22 September 2011
After losing her job as a computer operator -- with no savings, no credit and few prospects -- a 25-year-old Morris County woman found a classified ad in a national magazine offering fast, guaranteed personal loans of as much as $25,000.
Early last year she sent the Florida-based company $500, borrowed from her mother, as a fee to secure a $5,000 loan. She has not had any response.
"I was so desperate I didn't stop to think," said the woman, who spoke on condition of anonymity because, she said, she is ashamed of having allowed someone to bilk her. Feeding on Desperation
What happened to her is happening to people across the region. Fueled by a lingering recession that has made credit tight and people desperate, loan frauds that dangle the prospect of quick cash for an upfront fee are the fastest-growing category of consumer complaints throughout the metropolitan area, consumer agency officials said.
The agencies said that beyond advance-fee loan frauds, they had been inundated with complaints about other schemes that target individuals stretched to their financial limit.
In the mildest cases, consumers answering ads offering job information receive lists culled from old newspaper want ads, the officials said, and are bilked of the cost of a telephone call to a 900 number. Unemployed workers have paid bogus job consultants advance fees to process applications, the officials said, and homeowners facing foreclosure have sent fake credit companies overdue mortgage payments.
But in the worst cases, they said, homeowners have been tricked into signing second mortgages when they thought they were signing low-interest debt consolidation loans; some now face losing their homes.
"There is a very direct correlation between the recessionary economy and the increase in the types of consumer fraud we're seeing," said Emma Byrne, the director of New Jersey's Divison of Consumer Affairs.
Robert Winter, director of New Jersey's Division of Criminal Justice, said today's cases are reminiscent of those that were prevalent during the recession in the mid-1970's but became less frequent when times got better.
"In the 80's, we had a lot of over-the-counter securities stock fraud," he said. "Now, the victims are much more sympathetic."
The victims range from the urban poor to suburban homeowners, consumer officials said. In Connecticut, many are white-collar workers who have lost their jobs or are working part time and are hard-pressed to meet their bills, said Attorney General Richard Blumenthal.
In New York, where the fastest-growing fraud category involves advance-fee mortgage loans, most of the victims are homeowners in Queens and on Long Island, said Ed Saslow, chief of the Attorney General's Criminal Prosecutions Bureau. And in New Jersey, the victims are most often "those who can afford it least," said Ms. Byrne. "They're seniors, non-English speaking and the urban poor." Mortgage Tricks
Last week, the New Jersey Attorney General, Robert J. Del Tufo, ordered a licensed Bergen County home-repair contractor and a finance company to answer charges that they defrauded 12 homeowners by luring them into signing second mortgages on their homes when the homeowners thought they were signing applications for low-interest debt consolidation loans. The companies, Maywood Builders and Sterling Resources, have been ordered to appear before an Essex County Superior Court judge on March 5.
For Anna Brocal of Paterson, the resolution of the case cannot come too soon. Ms. Brocal said her mother was tricked into signing a $22,700 second mortgage loan by men who came to their home offering to replace windows at low cost.
"They said they worked for the Government," Ms. Brocal said. "The way they were talking, they made it sound so real." Ms. Brocal said that after asking her mother, Maria Brocal, whether she had credit cards, the men offered to give her a loan at 15 percent interest that would consolidate all her credit-card debt and cover the cost of replacing the windows. "When she signed the papers, my mother didn't know it was for a second mortgage," Ms. Brocal said. She added that her father is on Social Security, that the family's only additional income is from a rental apartment in their two-family house and that they had no intention of acquiring a second mortgage.
"These are the kinds of frauds we're seeing," said Ms. Byrne. "They hit people absorbed with three major costs -- home, car or health." Nationwide Fraud
Far from being limited to the New York region, the rash of frauds is nationwide, according to the Council of Better Business Bureaus in Arlington, Va. Last year, the agency received more than 300,000 complaints from consumers and small-business owners who paid advance fees of $100 to $10,000 for "guaranteed" loans, said a spokeswoman, Dianne Ward.
In most cases, the culprits are not caught and the victims do not recoup their losses. Attorney General Blumenthal said Connecticut has put one fraudulent advance-fee concern out of business in the last year and is investigating others. But, Mr. Blumenthal said, while his office recommends five-year sentences in such cases, judges are reluctant to send first-time offenders to prison.
Senator Joseph I. Lieberman, a Connecticut Democrat who heads the Governmental Affairs Committee's Subcommittee on Consumer and Environmental Affairs, has proposed that Congress outlaw advance fees for consumer and small-business loans offered by unregulated companies. But until such legislation is in place, consumer agencies say, fast-moving schemers will prove unwieldy to curb.
The New Jersey Attorney General's office has closed down two advance-fee loan operations and 11 companies that operate 900 numbers. Last month the office won a conviction against Timothy Burke, alias Robert Chapman, on charges that he had persuaded owners who were about to lose their homes because of missed mortgage payments to make the payments to his company, First Jersey Equities.
But Mr. Winter of the Divison of Criminal Justice said such cases are hard-won. "The general rule of thumb is white-collar criminals in the state system are continually given less time," he said. Ms. Brocal, whose parents face the possibility of foreclosure if they are forced to pay for a second-mortgage loan, says it is high time a law is passed.
"We paid $400 for one window, when it was worth about $75," Ms. Brocal said. "It sounded good at first, but we were scammed."
As the economy has worsened, fraud schemes have proliferated. Manuel and Maria Brocal were said to have been tricked into signing a second mortgage on their home in Paterson, N.J., by men who came to replace windows. They held their grandchildren, Edwin, 2 years old and Cecilia, 4 months. (F.N. Kinney for The New York Times) (pg. B4)