FTC cracks down on credit card debt scam

These days, criminals are trying any method they can think of to bilk consumers out of their money, and that includes using robo-calling devices to mislead them about outstanding debts they may have. Fortunately, one federal agency recently cracked down on five particularly large and successful plots.

Millions of people all across the country may have recently received telephone calls from a person named Rachel, or other common names, representing something called "Cardholder Services," according to a report from the Federal Trade Commission. These calls told recipients that they had an important message about the ability to lower the interest rates borrowers were paying on their credit cards, and could connect them with live operators who could assist them. The calls also typically came from what is known as a "spoofed" phone number, meaning that the number their caller ID displayed was not the number from which the calls were actually coming.

The problem with the calls
Those who chose to speak with an operator were in fact connected to a live telemarketer, the report said. However, this telemarketer's job was to allegedly pitch users intentionally misleading credit card rates that could drop as low as 6.9 or even 0 percent. They further claimed that these new, lower rates would allow consumers to potentially save thousands of dollars on their interest charges over the life of their debt, and would be able to pay off their balances between two and three times faster, all without increasing their monthly payments.

However, the scam begins when those who speak with the telemarketers are also told that they will need to be approved for the program, then pay an up-front fee to begin the process of lowering their rates, the report said. This fee could run anywhere from a few hundred to a few thousand dollars, with the largest observed coming to nearly $3,000. While this may sound like a lot of money, and something at which many consumers may balk, those who are in particularly dire straits with regard to their outstanding credit card debt were likely convinced that it was a sound investment because the telemarketer reassured them the up-front fee would save them money in the long run.

What they actually did
But after turning over large sums of money, most borrowers instead found that the companies did little or nothing to lower their interest rates, the report said. At best, they started three-way calls with the duped borrower's credit card issuer and asked them, orally, to lower the rate. Consumers can do this on their own, and in almost every case, these requests will be denied.

Some companies also simply signed consumers up for new credit cards at the rates advertised, but did little to help them deal with the otherwise mounting debt, the report said. Of course, those low rates were merely introductory, and typically expired after six months or a year.

Action against the companies responsible
Because these calls have become so pervasive, the FTC now receives an average of 200,000 complaints about them every month, the report said. The agency also recently shut down five companies that were conducting the calls from Arizona and Florida, which were alleged to have made millions of these bogus contacts with consumers.

"At the FTC, Rachel from Cardholder Services is public enemy number one," said FTC chairman Jon Leibowitz. "We're cracking down on illegal robocalls by bringing law enforcement actions and pursuing technical solutions to the problem."

Further, affiliated agencies in those states, as well as Arkansas, also sought legal action against these and similar organizations, the report said. Further, the FTC recently offered tech experts a $50,000 cash prize at its recent Robocall Summit to anyone who could come up with the best technical solution to block these calls coming to mobile and landline phones.

The five companies responsible were charged with misrepresenting themselves, and therefore violating the FTC Act related to misrepresenting the effect they could have on consumers' credit card rates, the report said. Four of the five were also charged with making other misleading promises, such as being able to pay off their debt more quickly.

While it's natural that if you have sizable outstanding credit card balances, and you want to find any way you can to reduce those obligations as rapidly as possible, it's unlikely that you'll find a quick-fix through an unsolicited and clearly automated phone call. Instead, you might want to choose a more traditional path, such as ordering a copy of your credit report to see where you stand. If any unfair markings are marring your credit score, working with a credit repair law firm might help to clear up the issue.