Ill. AG Says Failed Escrow Firm Exposed Clients to Tax Penalties, Insurance Cancellations

April 7, 2005

Acting on complaints from Illinois and out-of-state consumers, Attorney General Lisa Madigan has filed a lawsuit against a Cook County business that in 2003 allegedly informed its customers all accounts it held in escrow were frozen due to an internal audit and no payments would be made to their creditors.

According to Madigan’s lawsuit, customers of U.S. Mortgage Resources Inc., 10059 S. Roberts Road, Atrium Office Center, Palos Hills, repeatedly asked that their money held in escrow be returned. However, the company, which was involuntarily dissolved July 1, 2003, has reportedly failed to return any money and has refused to cooperate with Madigan’s request to seek a resolution of the case. In total, consumers have lost more than $10,500.

From February 1995 until October 2003, U.S. Mortgage, and its president, Robert O’Donnell, allegedly collected bi-monthly or monthly payments from consumers and agreed to pay the escrowed funds to entities specified by the consumers. The company, in turn, charged consumers a fee for the service.

Beginning in March 1997, an Ohio couple cited in Madigan’s lawsuit started sending U.S. Mortgage $460 a month to pay their homeowners’ insurance and property taxes. As of October 2003, the company held $2,300 in escrow on behalf of the Ohio couple and has reportedly refused to return the money. As a result of U.S. Mortgage’s conduct, the couple incurred a penalty for failure to pay their taxes on time and their insurance was cancelled.

In another case, the company allegedly has refused to refund $980 it held in escrow for an Illinois woman. U.S. Mortgage’s failure to make payments caused this Illinois woman to be penalized for late tax payments and to have her homeowner’s insurance cancelled.

Madigan’s suit charges the company and O’Donnell with violating the Illinois Consumer Fraud and Deceptive Business Practices Act and asks the court to prohibit the defendants from engaging in the escrow business in Illinois, to rescind all contracts with former customers and to pay full restitution.

In addition, the lawsuit seeks a civil penalty of $50,000, and additional penalties of $50,000 per violation the court finds were committed with the intent to defraud. The suit also asks the court to order U.S. Mortgage to comply with a Civil Investigative Demand issued by Madigan’s office in October 2004.

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