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Scams

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.

Managing someone else’s money

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Millions of Americans are managing money or property for a loved one who is unable to pay bills or make financial decisions. This can be very overwhelming. But, it’s also a great opportunity to help someone you care about, and protect them from scams and fraud.

We are releasing four easy-to-understand booklets to help financial caregivers. The Managing Someone Else’s Money guides are for agents under powers of attorney, court-appointed guardians, trustees, and government fiduciaries (Social Security representative payees and VA fiduciaries.)

The guides help you to be a financial caregiver in three ways:

  • They walk you through your duties.
  • They tell you how to watch out for scams and financial exploitation, and what to do if your loved one is a victim.
  • They tell you where you can go for help.

You can also order free print copies (including bulk orders) online soon.

We’re working hard to empower older Americans to have a secure financial future. Sometimes family members, caregivers and others in the community must pitch in. We’re here to help you, too.

Trick-or-treating for your money

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When it comes to tricking you out of your money, for scammers it’s Halloween all year long.

In 2011, an estimated 25.6 million adults (10.8 percent of the U.S. adult population) were victims of fraud. Consumer scams can take many different forms, from direct marketing to affinity scams and involve everything from identity theft to pension poaching. However, there are a few general tell-tale signs that you can look for if you’re trying to decide if a financial product or service you’re being offered is a scammer’s trick or a financial treat.

Phantom riches

There are a lot of bogus offers out there that guarantee huge investment returns, windfalls of money, or a fast track to important benefits for only a “small” fee or investment on your part. It could be the offer of a loan at a great rate of interest – as long as you send in a “security deposit” first. Once you do, “poof!” your money disappears along with the scammer who made you the offer.

Or, maybe it’s an offer to help you get thousands of dollars in benefits from the Department of Veterans Affairs– for a fee. If you’re a veteran interested in getting benefits like Aid and Attendance, you should be wary of any paid advisor who offers to help you qualify for the benefit or who claims to be able to get you the benefit more quickly than anyone else.

Superheroes

Scammers would like you to believe they have superpowers, often claiming inflated credentials and experience in order to access your money.

Distressed homeowners may fall prey to mortgage relief companies that offer to help them with their mortgage or foreclosure problems for an up-front fee. These self-styled heroes will tout their credentials and promise to help solve your problems, but often leave you worse off than you were before. And it’s illegal for them to charge you an advance fee for help, so report them by submitting a complaint online or by calling (855) 411-2372.

Make sure you thoroughly research anybody who offers to help you with a consumer financial problem! Even the fact that they may have been in the military themselves isn’t a guarantee that they are going to treat you right.

Zombie debt

Zombies can come back from the dead and so can your debts. You may have a debt from years ago and suddenly a debt collector is contacting you demanding that you pay it back – now. Financial institutions sometimes sell old debt to other businesses, which then try to collect on it. If the financial records aren’t accurate, you may even find you’re being asked to pay back a debt you already paid off – or one that wasn’t even your debt in the first place.

Personal Financial Managers and JAGs can help servicemembers review any demand for debt repayment that you don’t fully understand. We’ve also prepared sample letters that you can use to respond to a debt collector. The letters may help you learn more about the age and other features of the debt and help you protect some of your rights.

Vampires

Vampires prey on the unsuspecting. Fraudsters do the same – using the promise of a special deal or a one-time offer to lure unsuspecting consumers into deals they don’t realize are financial booby traps. Never be pushed into buying something or entering into a financial contract because the product is going fast or the amazing deal is a limited-time offer. Take the time to do your research and get all your questions answered. Ask CFPB is a good place to get some of those answers.

And always remember: unlike the hapless victim in a vampire movie, you have the ability to escape. You can walk away from the table, hang up the phone, or log off the website.

You don’t need garlic, stakes, or torches to fight off the scary forces of consumer fraud – just a little knowledge about the tricks scammers use.

Happy Halloween!

Protect yourself from buyer’s remorse

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This blog post is part of a series for National Consumer Protection Week

When you buy something it’s hard to know if you’re getting the best deal – and that includes when military families, who are often targets for marketers, are making big financial decisions. Even though some companies might try to take advantage of people, there are things servicemembers can do to make sure they’re getting their money’s worth.

Have you ever bought something online and clicked the box that says “accept” without having any idea of what you’re actually accepting? Or maybe you looked at the fine print but it didn’t make any sense.

