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Consumer advisory: Don’t fall for a foreclosure relief scam or bogus legal help

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Along with other cases from federal and state partners, today we charged that mortgage rescue scammers have taken $25 million in illegal advance fees from consumers. It serves as a reminder of how important it is to watch out for scam artists trying to take advantage of people who need help avoiding foreclosure.

Federal law bans law firms—except under very limited circumstances—from requesting or receiving payment from you for help obtaining foreclosure relief, such as a mortgage modification, before you’ve signed a mortgage modification agreement with your lender.

In one case, we allege that two companies and their principals offering legal services took in over $19.2 million in fees from over 10,000 distressed homeowners nationwide, with most, if not all, of that money coming from illegal advance fees for so-called loan modification services.

Warning signs

There are red flags that a company claiming to offer legal foreclosure relief help may not be worth your money. Watch for the following warning signs and ask more questions:

  1. Demands for payment upfront. If a lawyer or someone claiming to offer legal help wants to be paid first—before you receive a modification—they may be breaking the law. A licensed lawyer can ask you to pay first but only if the lawyer is licensed in the state where you live or where your house is located. Even a licensed lawyer in your state can only receive up-front payments if they meet other requirements about what they charge for, how they deposit the money, and if they comply with all other state laws and regulations.
  2. Any claim that a modification is guaranteed.Your mortgage company must agree before you can get a modification. A lawyer or someone claiming to offer legal help cannot guarantee you will get a loan modification.
  3. A hard sell. Most licensed lawyers do not call or e-mail you directly and push you hard to pay money right away. If someone claiming to be a lawyer calls you on the phone and asks you to sign papers or pay them right away, ask some more questions to be sure it’s not a scam. Here’s a guide to help you determine if it’s real legal help or a foreclosure scam.

Third party authorization

When it comes to actually getting help with foreclosure relief, your mortgage company may require you to authorize a third party to act on your behalf, so it’s important to know what this means for you. Only authorize a third party that is trustworthy and be careful about exactly what you’re authorizing them to do.

What servicers can do

Foreclosure relief scams are costly for consumers and also impact servicers and investors in the mortgage industry. We’re posting a new model third party authorization form that was developed as part of loan modification scam prevention efforts by representatives from government agencies as well as consumer advocacy groups, housing counselors, and the mortgage industry. The form may be useful for mortgage servicers who can choose to use the form in whole, or in part, by adapting other existing forms. The new model form provides additional questions that will help mortgage servicers build on existing privacy and fraud controls by collecting information that will make it easier for servicers to spot red flags of a foreclosure rescue scam.

Helping build financial capability across America

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We just published our second annual financial literacy report to Congress. It outlines our strategy and what we’ve done over the past year to enhance financial literacy and capability. In the report, you’ll find out about the tools and information we provide to help consumers navigate financial choices. You’ll see how we collaborate with organizations that reach consumers where they are, and how we research effective approaches to financial education.

Financial literacy is gaining attention worldwide. For the first time, a study of educational achievement has compared the financial literacy of young people across the globe. The results show that 15-year-olds in the United States are in the middle of the pack, compared to their peers in 17 other nations and regions that participated in the study.

We’ll put these results to work—collaborating with other government and educational agencies to look at promising solutions, innovative approaches, and scalable strategies for educating the next generation of young Americans.

Director Richard Cordray has said this about why financial literacy is so important: “Even as we work to improve the consumer financial marketplace, we recognize that it will remain a complex, dynamic part of our economy. It is therefore fundamentally important that consumers be equipped to navigate the marketplace and the financial choices they face effectively to achieve their life goals.”

Support for financial decisions

Sometimes you need a quick answer to a financial question. You can turn to Ask CFPB, a searchable resource with reliable answers to common questions—in English and in Spanish. Sometimes you need to work through a large financial decision, like paying for college or shopping for a mortgage. Today you can use our Paying for College module, and our Owning a Home tools and resources are coming next.

Managing our financial lives

Conversations about money decisions and money management can happen wherever people share information. Here are a few examples of how we’re helping to create opportunities to increase financial capability:

Helping people take more control over their economic lives is essential to our mission, and it is essential for individuals and families to get the most out of their financial lives. We’re continuing to work with groups and organizations that share this goal, to bring greater financial capability to everyone in America.

Three years of standing up for consumers

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The Consumer Financial Protection Bureau was created in the wake of the financial meltdown to stand up for consumers, make sure they’re treated fairly, and restore trust in the consumer financial marketplace.

