Surplus funds recovery scams target New Jersey homeowners who have lost property through foreclosure. These unlicensed companies charge fees of 25% to 50% to recover money that homeowners can claim themselves or through a licensed attorney at far lower cost. In 2015, the NJ Division of Consumer Affairs settled for $300,000 against four such companies for Consumer Fraud Act violations.
What Are Surplus Funds Recovery Companies?
After a foreclosure sale in New Jersey, if the property sells for more than what was owed on the mortgage, the excess money — known as surplus funds — belongs to the former homeowner or other parties with valid claims. Unfortunately, this situation has given rise to an industry of so-called “surplus funds recovery companies” that target vulnerable homeowners.
These companies typically monitor public foreclosure records and send unsolicited letters to former homeowners shortly after a sheriff’s sale. The letters inform the homeowner that surplus funds may be available and offer to “recover” the money — for a hefty fee, often 25% to 50% of the total amount. In many cases, the homeowner could have claimed these funds on their own or through a licensed attorney for significantly less.
The 2015 NJ Division of Consumer Affairs Enforcement Action
New Jersey regulators have taken notice of predatory practices in this industry. In 2015, the New Jersey Division of Consumer Affairs reached a settlement totaling approximately $300,000 against four surplus funds recovery companies for deceptive and misleading business practices. The enforcement action cited violations of the New Jersey Consumer Fraud Act (N.J.S.A. 56:8-1 et seq.), including misrepresentations about the services provided, the fees charged, and the difficulty of the recovery process.
This action underscored a critical point: many of these companies overstate the complexity of claiming surplus funds and charge fees that are disproportionate to the work involved. Some failed to disclose material terms of their agreements or used high-pressure tactics to secure contracts with distressed homeowners.
Red Flags: How to Spot a Surplus Funds Scam
If you have received a letter or phone call about surplus funds from your foreclosure, be alert to these warning signs:
Unsolicited contact shortly after foreclosure. Recovery companies monitor public records and reach out quickly, often before the homeowner has had time to understand their options. A legitimate attorney will not cold-call you with high-pressure sales tactics.
Excessive fees. Be wary of any company demanding 25% to 50% of your surplus funds. A licensed New Jersey attorney handling a surplus funds motion will typically charge a reasonable fee that is a fraction of what these companies demand.
Pressure to sign immediately. Scam operators often create a false sense of urgency, telling you that you must act now or lose your money. In reality, surplus funds held by the New Jersey Superior Court Trust Fund remain available for up to 10 years before escheatment to the state under N.J.S.A. 46:30B-41.
No attorney involvement. Recovery companies are not law firms and are not licensed to practice law in New Jersey. There is no licensing scheme for non-attorney surplus funds recovery companies in New Jersey, which means there is minimal regulatory oversight of their operations.
Vague or misleading claims about the process. Some companies imply that the process is extraordinarily complex or that only they can recover your funds. While the legal process does require filing a motion under Court Rule 4:64-3, a qualified attorney can handle this efficiently.
Why a Licensed Attorney Is Different
A licensed New Jersey attorney is bound by the Rules of Professional Conduct, which mandate transparency about fees, competent representation, and fiduciary duties to the client. An attorney must clearly explain the scope of work, the fee arrangement, and the realistic timeline for recovery. If an attorney fails to meet these obligations, the client has recourse through the New Jersey Office of Attorney Ethics.
Recovery companies, by contrast, operate with virtually no regulatory oversight. They are not required to carry malpractice insurance, they are not subject to professional conduct rules, and they have no fiduciary duty to you.
How the NJ Consumer Fraud Act Protects You
The New Jersey Consumer Fraud Act (N.J.S.A. 56:8-1 et seq.) prohibits unconscionable commercial practices, deception, fraud, and misrepresentation in connection with the sale or advertisement of any merchandise or service. If a surplus funds recovery company has engaged in deceptive practices — such as misrepresenting fees, overstating the complexity of the process, or failing to disclose material terms — you may have a claim under this statute.
The Consumer Fraud Act provides for treble damages, meaning you could recover up to three times the amount of your actual losses, plus attorney’s fees and court costs.
Free Eligibility Check — Contact Friscia & Associates
If you have been contacted by a surplus funds recovery company, or if you believe surplus funds may be available from a foreclosure sale of your New Jersey property, contact Friscia & Associates for a free eligibility check. We will review your case, confirm whether surplus funds exist, and explain your options — with full transparency about fees and the process.
Call us today at (973) 500-8024.
This page is for informational purposes only and does not constitute legal advice.