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More Than 100 South Carolina Homeowners Have Fallen for Debt Elimination Scams

By Peter Hull

The Island Packet, Hilton Head Island, S.C.

RISMEDIA, March 25 – (KRT) – Consumers beware. The Better Business Bureau and S.C. Department of Consumer Affairs have issued a warning about an elaborate mortgage scam by so-called debt elimination companies that can cost owners their homes and create a legal nightmare.

The companies target individuals searching for a quick source of debt relief by promising to eliminate a homeowner's mortgage, the alert states. Using independent agents to promote the program, the companies ask consumers to participate in a complicated scheme with multiple steps.

More than 100 homeowners in South Carolina have fallen afoul of the scam, said Kathy Barrett, president and CEO of the Better Business Bureau in Greenville, and two homes have been foreclosed after owners defaulted on loans they thought were eliminated.

The scam works, the bureau says, by first getting homeowners to pay $3,000 and place the title of their home in a trust. The company then requires the homeowner to present the mortgage lender with a document, put together by the company, which contains 40 to 50 "legal" challenges to the loan.

Dubbed the "CPA Report," the document outlines "violations" of federal law committed by the lender. The letter states the lender must respond with proof of the validity of the loan, usually within 10 days. When the lender fails to respond, a power of attorney is filed that the company claims gives the trustee authority to act on behalf of the lender.

Using the power of attorney, a "discharge of mortgage," or "quit claim deed" is filed certifying that the loan has been fully paid. By this time, the trust owns the home.

The homeowner then applies to refinance the home using brokers selected by the company, according to the bureau. Once the money is obtained, the company tells the homeowner the money will be divided among the homeowner, the company and the broker, an incentive for the homeowner to sign up. The company then promises to repeat the process to eliminate the new mortgage.

Homeowners who sign onto such a scheme most likely will face several potentially serious legal problems, Barrett said, including defaulting on their original mortgage, foreclosure, potential liability for failing to pay the additional loans obtained by the trust, future difficulty selling the house due to title complications and the possibility of charges as an accessory to criminal activity.

Consumers always should be skeptical of offers from any company claiming to easily eliminate a mortgage for an advance fee, Barrett said. Homeowners should consult an attorney before relinquishing their homes to an irrevocable trust and agreeing to participate in these programs, she said.

"As always," she said, "if it sounds too good to be true, it usually is."

Banks accused of fuelling debt 'crisis'

By Lucy Warwick-Ching
May 10 2005 - Banks were accused last night of fuelling Britain's £1,000bn personal debt problem by repeatedly offering debt-ridden customers loans they could not repay.

Evidence of "irresponsible lending" was revealed in a BBC1 documentary about the way lenders sold personal loans and how unsuitable the loans often were.

"Time and again we get calls from people with huge debts, which they cannot afford to pay and which are given without the borrower undergoing a full credit check or fully understanding the risks involved in borrowing such large amounts of money," said Mike Taylor, of Which?, formerly the Consumers' Association.

He said most institutions had granted loans in inappropriate circumstances and consumer debt, accounting for two-thirds of debt-related issues, was at crisis point.

Documents leaked to the BBC programme, Real Story, shown last night, provided evidence of reckless lending by one large bank that experts have called symptomatic of the industry.

An internal Lloyds TSB document detailing a review of 185 loans showed that, in more than half the cases, the bank did not have files required to show proper financial checks had been made. It found that staff, under pressure to meet targets to boost salaries, were manipulating paperwork and selling loans to people unable to afford them.

In one case, David Dickerson and his wife were given loans totalling £100,000 by Lloyds TSB. Mr Dickerson is unwell and on benefits, while Mrs Dickerson earns just £5,000 a year.

"Staff are under incredible pressure to push loans, credit cards and payment protection insurance policies. As a result, many do not make proper checks on whether customers can afford repayments," the National Consumer Council said. "The culture is currently one of hard sell, with too little effort to protect the customer. We hope this will change when the consumer credit bill is revised."

Failure to check a consumer's credit worthiness contravenes the Banking Code, which sets voluntary good practice standards of for financial institutions dealing with customers.

Seymour Fortescue, chief executive of the Banking Code Standards Board, said the BCSB was investigating Lloyds TSB's internal reports and would take disciplinary action if necessary. However, he said, Lloyds TSB deserved "some credit for commissioning these internal reports to see what was going on".

Lloyds TSB said in a statement it was committed to being a responsible lender. "We have stringent rules and controls in place. If a scenario arises whereby an individual operates outside those rules, as has been suggested, we take it extremely seriously and conduct a thorough investigation," it said.