The Federal Trade Commission (FTC) has passed new consumer protections that bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners received a written offer from their lender or servicer. The Mortgage Assistance Relief Services (MARS) Rule will require these companies to disclose information more clearly to consumers and not make any misleading advertisements including any representations that they are not associated with the government, their services have not been approved by the government or the consumer’s lender. The new rules require that if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.
The new rule states that a consumer can receive an offer and choose to reject it, without having to pay any fees to the mortgage relief company. Attorneys are generally exempted from the new rules but must place any fees into a separate trust account until all conditions are met for the consumer accepting a modification.
“At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results,” FTC Chairman Jon Leibowitz said. “By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”
The changes in the rules will become effective at the end of January 2011.