Two new laws for consumers take effect today (January 31st), even though the first half of these rules is already in effect. The laws deal with gift cards and loan modifications.

1. Gift card changes

Consumers gained added gift card protections (no inactivity fees for at least a year, and they can’t expire for five years) in August, but the card makers didn’t have to disclose the new rules to consumers until today. The industry was concerned millions of gift cards would be thrown away and wasted simply because they did not contain the new disclosures.

While working on a gift card story in December, I noticed many of the gift cards on display already had the new disclosures on them. Now, you’ll see them on every gift card.


2. Foreclosure help

There have been a lot of problems in the foreclosure industry. Issues focus on loan modifications, foreclosure avoidance help, and short sales. Consumers are falling for companies that charge upfront money to modify their loan, even though the service is available for free from certified housing counselors. In most cities, you just have to pick up the phone and dial 211 to find a certified counselor who can help modify your loan for free.

Still, consumers have been falling for companies that promise to modify their loan for a fee. I’ve done several stories where the homeowner still lost their home because the company they paid didn’t do a whole lot to help them.  I’ve sat in their living room as they sobbed over the loss of the home they built for their family. It’s heartbreaking to hear these stories. The families spend $1500 as a last ditch effort to save their home worth hundreds of thousands only to lose every penny in the end.

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NeighborWorks launched a campaign to make consumers aware of the warning signs that these loan modification companies are scamming you. Asking for upfront money is one of the red flags. In some states, it was illegal to take money upfront. Still, consumers repeatedly fell for the offers for help thinking if they paid someone they would get better service. In this case, you don’t get what you paid for.

Now, it’s a federal law. Starting today, companies can’t collect fees until the homeowner has a written offer from the lender or servicer that they agree is acceptable, and a written document from the lender or servicer explaining the key changes to the mortgage.  The company must also remind the consumer that they can reject the offer without paying a fee.

Since December, the companies have been required to disclose key information to consumers to help them make better decisions. The companies must tell the consumer they are not associated with the government and their services are not approved by the government or the homeowner’s lender. They must also tell the consumer that the lender may not change or modify the loan, and that if the consumer stops paying their mortgage during the process they could end up losing their home and damage their credit.

The fees must be clearly explained, and the consumer also has the right to stop doing business with the mortgage relief company at any time.

Attorneys are exempt from the rule if they are engaged in the practice of law, licensed in the same state as the homeowner or building in question is located, and they comply with state laws governing attorney conduct.  Attorneys must also put the money in a trust account.