Thanks to the collapse of the housing bubble, Wall Street's suicidal tendencies and unemployment rates nearing 10%, millions of consumers are desperate to dig themselves out of debt. Untold numbers of them have been victimized by fraudsters, and the Federal Trade Commission and states have been working overtime to put them out of business.
Here's our list of the five worst scams of 2010:Mortgage Relief Scams
Plunging real estate values have pushed millions of mortgages "underwater," with homeowners owing more than their homes are worth. Mortgage relief scams have proliferated like mushrooms, and an ongoing FTC crackdown recently targeted more than a dozen of them. One of these schemes, the "Residential Relief Foundation," lied to consumers about their ability to reduce mortgage payments. The so-called foundation charged customers a $1,495 up-front fee and falsely promised to remove late fees and penalties, reduce debts by up to 50% and make them debt free in 12 to 36 months.
Debt Relief Scams
You can't turn on the TV or radio without being subjected to commercials for debt-relief services, many of which are complete scams. One of the worst offenders, Debt Relief USA, was recently sued by the Texas Attorney General for illegally collecting millions of dollars from consumers to settle their debts, charging onerous fees and damaging its customers' credit ratings. Debt Relief USA, which went bankrupt in 2009, has agreed to compensate thousands of its swindled customers $3.7 million, and may end up owing them another $1 million when its bankruptcy case concludes.
With so many consumers hurting financially, it's no wonder many of them are falling for the promise of getting rich quick offered by sweepstakes scams. The FTC recently shut down one of these schemes, which operated under numerous names, including National Awards Service Advisory, International Award Advisors and Prize Registry Bureau. The fraudsters tricked consumers into paying a $20 fee to collect phony multimillion-dollar prizes with personalized mailers bearing fake government agency names and official-looking seals. In order to collect the prize, consumers were required to send a $20 "processing fee," for which they received nothing.
Identity Theft Scams
Everyone's rightly concerned about that most 21st century crime, identity theft, and lots of companies are trying to profit from those fears. Perhaps the best known of them, LifeLock, agreed to pay a $12 million penalty in March to settle charges by the FTC and 35 states about false claims it made about the effectiveness of its identity theft protection. LifeLock CEO Todd Davis, who famously publicized his social security number in an ad campaign to demonstrate his company's supposedly foolproof protection, was subsequently humiliated when his identity was stolen 13 times.