Shysters beware of new consumer protections

YAKIMA, WASH. -- The just-completed legislative session in Olympia will be remembered most for all the financial aches and pains surrounding the state's budget problems.

But lawmakers also passed a spate of consumer protection measures designed to rein in shysters who take advantage of people down on their luck in the down economy.

County treasurers, including Yakima County Treasurer Ilene Thompson, are particularly pleased to see a measure that protects the pocketbooks of families that have lost their homes.

The new law targets companies and individuals who prey on owners of foreclosed properties by offering to get them whatever money is left over after their home is auctioned. The "help" has a price: a fee that's a percentage of the recovery.

But in fact, there's no reason for homeowners to pay any fee to recover funds owed to them anyway.

"People are playing the fear factor on these folks when in fact the money is theirs anyway," Thompson said.

Previously, the law didn't limit the fees. The new measure imposes a 5 percent cap.

Attorney General Rob McKenna's office said violators will be prosecuted under the Consumer Protection Act.

Thompson's office tells people in foreclosure not to sign any deals with companies offering to get them money. But in the event they do, the new
law will provide some protection.

"It's a step in the right direction," Thompson said.

Lewis County Treasurer Rose Bowman said it's easy and free for former property owners to receive surplus funds after a foreclosure. She said they only have to fill out a form available at their county treasurer's office and have it notarized.

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Another consumer protection measure governs loan modification, which is the process of negotiating new terms when people are struggling with their mortgages.

The problem comes when unlicensed loan modifiers offer to save your home at an up-front cost of thousands of dollars, said Rep. Sharon Nelson, D-Maury Island.

"And then they'll literally disappear with your money, leaving you with your unresolved home loan issue and probably even broke," Nelson said in a recent news release.

Deborah Bortner, director of consumer services for the state Department of Financial Institutions in Olympia, said predators look up foreclosures in public records, then call the homeowner claiming they can save their home. The department has received more than 300 complaints about loan modifiers over the past 16 months.

"There are some legitimate companies that help, but there are way more scammers," Bortner said in a telephone interview.

Homeowners who know they are going to be in trouble, perhaps because of some sudden medical bills, should call their lender and see if the loan can be modified, Bortner said.

The legislation requires licensing for loan modifiers as well as loan servicers and their services and extends all the protections current in statutes governing mortgage loan originations.

Bortner said homeowners can check the department's website to see if the company soliciting their business is licensed. If not, "that's a big red flag."

Nelson also got another bill passed dealing with escrow agents. She said people routinely hand over hundreds of thousands of dollars to an escrow company without assurances the owners won't take some of that money.

Missing escrow money has amounted to as much as $1 million in recent years, according to the state Department of Financial Institutions.

Although the funds are covered by a bond, that insurance typically only covers the actions of the escrow agent, not the owners of the company for whom the agent works. Under the new law, owners must also get a bond.

"In the last 10 years, on 16 occasions we had escrow agents who were also owners abscond with some part of people's money," Bortner said.

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Homeowners aren't the only ones to get something out of the Legislature.

The Attorney General's Office saw a disturbing trend where used car dealers were obtaining "lemons" at auctions and reselling them throughout the state.

The state has a Lemon Law, but it only covers new car dealers, saying they must disclose whether a vehicle was ever bought back from a manufacturer under another state's Lemon Law program.

But used car dealers weren't required to make the same disclosure. Now they are.

The potential buyer will be able to look at the car's title and see a comment that the vehicle was previously returned to the manufacturer and that this may affect its resale value.

* Leah Beth Ward can be reached at 509-577-7626 or lward@yakimaherald.com.