As the bad economic times stretch into another year, people are weary of the struggle, especially homeowners having trouble making mortgage payments. Often, these same people are also handling job loss, illness, divorce - so many reasons they are particularly vulnerable to debt relief scams.
The Federal Trade Commission issued a consumer alert on March 22, 2012, to be wary of firms that promise to include consumers - for large fees - in mass joinder lawsuits against mortgage lenders. The firms describe the suits as protection against foreclosure or the source of relief from high mortgage rates - tempting for people seeking debt relief.
The lawsuits in theory would join together many plaintiffs in the same situation to go after lenders together. However, too often the lawsuit never happens, but the "fee" the vulnerable consumer couldn't afford in the first place is long gone, making a bad situation even worse.
The FTC is warning consumers to be wary of such fraudulent practices, as the agency recently brought a lawsuit to stop one such enterprise. The firm subject to the FTC suit has an Internet presence with three websites that apparently give the false impression that the operation is nonprofit. That operation appears to have charged up to $10,000 for a person to join a legal action against lenders. Reportedly, the judge issued a temporary restraining order freezing the firm's assets.
Source: Los Angeles Times, "FTC cracks down on foreclosure-rescue scheme," E. Scott Reckard, March 23, 2012