Mortgage and Debt Relief Companies Under Fire – How You Can Spot a Scam

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Another day, another company (or two) being taken down for deceptive and harmful practices. This time, the FTC is targeting two companies – one in the mortgage industry and the other in the debt relief industry.

We’ve been delighted to see more of these reports coming out recently, with the CFPB and FTC working hard to crack down on manipulative business practices and inform consumers on how to protect their finances. And these reports aren’t just good to see – there’s a lot you can learn from them as well. Today, we’re highlighting the practices which caused these companies to be shuttered to help you spot red flags in the future.

Latest Companies Taken Down by the FTC

As highlighted in a report by Collections&CreditRisk, the most recent companies targeted by FTC are: Mark Nagy Atalla’s companies, American Mortgage Consulting Group and Home Guardian Management Solutions and Paul Wexler’s company, Southeast Trust LLC. Both companies have been banned for providing their respective services (mortgage lending and debt relief) for a variety of reasons. Below are the reasons and how you can use them to spot a scam.

How You Can Spot a Scam

Each of these companies have been targeted for a variety of manipulative practices designed to take money from consumers without necessarily providing the services intended. Here are a few of the charges, plus what you can look out for in the future:

Charging upfront fees in exchange for a delayed benefit. Atalla’s mortgage companies charged borrowers an upfront fee of thousands – all for the promise of lower monthly mortgage payments. Not only did these companies fudge the likelihood of actually getting these lower payments, the borrowers were also falsely promised full refunds if they didn’t get the lower payments.

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Wexler’s company also did this – by charging customers hundreds of dollars, claiming that they could help them obtain lower credit card interest rates.

Scam alert – If you’re dealing with a company that will only do business with you if you offer a large upfront fee, they might be a scam. Before you take action with the company, research them with the Better Business Bureau, examine similar companies in their space to find out if these fees are industry standard, and above all else, listen to your gut. If the fees don’t seem right – or will cost more than the savings provided with the service – turn away.

Company misrepresentation. Atalla’s mortgage companies didn’t just deliver false promises. They also claimed to be affiliated with the U.S. government and claimed to provide legal representation to consumers. These claims were enough to buy trust from consumers, but weren’t in fact true.

Wexler’s company also practiced misrepresentation, in a less direct way. Wexler’s company also did business under the name Financial Freedom Credit Consulting and was previously known as The Debt School LLC. This isn’t direct misrepresentation, but rather a tactic business owners can use if one of their companies receive a bad BBB rating or consumer reviews. Essentially, they get around these bad reputations by operating under a different name, but operating exactly as they did with the former company.

Scam alert – Before you deal with a financial services company, research the name of the business owner. If you find that they formerly ran other companies with the exact same service, research those companies. Chances are you’ll find scathing reviews. And if that’s the case, you can trust that the new company will be the same. Run – don’t walk – away from this company.

The same research should be done if a company claims to have abilities or affiliations that would make them more trustworthy. Do they say they’re with the government? Look it up. Do they claim to have special abilities to help you? Verify those abilities. It’s best not to trust a company’s promises blindly. And a legitimate company will always back up their claims.

Unwillingness to disclose information. Atalla’s companies worked hard to keep their customers in the dark. They told them to cut off communication with their current lenders and they wouldn’t disclose information that would allow customers to understand the process they were partaking in to modify their loan payments.

Scam alert – Any company you’re dealing with should provide, in writing, a terms and services sheet that explains everything you need to know about your transactions in full detail. If they’re withholding or delaying information from you (or giving you non-specific verbal only information), then they’re in violation of important regulations meant to keep you in the know.

Again, legitimate companies understand that they can’t take your money to perform a service without giving you specific details of what that service will provide and how. These companies should never encourage that you STOP communications in a way that can harm you. While there are some companies that effectively use the tactic of halting communications with your current lenders, it’s a risky practice that is usually best to avoid.

Calling you even if you’re on the Do Not Call Registry. Wexler’s company regularly called people who were on the Do Not Call Registry.

Scam alert – The Do Not Call Registry was put in place to protect consumers from harassing calls from businesses. If a company (that you’re not already doing business with) is calling you and your name and number are on the registry, then they’re in direct violation with the law. Don’t do business with any company that is willing to directly violate a law meant to protect you – it’s not a good sign for how they’ll handle you and your finances if you become a customer.

The sad truth is, for every company shuttered or practices changed, there are several more in the wings doing the same thing. The only way you can protect yourself is to be mindful of red flags. Whether the company is big or small, new or old, seemingly credible or not, always be on alert for these red flags so you can be sure that your finances are protected.

Image Credit: Jon Kromer

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