Or, you sit in an office with a salesperson who has a stack of paperwork for a product you’re financing. They give you a two-minute explanation of what it all means and ask if you have any questions. You say “no” because it’s embarrassing to say that you didn’t understand what they just said. And when they say “sign here” you do it. Congratulations! You’ve just bought an iPad for… $3,600?!!

So, what can servicemembers do when they’re confused at signing time?

  • Get help.
    If you can’t make heads or tails of a contract, take it to someone who can: your installation Personal Financial Manager or JAG. If the seller doesn’t want to give you a copy of the contract before you sign, that’s a red flag; so is pressure to sign it “right now, while the offer is still available!”
  • Don’t be afraid to step away and say you want to take time to think the purchase over.
    You are the buyer and you should be in the driver’s seat in this transaction. You are under no obligation to please the seller; don’t cave even if they act like they are disappointed or disgusted that you won’t commit.
  • Think about the total cost of what you’re buying, not just the monthly payment.
    I can’t tell you how many times I’ve seen servicemembers sign up for what seems to be an affordable monthly payment, and then realize they’re paying an outrageous total price for the item. The $3,600 iPad I mentioned above is a true story. So is the story of the servicemember who signed a contract to borrow $1,600 – at a cost of $15,000 in finance charges!
  • If someone says they only accept payment by allotment, consider walking away.
    Under federal law, a business generally can’t require consumers to make payments by automatic electronic payment, but there’s an exception to this that leaves out military allotments. When you pay by allotment directly from DFAS (Defense Finance & Accounting Service), it may be convenient for your creditor, but it means you miss out on protections that you might have had if the money was deposited in your bank account and then paid out from there (like not being required to pay by automatic electronic payments).
  • Never give someone access to or control over your financial accounts unless they are someone you trust completely and there is a compelling reason to do so (like a power of attorney when you are deployed).
    Many scams on servicemembers, veterans, and their families have started with giving a persuasive acquaintance or “advisor” access to their accounts.

The term “buyer beware” goes all the way back to the Roman era: caveat emptor. Take a hint from Caesar and his legions and protect yourself from getting into a bad deal. But if you do feel that you’ve been scammed or treated unfairly, come see us at consumerfinance.gov/Servicemembers.

We are here to help!

Hit or myth?

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Sometimes people in the military have interesting beliefs about things that impact their finances. Sometimes they’re correct; sometimes they’re partially true; and sometimes they’re just flat wrong. Check out the statements below – hit or myth?

“Shopping around for a loan will kill my credit score.”
This one is a myth – sometimes. When you apply for or inquire about getting a loan, a lender will request a copy of your credit score from the major credit bureaus (that’s called a hard inquiry.) And usually, each hard inquiry will cause a small reduction in your credit score because it can be a sign that you have taken on a new debt that hasn’t shown up yet on your credit report – which would make you more of a credit risk. But, the major credit bureaus and their score providers have made an exception if you’re shopping for an auto, home, or student loan. In that case, they treat multiple hard inquiries within a short period (it varies from 14 to 45 days) as a single inquiry, since they understand you’re just looking for the best deal, not planning to take out ten new loans. So, shopping around for a few weeks for a car, home, or student loan shouldn’t have much effect on your credit score.

“If I buy something, I am guaranteed a 36-hour “cooling-off period” where I can change my mind and cancel the deal.”
This one is mostly a myth but there are a few transactions that may have a cooling-off period. The Federal Trade Commission’s Cooling-Off Rule generally gives you three days to cancel purchases of $25 or more if the sale was made at your home, workplace, or dormitory, or at facilities rented by the seller on a temporary or short-term basis, such as hotel rooms, convention centers, fairgrounds, and restaurants. Federal law also provides limited cancellation rights for some types of mortgage loans and student loans, and state law in some states might have cooling-off periods relating to real estate deals, such as apartment leases.
In the vast majority of cases, though, once you’ve bought it, it’s yours right away and there’s no going back in a few days and saying “I’ve changed my mind.”

“I have to be behind on my mortgage payments before I can apply for a loan modification or short sale on my house.”
If you’re in the military, this is now a myth in many cases. The Department of the Treasury, the Federal Housing Finance Agency, and the government-sponsored enterprises Fannie Mae and Freddie Mac have all changed their guidance to say that a military permanent-change-of-station move qualifies you to apply for a loan modification or short sale even if you’re not behind on your mortgage payments. Be sure to mention your military status and PCS orders when you talk to your lender!

