Google ads has become a favorite way for mortgage scammers to prey on homeowners seeking assistance in these troubled times, a study by non-profit public interest group Consumer Watchdog finds. The problem has become so rampant that the group has asked the Federal Trade Commission (FTC) to prevent Google from hosting the ads.

“Because Google so far has turned a blind eye to these fraudsters, perhaps because of the substantial revenue such advertising can generate, perhaps because of the substantial revenue such advertising can generate,” wrote John M. Simpson, director of Consumer Watchdog’s Inside Google Project, in a letter to FTC Chairman Jon Leibowitz, “we ask that the FTC investigate Google’s role as a facilitator of deceptive and fraudulent advertising and act to prevent the Internet giant from continuing its harmful behavior.”

According to the group’s study, Google ads is often used by foreclosure rescue firms that are or have been under investigation for fraud, or ones that are currently trying to falsely imply to potential customers that they are affiliated with the U.S. government.

Other sketchy characters on Google ads include spammers who are simply trying to squeeze information out of struggling mortgage holders, and then sell this information to other Internet marketing firms.

In order to curb the abusive activity on Google ads, Consumer Watchdog has proposed five recommendations:

• Google should be more diligent in screening advertising in areas such as mortgage modification and credit repair where fraud is known to be a serious problem. If the company finds that screening ads is not feasible, it should ban all advertising in areas where regulatory agencies have shown that fraudulent advertising is endemic.

• Where fraud is a known problem but legitimate firms also operate, Google should use its advertising techniques to post public service ads that counter deceptive ads. For example, if a loan modification ad refers to the federal government, a Google-sponsored disclosure statement should appear prominently alongside to warn consumers that they should be wary of mortgage lenders using such terms.

• Google should initiate and help set industry-wide standards to prevent fraudulent advertising on the Internet.

• Google should donate revenue it has received from questionable financial advertising to non-profit groups that help consumers with credit problems, including homeowners seeking to avoid foreclosure.

• The Federal Trade Commission should begin using its legal authority under the Lanham Act to seek injunctions against search providers who accept large inventories of advertising from firms they have reason to believe are engaged in deceptive practices.

Consumer Watchdog, which describes itself as nonpartisan, says Google isn’t alone in accepting dubious advertisers — Microsoft’s Bing and Yahoo! are also guilty, they say.

The group hopes that, by persuading Google to change its policy towards these unscrupulous companies, it will set the “gold standard for privacy for the industry,” and greatly reduce the number of people defrauded by these types of rackets.

Read the full study here: PDF. Read the full letter to the FTC here: PDF.