New rules in effect

A new Federal Trade Commission rule protects borrowers from loan modification scams. The new rule, effective Wednesday, requires loan modification companies to:

•Disclose that they have no ties to the government and their services aren't government-approved.

•Mention that the lender might not modify the consumer's loan.

•Explain to homeowners that stopping mortgage payments will likely ruin their credit and could cause them to lose their home.

•Have proof to back up claims about the effectiveness of its business.

Also, a company can't make false or misleading claims, including claims about:

•A homeowner's expected results if he or she works with the company.

•The cost of the service.

The new rule also bars companies from telling clients to stop working with their lender. And beginning Jan. 31, companies may no longer charge upfront fees, although attorneys are generally exempt from that rule.