This item was originally posted in the Legal Issues Forum. I am reposting it here because I think it would be helpful for investors. 

Here's an interesting article from the National Association of Realtors online magazine, which highlights efforts to protect consumers in foreclosure from unscrupulous practices that some investors use. Several states have passed or are considering new rules to protect distressed sellers.

In California, several rules protect homeowners in distress. Civil Code section 2945, the California Foreclosure Consultant Act, defines several kinds of activities as "foreclosure consultant" acts, and requires notice and rescission rights to be provided to a homeowner before paying the consultant. 

Civil Code sections 1695 and following provide another protection for owners in foreclosure. Known as the Home Equity Sales Contract Act, the rules require notice and rescission rights similar to the Foreclosure Consultant Act. These rules also provide civil fines and criminal penalties for equity purchasers who use illegal methods to acquire title to property sold by a distressed owner.