Loan Modification and Debt Settlement Scams

Loan Modification and Debt Settlement Scams

If you look at the Department of Financial Institutions or Attorney General’s websites you would think that those agencies have made loan modification fraud a top priority. If you do get that impression, think again. Those agencies do little or nothing to prevent abuse or seek the return of your money. Nor do they even mention debt settlement rip-offs, which focus on credit card debt, despite the fact that there is every indication that it is as large or larger a problem.

Loan Modification Scams and the Attorney General's Efforts

The Attorney General’s Office (“AG”) dedicates an entire page to loan modification scams. However, the AG does not mention the equally important problem of debt settlement scams. The AG also does not offer any dedicated staff to address the issue. Consumers must file a complaint against a business just like it was any other disagreement over a transaction. While I have had very good luck with the AG’s pursuing routine problems with businesses, it is also clear to me that they do no more than an active Better Business Bureau would when dealing with a legitimate business. The AG’s consumer complaint process is ineffective against unscrupulous vendors. The consumer complaint process will not lead to prosecution unless they receive complaints in large enough numbers. In other words, the scam artists who rip you off can thumb their noses at the AG and nothing will happen unless there are literally dozens of complaints. Unfortunately, there rarely are. While the AG declined to tell me how many prosecutions they had made, the Freedom of Information Act request I submitted will almost certainly show that it is next to none.

Loan Modification Scams and DFI

The Department of Financial Institutions (“DFI”) also dedicates an entire page to loan modification scams without even mentioning debt settlement rip-offs. The page is also is more oriented towards consumer education and awareness than enforcement. This impression is reinforced by four things. First, the page only mentions at one point filing a complaint. In so doing DFI does not suggest it will be able to assist in getting your money back. Second, DFI has an “alerts” page where they notify consumers of companies suspected of fraud. Only a handful of companies are listed. Further, when I called DFI to ask if they took action against the companies they listed on its own website as being involved in scams, they could not say. It is clear that DFI doesn’t even effectively enforce the laws against companies it believes are ripping us off! In fact, DFI could not even tell me how many loan modification companies they had issued a Statement of Charges against. I have submitted a Freedom of Information Act request to make DFI reveal this, and I will let readers know when they finally get around to answering that request. Third, past history shows that client restitution is one of the first elements that DFI is willing to trade away to settle the case. Of course, the last thing that DFI will trade away is its own investigative costs. I have handled dozens of cases with DFI and I have always found this to be the case.

Where does this leave you, the consumer?

You are left having to take matters into your own hands. There are powerful tools for you to use. The Debt Adjustors Act and the Federal MARS rule can force companies to give you your money back. However, the AG’s office, DFI and nearly all private attorneys won’t lift a finger despite these weapons. Seth Rosenberg is the only attorney in Washington State to litigate against these companies to get your money back. Further, Seth Rosenberg takes these cases on contingency, which means you don’t pay a dime unless he gets your money back. It is a sad state of affairs when government regulatory agencies won’t lift a finger to end fraud schemes that affect thousands of Washingtonians, steal tens of millions of dollars and exploit the vulnerable, leaving you to fend for yourself. Just know that you are not alone.

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