By Tim Devaney - 07/23/14 02:57 PM EDT
Federal regulators are cracking down on scammers who they say prey on distressed homeowners with false offers of foreclosure relief.
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) announced Wednesday they are taking action against dozens of companies that they allege falsely promised to help distressed homeowners prevent foreclosure and lower their monthly payments.
“We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure," CFPB Director Richard Cordray said in a statement. “These companies pocketed illegal fees — taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began. These practices are not only illegal, they are reprehensible.”
Many of the foreclosure-relief scammers disappear after they collect the money, regulators said.
"Ultimately, many consumers who paid these companies advance fees did not receive a mortgage modification and ended up worse off than they began," the CFPB said.
The CFPB, alone, identified three companies that took more than $25 million from consumers for services they never performed.
In California, Clausen & Cobb Management Co. would charge distressed homeowners an initial fee of $1,995 to $3,500, as well as a monthly fee of $495 to negotiate with their mortgage companies to lower their monthly payments, the CFPB says.
The Hoffman Law Group allegedly charged distressed homeowners an initial fee of $6,000 as well as $495 a month to join a lawsuit that the firm promised would help them avoid foreclosure and lower payments.
Federal regulators say it was difficult to spot the scam, because many of the companies were law firms, lending a false sense of credibility to their claims.
"In the end, many consumers learned that the defendants had not contacted their lenders or obtained any meaningful relief for them," the CFPB said.