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By Bill Wichert August 21, 2011

Assemblyman Gary Schaer claims hair stylists face more government regulations than foreclosure consultants

Sit down for a hair cut and you quickly see it: a document telling you this stylist or barber is licensed by the State of New Jersey.

Assemblyman Gary Schaer (D-Passaic) said the state should also be in the business of regulating foreclosure consultants, those who try to help people save their homes.

Following a recent court ruling allowing four banks to resume uncontested residential mortgage foreclosures in state court, Schaer issued a press release on Aug. 17 calling on Gov. Chris Christie to sign a bill aimed at protecting homeowners from foreclosure rescue scams.

Foreclosure consultants could charge homeowners with the promise of helping them avoid or postpone foreclosure. In some cases, clients could end up turning over their homes, paying rent to live there and then getting evicted.

"New Jersey continues to be the ‘Wild West’ of foreclosure consulting," Schaer, one of the bill’s sponsors, said in the press release. "Hair stylists are required to undergo more government scrutiny than foreclosure consultants."

Could hair stylists really face more government requirements than foreclosure consultants?

PolitiFact New Jersey discovered that Schaer’s claim was accurate. Hair stylists must receive a license and follow other regulations, while Schaer’s bill would actually outline the first regulations for so-called "foreclosure consultants."

However, individuals providing such consulting services as "debt adjusters" face state regulations, and a new federal law already imposes requirements similar to those under Schaer’s bill.

First, let’s talk about the regulatory environment faced by hair stylists.

According to 23 pages of state regulations, hairstyling and other related positions require a license from the New Jersey State Board of Cosmetology and Hairstyling. Hair stylists and barbers must complete an educational course, and pass an exam conducted by the board.

By contrast, there are no state regulations for "foreclosure consultants," because the term doesn’t exist under state law, according to Marshall McKnight, spokesman for the New Jersey Department of Banking & Insurance. The bill sponsored by Schaer would define that term and lay out the new regulations, McKnight said.

Under the bill, known as the "Foreclosure Rescue Fraud Prevention Act," the new requirements for foreclosure consultants would include securing a license from the Commissioner of Banking & Insurance and undergoing a criminal background check.

"People are being scammed on a constant basis," Schaer said in a phone interview. "There’s no oversight at all."

But most of the foreclosure consultants’ activities listed in the bill are covered by the state’s Debt Adjuster Act, which requires "debt adjusters" to be licensed to act as intermediaries between a debtor and his creditors. In essence, debt adjusters can perform a type of foreclosure consulting, but they must be licensed -- just like hair stylists.

In 2008, state officials issued warnings about individuals or entities advertising or performing foreclosure consulting and other services. Those warnings indicated that providing such services requires a debt adjuster’s license.

Peggy Jurow, a senior attorney with the Anti-Predatory Lending Project at Legal Services of New Jersey, said foreclosure consultants are subject to the state’s Consumer Fraud Act, but otherwise, they’re not regulated.

So, Schaer’s bill marks new territory in regulating "foreclosure consultants."

Christie spokesman Kevin Roberts said the governor has until Thursday to take action on the legislation, which was passed unanimously by the Legislature on June 29.

"As with all pieces of pending legislation, it is receiving the careful review of our counsel’s office prior to the Governor taking action," Roberts said in an email.

Now, even though Schaer’s statement refers to state regulations, let’s take a quick look at how federal law regulates foreclosure rescue services.

Federal regulations don’t require licensing or background checks for foreclosure rescue consultants, but a new law from the Federal Trade Commission mandates requirements similar to those under Schaer’s bill.

Called the Mortgage Assistance Relief Services (MARS) Rule, that law prohibits foreclosure rescue service providers from receiving fees until homeowners get a written offer from their lenders. All of the rule’s provisions were in effect as of Jan. 31.

The ruling

Schaer claimed hair stylists must "undergo more government scrutiny than foreclosure consultants." He’s right, because there are no existing state regulations governing foreclosure consultants. That term and the regulations would come from Schaer’s bill.

Foreclosure consulting done by "debt adjusters" requires a state license, but since Schaer’s statement was in reference to "foreclosure consultants," we rate the statement True.

To comment on this ruling, go to

Featured Fact-check

Our Sources

New Jersey Assembly Democrats, Rise in Foreclosures Days Away, Schaer Urges Christie To Sign Consumer-Protecting "Foreclosure Rescue Fraud Prevention Act,"Aug. 17, 2011

Interview with Assemblyman Gary Schaer, Aug. 18, 2011

Foreclosure Rescue Fraud Prevention Act
, accessed Aug. 18-19, 2011

New Jersey State Board of Cosmetology and Hairstyling Laws
, accessed Aug. 18-19, 2011

The Star-Ledger, N.J. Legislature bill would regulate foreclosure rescue fraud, offer relief to distressed homeowners, July 3, 2011

Federal Trade Commission, Mortgage Assistance Relief Scams: Another Potential Stress for Homeowners in Distress, February 2011

Federal Trade Commission, FTC Issues Final Rule to Protect Struggling Homeowners from Mortgage Relief Scams, Nov. 19, 2010

Email interview with Kevin Roberts, spokesman for Gov. Chris Christie, Aug. 18, 2011

Phone and email interviews with Betsy Lordan, Federal Trade Commission, Aug. 18, 2011

Email interview with Andrea Risotto, U.S. Department of the Treasury, Aug. 18, 2011

Phone and email Interviews with Marshall McKnight, New Jersey Department of Banking & Insurance, Aug. 18-19, 2011

Phone and email interviews with Peggy Jurow, Legal Services of New Jersey, Aug. 18-19, 2011

The Star-Ledger, N.J. judge allows 4 major banks to resume uncontested foreclosure proceedings, Aug. 15, 2011

New Jersey Department of Banking & Insurance, Frequently Asked Questions-Debt Adjuster, accessed Aug. 19, 2011

New Jersey Department of Banking & Insurance, Bulletin 08-13, July 28, 2008

New Jersey Department of Banking & Insurance, Bulletin 08-27, Dec. 19, 2008

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