The FTC has announced that they are looking at the possibility of banning up front – or advance – fees with regards to home rescue programs. It’s a good move. Advance fees represent too much opportunity for fraud as it forces someone to pay large amounts of money on the good faith that the company accepting the money is going to do the right thing.
FTC Chairman Jon Leibowitz offered the following on why advance fees are a problem that needs to be remedied:
“In particular we are going to closely examine whether to ban upfront fees for mortgage modification services as several states have already done,” he said. “Because very often, if they’re asking for advance fees, … it’s a red flag that the service is bogus.”
The state of California has already taken this step, but still allows companies to charge advance fees with the appropriate agreement granted by the state’s Department of Real Estate. The fact that a company collecting advance fees is registered is a good thing, but there remains a possibility for abuse.
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