WASHINGTON (AP) — The Justice Department filed its first predatory mortgage lending case Wednesday against a Texas developer accused of luring tens of thousands of Hispanic homebuyers into “bait and switch” sales through platforms like TikTok.

The lawsuit focuses on a massive development northeast of Houston, Colony Ridge, that promises homeownership with advertisements in Spanish, but then steers applicants into buying properties without basic utilities by taking out loans they can’t always repay, the Justice Department alleged. The suit said the developer uses high-pressure sales tactics that exploit limited English proficiency.

“The impact of this unlawful, discriminatory and fraudulent scheme is devastating,” said Assistant Attorney General Kristen Clarke, who oversees the department’s civil rights division. Many buyers found the lots didn’t have basic utilities, or were prone to flooding with rain and raw sewage.

Colony Ridge CEO John Harris said in a statement that the lawsuit is “baseless and both outrageous and inflammatory.”

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“Our business thrives off customer referrals because landowners are happy and able to experience the American Dream of owning property,” he said. “We loan to those who have no opportunity to get a loan from anyone else and we are proud of the relationship we have developed with customers.”

Colony Ridge developer Trey Harris has previously acknowledged to The Associated Press that his company provides loans to customers at interest rates that are higher than typical, but he said banks won’t provide those loans. He denied that the development was responsible for flooding problems in the area.

The development is home to more than 40,000 people and its geographic footprint is nearly the size of Washington, D.C. It’s been growing quickly, in part with TikTok advertising and loans that required no credit check and only a small deposit. But those loans had high interest rates and the company didn’t check that customers could afford them, authorities said. Between 2019 and 2022, Colony Ridge initiated foreclosures on at least 30% of its seller-financed lots within three years, according to the Justice Department.

“Foreclosure is actually a part of Colony Ridge’s business. When a family falls behind on payments and loses their property, Colony Ridge buys back the property and flips it to another buyer, often at a higher price,” said Rohit Chopra, director of the Consumer Financial Protection Bureau.

This fall, the neighborhood attracted other national attention as conservative media and GOP activists pushed unsubstantiated claims that it was a magnet for immigrants living in the U.S. illegally and that cartels control pockets of the neighborhood. There was no evidence to support the claims, and residents, local officials and the developer disputed the portrayals.

The new Justice Department suit, on the other hand, alleges unlawful discrimination and seeks unspecified civil penalties as well as compensation for customers. One woman used the proceeds from selling her mother’s home to buy into Colony Ridge, only to be find she’d have to spend thousands more to set up basic infrastructure. During heavy rains, the property floods so badly that she cannot enter or leave the neighborhood, Clarke said. The case is also part of the department’s work to fight redlining, an illegal practice in which lenders avoid providing credit to people because of their race, color or national origin.

“Colony Ridge set out to exploit something as old as America — an immigrant’s dream of owning a home,” said U.S. Attorney Alamdar Hamdani for the Southern District of Texas. Their practices “often ended with families facing economic ruin, no home, and shattered dreams.”

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Associated Press writer Juan Lozano in Houston contributed to this story.