Foreclosure consultants

     Homeowners whose residences are in foreclosure may be the target of sharp practices which take advantage of the debtor's necessitous circumstances. Such practices include the billing of fees for services which cannot be rendered or which are never performed or are inadequately performed and misrepresentations to the homeowner by self-proclaimed angels about the nature and scope of assistance which can be provided.   In response, the California legislature has regulated the behavior of what it calls "foreclosure consultants." See Cal. Civ. Code Section 2945. "Foreclosure consultants" are broadly defined. See Cal.Civ. Code Section 2945.1. The statute, which we do not reproduce in full, requires that contracts between a homeowner and foreclosure consultant be in writing and contain certain required clauses and notices, and provides the homeowner the right to rescind the contract within three business days after having signed it. The statute also limits the fee which may be charged or collected by a foreclosure consultant, prohibits a variety of practices, including the taking of a lien by a foreclosure consultant on any property of the homeowner to secure payment of the consultant's fee, and provides both civil and criminal remedies for violation of the statutory requirements.

     Often, family or friends of a homeowner facing foreclosure will, with good intentions, offer to help. Because of California's broad definition of "foreclosure consultants," such good samaritans may unwittingly find themselves to have violated California's statute.

     In other states, in the absence of comparable legislation, affected debtors will be left to much less clearly defined and less certain theories of liability and remedies at common law (e.g. misrepresentation, duress, unconscionability) or under state legislation which broadly prohibits unfair and deceptive practices.