The Federal Trade Commission (FTC) has proposed changes to the law that would prohibit so-called "foreclosure prevention" companies from charging up-front fees for their services.
"Homeowners facing foreclosure or struggling to make mortgage payments shouldn't have to contend with fraudulent companies that don't provide what they promise," FTC Chairman Jon Leibowitz said. "The proposed rule would outlaw up-front fees so companies can't take the money and run."
Foreclosure prevention scams have been one of the leading causes of grief amongst homeowners facing foreclosure. Many homeowners sink thousands of dollars into foreclosure prevention scams only to end up losing their home and needing to file bankruptcy anyway. It is about time that the FTC has stepped up to the plate to battle foreclosure prevention scammers on their own turf. Foreclosure prevention scammers depend heavily on the trust and desperation of many homeowners fighting foreclosure. They demand upfront fees and feed on the fears and ignorance of homeowners to bilk them of their scarce financial resources. Prohibiting these "foreclosure prevention" companies from charging up-front fees may be just what we need to shut down many of these scammers. However, we need to make sure that enough resources are allotted to properly police this proposed rule. It is certain that these companies will continue to prey on homeowners facing foreclosure if they know they won't be punished.
For those homeowners who have already been scammed by "foreclosure prevention" companies, please take the time to file a complaint with the FTC. While it is not guaranteed that they will be able to recoup all of your losses, you can at least help to protect future homeowners from these schemes. And if you are a homeowner hoping to get a "quick fix" via "foreclosure prevention" companies, please be wary. Most of these so-called foreclosure prevention fixes don't deliver on their promises.