“If I enter active duty with student loans, the thing to do is ask for a military deferment on the loans so I don’t have to pay.”
I’d call this one a myth in most cases. Unless it’s a subsidized federal student loan, the loan will keep accruing interest even though you’ve deferred payment, and you’ll end up owing even more (maybe a lot more) by the time you leave active duty. Consider this instead: no matter what type of loan it is (federal or private) under the Servicemembers Civil Relief Act, you could ask your loan servicer to reduce your interest rate to six percent while you’re on active duty. And if it’s a federal loan, you could also sign up for Income-Based Repayment so your monthly payment’s affordable, and you could count your payments towards Public Service Loan Forgiveness and be done with the debt after 120 qualifying payments.

“I can get a free copy of my credit report from each of the three major credit-reporting agencies every year at www.AnnualCreditReport.com.”
This one’s a hit! www.AnnualCreditReport.com is the official site to get a free copy of your credit report once a year from Equifax, Experian, and TransUnion. Other websites – including FreeCreditReport.com or CreditReport.com – are not.

“If I have a bad credit report the first thing I should do is pay someone to fix it.”
Myth! If there are mistakes on your credit report, you can contact the credit bureau – or the company that provided the information – yourself and request they be fixed. But if the negative information on your report is legit, then only the passage of time will make the bad info disappear – you can’t speed up the process and neither can a credit repair company.

“If I am deployed to a combat zone, the government offers a savings account that earns ten percent interest while I am deployed.”
Hit! The Savings Deposit Program will earn ten percent APR on up to $10,000 while you are deployed to a combat zone. You can set up the account through your unit’s finance officer once you are deployed.

“The CFPB can fix all my financial problems.”
Sorry, that’s a myth! But we can help you with many of your consumer financial issues. Come see us at consumerfinance.gov/Servicemembers and learn what we do!

Why you should be suspicious of government logos

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No, really. Just because something has a government logo on it doesn’t mean that it’s legitimate.

Just today, we announced that we’re cracking down on two mortgage loan modification operations that allegedly ripped-off struggling homeowners across the country using websites, emails, and other advertising materials with government logos, letterhead, or other marks to trick consumers into believing that their services were associated with government agencies.

For example, one of the operations claimed that, for a fee, they could help people get benefits from programs offering government-sponsored relief for homeowners, including the recent nationwide mortgage servicing settlement or the federal Independent Foreclosure Review program. In fact, you don’t have to pay anything to get the benefits of these programs, you just have to qualify.

The national mortgage settlement is a $25 billion agreement with the nation’s five largest mortgage servicers to provide relief to homeowners – including loan modification and refinancing – for homeowners covered under the agreement. The federal Independent Foreclosure Review program provides homeowners the opportunity to request an independent review of their foreclosure process under consent orders between federal regulators and 14 mortgage servicing companies.

If you think you might qualify and want more information, don’t rely on any information you receive just because it has a government logo on it – check out the official government sites about the settlement or the Independent Foreclosure Review program.

How to spot a scam

Mortgage assistance and foreclosure relief scams are designed to take your money. They often use mail or email designed with emblems, logos and names intended to mimic government agencies or programs, lawyers or law firms, or legitimate creditors. Unfortunately, scammers are also constantly re-inventing new ways to scam struggling homeowners. So it’s not always easy to tell the difference between the scams and legitimate services. But there are a number of ways to help spot the fakes. Keep an eye out for red flags if a mortgage assistance or foreclosure relief scheme:

  • Tells you to stop making mortgage loan payments. Not making your mortgage loan payments could hurt your credit score and limit your options.
  • Tells you to start making payments to someone other than your servicer or lender.
  • Ask you to pay high fees upfront to receive services.
  • Promises to get you a loan modification.
  • Asks you to sign over title to your property.
  • Asks you to sign papers you do not understand.
  • Pressure you to sign papers immediately.

Get real help, fast

Don’t be fooled. You can get real help by calling us at (855) 411-CFPB (2372) from 8 a.m. – 8 p.m. ET, Monday-Friday to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

A mortgage assistance or foreclosure relief scam could cost you your house. If you think you’ve been scammed, report suspected fraud immediately. The longer you wait, the more difficult it could be to prevent serious problems. There are lots of ways to register a complaint or report suspected scams:

Share this information with others
It can be hard for people to talk about finances, especially if they’re in trouble. Even if you’re not facing foreclosure yourself, please share a link to this advice with your networks using the hashtag #ForeclosureHelpisFree. You never know who you might be able to help.