FTC gets tough on scammers targeting those who can least afford to lose out
Hard times are prime time for scammers.
Con artists and business owners utilizing shady practices know that desperate people will use up all their resources and even go into debt if they think it will help them out of a financial jam. So the scammers devise plans that promise jobs, access to government grants, debt relief, medical discounts, or work-at-home opportunities. The worst of the schemes involve false promises to help homeowners modify their mortgages.
The Federal Trade Commission calls these practices ”last-dollar frauds” because the con artists specifically prey on people who are financially distressed.
Since the financial meltdown started, the FTC has been concentrating on last-dollar cons and coordinating its crackdown efforts with other federal and state law enforcement agencies around the country.
The FTC’s crackdown is a worthy effort against a mammoth problem.
”As long as the economy is sluggish and struggling, fraud artists are going to be concentrating on people vulnerable in the downturn,” said David Vladeck, director of the FTC’s bureau of consumer protection. ”The single factor that is the best predictor that someone will be a victim of fraud is financial insecurity.”
Besides mortgage/debt-relief frauds, here’s what the FTC considers to be the top last-dollar scams:
- Credit card interest-rate-reduction frauds.
- Investment seminar/precious metal schemes.
- Government grant fraud.
- Work-at-home cons.
- Credit card/line-of-credit frauds.
”We try to target the biggest guys and the most important fields of fraud,” Vladeck said.
In March, the FTC announced Operation Empty Promises, a multiagency initiative focusing on job scams, business opportunity fraud, and bogus work-at-home opportunities.
The FTC has been targeting operations that claimed, for an upfront fee, they would negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, short sale, or other foreclosure relief. Often, consumers got little or no help despite having paid the hefty fees. As part of this effort, the FTC also finalized two rules prohibiting companies from charging advance fees for debt relief and mortgage assistance services.
In a similar decision, the agency amended the Telemarketing Sales Rule to ban companies that sell debt-relief services over the telephone from charging fees before settling or reducing a customer’s credit card or other unsecured debt. The advance fee ban is not retroactive, so it applies only to consumers who enrolled in a debt relief service after Oct. 27, 2010.
”I think we are having an impact,” Vladeck said. ”Are we draining the swamp of these guys? No, we are not.”