EasyKnock faces consumer lawsuits and actions from state regulators

Residential sale-leaseback platform EasyKnock continues to face scrutiny from state regulators and is now under fire from disgruntled consumers.

As of early July, the firm was facing consumer lawsuits in Texas, Maryland, South Carolina, Pennsylvania and Ohio, and actions from state regulators in Massachusetts, Michigan and Connecticut.

The increased interest in EasyKnock began in December of 2023, when Massachusetts Attorney General Andrea Joy Campbell announced that she had entered into a settlement with EasyKnock for what her office alleged was deceptive practices that stripped consumers of their home equity.

Campbell’s office claimed that EasyKnock “engaged in an unfair and deceptive equity-skimming scheme that involved purchasing the homes of cash-strapped consumers at bargain-basement prices and then renting them back to the consumers, at times for unfair rents,” in violation of the state’s consumer protection law. In addition, her office alleges that EasyKnock violated some of Massachusetts’ landlord-tenant laws.

According to the attorney general’s office, their investigation found that “EasyKnock targeted consumers with online advertisements that used loan-like language and failed to adequately disclose that the company’s products require the consumer to sell their home to EasyKnock.”

EasyKnock agreed to permanently end its sale-leaseback solution in Massachusetts, and to pay $200,000 to the state as part of the terms of its settlement.

The action in Massachusetts was followed up in February with Connecticut’s commissioner of consumer protection issuing a civil investigative demand (CID) into EasyKnock. The CID was in conjunction with a probe “into business practices regarding residential sale-leaseback agreements which may constitute unfair or deceptive acts or practices.”

The most recent state regulator to take action against EasyKnock is Michigan’s Attorney General Dana Nessel, who announced that her office had sent a notice of intended action to company, ordering it to cease and desist from it “unlawful business practices.”

In a release, the attorney general’s office claimed that EasyKnock’s marketing was misleading and that the firm had “made misrepresentations or misleading statements to pressure homeowners into transactions, caused confusion about escrow fund disbursements, and failed to make necessary home repairs in a timely manner.”

In an emailed statement, a spokesperson for EasyKnock wrote that “any time you are dealing with innovation, it will invite scrutiny because it’s unfamiliar, people are learning about it for the first time.”

“So, it is expected that states and government agencies would be curious and want to take a closer look — not only at our company — but any company that is operating in the homeownership space,” the spokesperson continued.

However, the spokesperson noted that EasyKnock takes issue with some of the characterizations made in the Michigan attorney general’s comments, noting that the firm is happy to cooperate with the attorney general’s office.

“We are helping them understand our processes and our business. We anticipate the same positive outcome that we experience whenever given the chance,” the spokesperson wrote. “Bottom line, once we have had the opportunity to engage in further dialogue with the Michigan AG and provide insights into our business, we believe they will come to a different determination, as others have in their wake.” 

In addition to these actions, EasyKnock is facing several consumer lawsuits, one of which is seeking class action status.

Filed by Randee Noggle, Adam Noggle, Catherine Rodgers, Leonard Rodger, Kendrick Rouser, Gunther Hamann and Lauren Hamann on June 25, 2024, in U.S. District Court in Detroit, the suit alleges that EasyKnock uses a “deceptive and unfair lending scheme” to “lure homeowners with poor credit, but with significant home equity, into unlawful, usurious loans known as ‘Sell & Stay’ transactions.”

“While Defendant’s “Sell & Stay” transaction is ostensibly structured as a sale-and-lease-back scheme, in fact, it bears all the hallmarks of what Michigan courts have long held to be an “equitable” or “disguised” mortgage,” the complaint states. “The primary hallmarks of a disguised mortgage are: the adverse financial position of the grantor, the intent of the parties, and the inadequacy of the purchase price for the property.”

Due to this, the plaintiffs in the Noggle suit, as well as the other suits, have brought their complaints under the Truth in Lending Act, which protects consumers from unfair and deceptive mortgage lending practices and requires lenders to provide clear and upfront information about borrowing costs, interest rates and fees.

However, in response to similar claims made in an investigation done by NPR, EasyKnock states that it cannot be in violation of the Truth in Lending Act as the deals are not loans, but instead a home sale transaction and a rental agreement.

“We provide empowerment and time for people to make decisions about their housing when they need it most. Ultimately, it is a new way to build financial resiliency for people who want it. We’re obviously not lenders, nor advisors, but the solutions we provide have helped hundreds of customers and their families – see our 4.6 stars on Trustpilot, for example,” an EasyKnock spokesperson wrote in an email. “Now, there’s no doubt, these solutions, like any home sale, have their complexities, which makes it critical for us to educate people on how it works. That’s a big part of our work ahead. In fact, we have an active campaign to demonstrate the many ways we are transparently communicating and supporting our customers. Once people – including those at State agencies – have a clear understanding of our products and practices, they respond positively.”

EasyKnock was founded in 2016 by Jared Kessler, and is based in New York City. The platform closed a $3.5 million seed funding round in 2018 that included $100 million in new debt funding from investors including Montage Ventures, Crestar Partners and Blumberg Capital. Most recently, EasyKnock announced a $28 million series D funding round from new and existing investors including Gaingels, Moderne Ventures, QED Investors, and Zillow co-founder Spencer Rascoff.

Over the past year, the firm has been on an acquisition spree of sorts, staring with its acquisition of struggling power buyer firm Ribbon in May 2023, home maintenance company Onder,home equity investment firm Balance Homes, and home equity investment firm HomePace.

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