Our focus is on making financial markets work for American consumers — whether they’re applying for a mortgage, borrowing for college, choosing a credit card, or using any number of other consumer financial products.

We officially opened our doors on July 21, 2011 — three years ago today. Since then, we’ve used a range of tools in our toolbox to protect consumers: writing rules of the road, supervising and enforcing those rules, responding to consumer complaints, and much more.

Here’s a look at our work so far by the numbers.

Helping consumers help themselves

When we opened in 2011, we immediately launched a system to collect consumer complaints. Since then, we have handled over 400,000 complaints in multiple languages about credit cards, mortgages, bank accounts and services, student loans, credit reporting, money transfers, debt collection, payday loans, vehicle and other consumer loans – and most recently, prepaid cards.

In many cases we’re able to get people some relief – either money back or things like correcting their credit report or stopping harassing phone calls by debt collectors. Our Consumer Complaint Database allows you to see what consumers complained about and why, as well as how and when the company in question responds.

We’ve developed many other consumer resources too, including:

Here’s more about our efforts to help consumers help themselves.

Establishing strong consumer protections

Risky mortgage lending contributed to the crash of the American economy, and shoddy mortgage servicing practices compounded the misery by pushing many consumers into foreclosure. Since opening our doors, we’ve been hard at work establishing new, common-sense mortgage rules to protect consumers at every stage of the process – from shopping for a loan, to closing on a mortgage, to paying it back. These rules represent a back-to-basics approach to the mortgage market.

We’ve also written rules with new protections for consumers of money transfers and credit cards, as well as new rules to supervise larger nonbank debt collectors, credit reporting agencies, and student loan servicers for the first time at the federal level.

In the years ahead, we’ll be shifting to focus on rules that root out deception, debt traps, and dead ends across markets. The goal is a marketplace where the costs and risks are clear, and no consumer is harmed by unfair, deceptive, or abusive acts or practices.

Here’s more on our efforts to write rules that establish strong consumer protections.

Enforcing consumer protection laws

In addition to providing consumer resources and writing rules, we enforce federal consumer financial protection laws and work to hold bad actors accountable for their actions. To date, our enforcement actions have resulted in $4.6 billion in relief for roughly 15 million consumers harmed by illegal practices.

Through our credit card enforcement actions, we’ve returned nearly $1.8 billion to millions of consumers harmed by deceptive marketing and enrollment, unfair billing, and discriminatory credit card practices. In mortgage servicing, we’ve ordered $2.6 billion in relief for consumers harmed by systematic misconduct by mortgage servicers. We’ve also taken action against firms illegally taking advantage of consumers struggling with debt, helping other companies collect illegal fees from consumers, and using predatory or deceptive lending and debt collection practices.

Here’s more on our enforcement of consumer protection laws.

With our full set of tools, we’re looking to create a marketplace where costs and risks are clear, and no consumer is harmed by unfair, deceptive, or abusive acts or practices.

Thanks to so many of you for your birthday wishes. Time for us to blow out the candles and get back to work!

Three years of standing up for consumers

Everyone has a story—what’s yours?

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When it comes to dealing with financial issues, it’s easy to feel like you’re on your own. We realize that when it comes to making tough decisions or dealing with financial problems, everyone has a story to tell, and many of those stories are worth sharing. That’s why today, we’re excited to share stories about navigating consumer financial markets, as told in their own words.

Your stories matter to us. They inspire and inform the work we do. They can help us spot issues in the financial markets, illustrate challenges people are having, uncover insights into the products and services you depend on, and identify and fix problems before they become major issues. The result is a better outcome for everyone – a fair financial marketplace.

This July, we’re celebrating our three year anniversary. Over these three years, consumers have shared their stories with us in the more than 400,000 complaints and Tell Your Story submissions. We’ve seen the power of consumers’ voices when people speak up, and we’re proud to share some of these stories with you.

Take a look at stories from people who are taking charge of their financial futures and share yours as well!

Save the date, El Paso!

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Join us for a field hearing in El Paso, Texas on consumer complaints. The hearing will take place on Thursday, July 17 at 10:30 a.m. MDT.

The event will feature remarks from Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public. The field hearing will take place at:

Chamizal National Memorial
Theater
800 S San Marcial Street
El Paso, TX 79905

This event is open to the public, but RSVP is required to attend. Send us an email to RSVP. A livestream will also be available here on our blog.

If you need an accommodation to participate, you can make a request.

See you there!

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