively, even if one subtracted out from the amounts paid a full standard 6% real estate commission ($25,200), and assumed that the homeowner repaid only $53,000 to ANE and/or Maxino (or $49,000 beyond the principal amount loaned), the $4,000 loan to the homeowner would have had an effective annual interest rate of 5,139%.
Herring’s settlement with ANE and Maxino takes the form of a Consent Judgment, which was entered by the Richmond Circuit Court on August 16, 2021. The Consent Judgment enjoins ANE and Maxino from violating specific consumer finance statutes, including by making any “loan requiring a collateral sale and/or purchase” to Virginia consumers where the total amounts of compensation collected beyond the principal amount advanced exceed an effective annual interest rate of 12 percent.
In addition to the injunction, the Consent Judgment requires:
- ANE and Maxino to reimburse the Commonwealth’s attorneys’ fees and costs in the amount of $11,000.
- ANE and Maxino to identify additional Virginia consumers with whom either of them, or both collectively, made a loan requiring a collateral sale and/or purchase during the period from Jan. 1, 2018 to the present.
- ANE and Maxino to provide restitution and/or forbearance relief to any Virginia consumers who received loans requiring a collateral sale and/or purchase during the period from Jan. 1, 2018 to the present.
Any Virginia consumer who received a loan requiring a collateral sale and/or purchase from ANE and/or Maxino during the period covered is encouraged to file a complaint with the Office of the Attorney General.
This matter was handled by the Predatory Lending Unit of Herring’s Consumer Protection Section. The Unit was established as part of Herring’s reorganization of his Consumer Protection Section, which now includes a focus on predatory lending in addition to deceptive conduct, antitrust matters, charitable solicitation, and more.
During Herring’s administration, the Consumer Protection Section has recovered more than $410 million in relief for consumers and payments from violators.
For additional information on the settlement or to file a complaint about a consumer protection matter, contact the Consumer Protection Section: