Foreclosure and Credit Assistance

Many unscrupulous businesses have taken advantage of consumers with false promises to help consumers keep their homes. Scam artists prey on the vulnerability of desperate homeowners in order to collect handsome fees -- but don't deliver any of the promised services. Many of these shady operations engage in high-pressure sales tactics and demand substantial fees in advance.

If you are behind on your mortgage payments and facing foreclosure, WATCH OUT for fraudulent foreclosure consultants who target distressed homeowners. The following tips can help you avoid being scammed.

RED FLAGS - Avoid working with anyone who does any of the following:

• Guarantees to stop the foreclosure process - no matter what the circumstances.
• Instructs you not to contact your lender, your lawyer, or a credit or housing counselor.
• Collects a fee up front before completing all services. This practice may be illegal in many circumstances in Michigan under the Credit Services Protection Act.
• Encourages you to lease or rent your home so you can buy it back over time.
• Tells you to make your mortgage payments directly to them, rather than to your lender.
• Tells you to transfer your property deed or title to them.
• Offers to fill out paperwork for you.
• Pressures you to sign paperwork that you haven't had a chance to read thoroughly or that you don't understand.

What You Can Do To Avoid Being a Victim:

1. DON'T sign any documents without reading and understanding them first.
2. DON'T transfer title or sell your home to the foreclosure rescuer.
3. DON'T pay money to a foreclosure rescuer before any work has been done.
4. DON'T ignore letters from your lender/loan servicer. Your loan servicer is the company that processes your mortgage payments. (Sometimes the company you borrowed money from will continue to service the loan, but often the company that you borrowed the money from and the company you make your loan payments to are different). You should contact your lender/loan servicer if you are having trouble making your payments on time. Many will work with homeowners who are behind on their payments to help them avoid foreclosure.
5. DON'T pay your mortgage payments to someone other than your lender/loan servicer, even if that person promise to pass the payment on to the lender/loan servicer.
6. DO contact HUD at 800-569-4287 or the Michigan State Housing Development Authority at for a referral to a housing counselor near you.

Michigan Credit Protection Act

The Michigan Credit Services Protection Act protects consumers by requiring most businesses that offer to prevent foreclosures or modify mortgage loans to complete the services before collecting money from the consumer. In other words, a credit services organization may not charge a fee in advance.

It is Illegal to Demand Payment Before Completing Services

Under Michigan's Credit Services Protection Act, it is illegal for most companies and individuals to charge or receive a fee before completing any of the following services:

• Offering advice or assistance for avoiding foreclosures on a home mortgage.
• Negotiating with creditors on the consumer's behalf to defer or lower payments.
• Taking steps to improve, or offering advice or assistance for improving, a consumer's credit records, history, or rating.
• Obtaining credit or a loan, or offering advice or assistance in obtaining credit or a loan, on behalf of a consumer.

Who Does this Apply to?

Any individual or business that provides or offers foreclosure prevention services (or any of the other credit-related services listed above) is a "credit services organization" covered by the Act, but there are exceptions for the following:

• Lenders and debt collectors licensed by the State of Michigan.
• Federal banks and credit unions.
• Licensed attorneys.
• Judges and persons acting under court order.
• Consumer reporting agencies engaged in the regular course of the credit reporting business.
• Licensed debt management businesses.
• Registered investment advisers and broker-dealers.
• 501(c)(3) tax-exempt, charitable organizations.

What Other Protections Does the Credit Services Protection Act Offer?

The Act requires credit services organizations to

• execute a written contract with the consumer that identifies all services to be provided,
• complete the promised services within 90 days after the contract is signed, and
• be truthful in dealings with consumers and creditors.

The Act also allows consumers to bring private lawsuits and, if successful, to recover

• actual damages (but not less than the fee they paid),
• legal expenses, including attorney fees and court costs, and
• punitive damages.

The full text of the Michigan Credit Services Protection Act is available on the Michigan Legislature's website.

Additional Information on Foreclosure Rescue Scams, Credit Counseling, and Foreclosure Prevention Michigan Attorney General's Office:

• "Michigan Lending and Foreclosure Guide"
• "Avoiding Foreclosure: A Guide for Michigan Homeowners"
• "Beware of Foreclosure Rescue Scams-Common Warning Signs"
• "Get Help If You Are Behind on Your Mortgage Payments"
• "Understanding the Foreclosure Process"
• "Home Lending and Foreclosure Rescue Scams"
• "Avoiding Credit Repair Scams"

No one can legally remove accurate and timely negative information on a credit report. This alert provides some tell-tale signs that a credit repair offer is a scam, details your rights when contracting for credit repair, and gives resources for free self-help credit repair.

U.S. Housing & Urban Development:

Federal Trade Commission:

• "Foreclosure Rescue Scams: Another Potential Stress for Homeowners in Distress"
• "Fiscal Fitness: Choosing a Credit Counselor"

U.S. Financial Literacy and Education Commission:

• General Information on Financial Matters
• Home Ownership Resources (including Foreclosure Prevention)

U.S. Dept of Justice:

Internal Revenue Service:

The IRS has revoked tax exemptions for many non-profit credit counseling organizations. Check the IRS database of tax-exempt, charitable organizations to determine if a non-profit agency has retained its tax-exempt status.

How to File a Complaint with the Attorney General

Consumers may report violations of the Credit Services Protection Act to the Attorney General's Consumer Protection Division at:

Consumer Protection Division
P.O. Box 30213
Lansing, MI 48909
517-335-7599
Fax: 517-241-3771
Toll free: 877-765-8388
Online complaint form