Relates to distressed property consultants advertisements

5 Co-sponsors

• Craig M. Johnson
• Liz Krueger
• Velmanette Montgomery
• George Onorato
• Diane J. Savino

BILL NUMBER:S5896D

Title of bill

An act to amend the real property law, in relation to distressed property consultants advertisements

Purpose

This bill requires that distressed property consultants provide information about the availability of free state-funded services in their advertisements.

Summary of provisions

Section 1: Adds a new subdivision 3-a to Real Property Law section 265-b to provide that any advertisements, be they in print media or electronic media, for the services of a distressed property consultant must include a statement that such services are available and can be provided for free from certified Housing Counselors. Further that a listing of such counselors is available from the NYS Banking Department.

Justification

This bill requires that all companies that offer distressed property consulting services as defined by law, must include a statement that alerts consumers that the services that they provide can often be provided for free through housing counselors funded by New York State and that they should consult an attorney before signing such a contract. It also requires that these companies must provide the number of the New York State Banking Department as part of the consumer disclosure statement.

With the onset of the subprime lending crisis and the resulting economic crisis, the nationwide jump in foreclosures and mortgage defaults has triggered a corresponding rise in the number of predatory scams targeting financially-strapped homeowners. The federal government recently announced a crackdown on loan modification and foreclosure rescue scams. Further, the FBI is currently targeting more than 2,000 companies for allegedly scamming troubled homeowners with "rescue" offers -- up 400% from five years ago. Also, a recent Federal Trade Commission (FTC) investigation of nationwide online and print ads offering mortgage foreclosure rescue assistance found that about 70 separate companies were running questionable ads.

In the spring of 2009, Attorney General Andrew Cuomo announced that his office was conducting a statewide investigation into the loan modification industry. Subpoenas were filed against twelve companies that offer these services to consumers across New York. According to the Attorney General's investigation, many of these companies lured consumers through false and misleading tactics, such as using company names and advertisements that give the false impression that they are affiliated with a government agency. Further, such advertisements

falsely claim to have extraordinarily high success rates - of as much as 100 percent, and falsely claimed to have a special relationship with the homeowner's lender.

Capitalizing on the current economic downturn and housing crisis, these companies often scour foreclosure notices and filings and prey on consumers desperate to save their homes from being foreclosed. Their solicitations may be in person, by mail, telephone or e-mail, or via advertisements. Often, these scammers use titles that sound official, such as "foreclosure or mortgage consultant" or falsely market themselves as a "foreclosure service" or "foreclosure rescue company."

By requiring a consumer warning statement in all distressed property consultant advertisements with the phone number of the New York State Banking Department as well as a reminder that New York State provides free counseling services, this legislation will reduce the number of distressed New York State homeowners who compound their financial difficulties by falling victim to the misleading advertisements of distressed property consulting companies.

The amendment from the "C" Print to "D" Print was a minor revision of the disclosure statement contained in subdivision (3-a) (a) of this bill.

Legislative history

New bill.

Fiscal implications

None.

Effective date

On the sixtieth day after becoming law.