Beware financial services demanding upfront payments

If any company offers a financial service for an up front payment, that is a major red flag. Image from Wikimedia Commons.

Despite the many financial services firms engaged in legal and ethical practices, there are a lot of scams. The classic sign of a financial service scam is demanding payment up front.

It is too good to be true

There is an old maxim stating that “if it sounds too good to be true, it probably is.” A scam artist promises financial services to cure any ill, only demanding a large payment up front. The victims find out months later that nothing has been done and they have been bilked of that initial payment.

Money for nothing

One scam is the promise of lowering a mortgage principle and getting a loan modification by getting a forensic audit, according to a recent article on Daily Finance. A company in the story, New Century Solutions, would call homeowners. The firm would promise a forensic audit on their mortgage loans and use the results to get a better loan rate for them for an upfront payment of a few thousand dollars.

Mortgage scams run rampant

General mortgage modification fraud is also a huge problem. A mortgage modification company will claim it can modify a person’s mortgage for a fee.

For instance, in Providence, R.I., two “consultants” were recently shut down by the Rhode Island Attorney General, according to CBS affiliate WPRI. David Conti and Lucy Ruiz ran three different “modification” companies that would solicit by phone, promising to modify their mortgage at a new rate. They asked for $1,000 to $3,000 up front.

Spanish-speaking troubled homeowners in Idaho, according to the Idaho Statesman, were being preyed upon this summer by a company that used a variety of company names starting with the word “Freedom.” “Freedom Companies Inc., Freedom Financial Mortgage,” etc., would promise mortgage relief for $1,995 in advance, only to never deliver.

According to the Sacramento Bee, a man named Ashik Ahmed Azeez was sentenced to 90 days in jail on Sept. 6, for mortgage fraud through his company, Turbo Mortgage Modification.

“Mass joinder” lawsuit scams, according to the Los Angeles Times, are also starting to crop up. A person is offered to join a lawsuit to stop foreclosure for an advance fee of several thousand dollars.

Cure-all for credit card debt

Loan consolidation and debt settlement scams are also commonly used to bilk people in credit card debt.

While he was Attorney General of New York, now-governor Andrew Cuomo sued several companies for credit card debt relief fraud. According to the New York Times, one such company, Credit Solutions of America, enrolled 18,000 customers in their “debt relief” program and received $17 million in fees. Fewer than 2,000 had their debt lowered.

The Common ground

The above scams, easily found using Google, all demanded an advance payment for their services.

There is no bigger red flag than a company demanding an up front payment for services. Not only is it unethical, it’s also grounds for a Federal Trade Commission lawsuit. The FTC made it illegal for debt service companies to ask for an advance payment in October of 2010.


Daily Finance


Sacramento Bee

Los Angeles Times

Idaho Statesman

New York Times

Federal Trade Commission

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