Research and Statistics

Beware of phone calls offering credit card relief


New telephone scams are targeting consumers with promises of lowering credit card interest rates, fixing damaged credit reports.

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New telephone scams are targeting consumers with promises of lowering credit card interest rates, fixing damaged credit reports, and in some cases awarding them higher spending limits.

In March 2010, the Federal Trade Commission (FTC) announced that Credit Restoration Brokers and Debt Negotiation Associates, had agreed to settle FTC charges that the companies deceived consumers into paying thousands of dollars by falsely promising to remove foreclosures, tax liens, bankruptcies and child support delinquencies from credit reports. The FTC’s complaint also alleged these companies falsely told consumer reporting agencies that consumers were identity theft victims in order to dispute negative items.

“In this case, the companies called or met with consumers who responded to their ads on websites and through pamphlets,” says Frank Dorman, Public Affairs Officer for the FTC. “Consumers were lured by promises this company could improve their credit report for a charge of $2,199. The reality is that no one can legally remove accurate negative information from your credit report.””

The Better Business Bureau (BBB) has also issued alerts on several companies who have made unsolicited phone calls to consumers claiming they can save them money on interest paid on their credit cards. Some of the most recent alerts issued in March centered around two businesses, Clear Your Debt and Swift Rock Financial Services, which offered consumers assistance in settling their debt in exchange for a monthly fee debited from their accounts.

Don’t pay for what you can do for free
“The truth is these companies don’t provide any services that consumers can’t obtain themselves for free,” says Alison Southwick, media relations manager for the BBB. “Negotiating a lower interest rate is something consumers could negotiate on their own by simply calling their credit card company.”

Southwick says the BBB warns consumers about giving out personal information, including credit card numbers, to unknown telemarketers.

“For a lot of consumers who are dealing with mounting debts, a caller claiming they can lower interest rates or erase debts seems like an answer to their prayers,” Southwick says.

While these offers can sound tempting, especially in light of recent interest rate increases on many existing accounts, the BBB warns against giving out credit card information to unsolicited telephone marketers. In many cases, consumers who accepted the offer for debt settlement paid a fee to maintain their current credit card minimum payment amount and were told that future payments would be applied entirely to the principal with no interest. Instead, consumers reported empty promises and repeated charges on their credit cards after accepting the offer.

Never provide card info to unsolicited callers
Todd Christensen of Boise, Idaho, received two calls from telemarketers in the spring of 2009 that he found suspicious. A pre-recorded message claimed he had been chosen by his credit card company to receive an increase in his credit limit.

“I was told that in order to accept the offer, I just needed to speak to a representative,” Christensen says. “When I asked the man which of my credit cards he was representing, he immediately hung up without a word.”

Christensen, director of education for the National Financial Education Center\u2028at Debt Reduction Services, now shares his experience with students to make them aware of some of the tactics used by telephone scam artists.

He also offers the following advice to protect against phone scams:

  • Never give out personal information including Social Security, credit card and account numbers on the telephone unless you initiate the call.
  • Even if a caller already has your credit card number, don’t give them any further information. A financial institution will never call or e-mail you to confirm or verify your account information.

“Many consumers reported receiving calls in February where the telephone solicitor claims to be from the fraud department of their credit card company,” Christensen says. “They say the card has been flagged for suspicious activity and they need to confirm you still have the card in your possession, so they ask for the card verification number (the three-digit number on the back of Visa and MasterCard cards, or four-digit number on American Express cards). By obtaining this information, they can go on to rack up numerous charges on your account.”

Sandra Chu, global corporate relations representative for Visa, says credit card companies never initiate calls to cardholders to request their personal account information.

“If cardholders get a call like this, they should report the situation to the financial institution that issued the card as well as to the Federal Trade Commission,” she says.

The Federal Trade Commission can be contacted at (877) FTC-HELP or via its website. The Better Business Bureau also reports on fraudulent companies and maintains a reliability report on companies at online.

To avoid receiving incoming calls from telemarketers, consumers can also register their phone numbers with the National Do Not Call Registry.

See related:New phone phishing scam on the rise, Nearly 100 charged worldwide in massive phishing scam bust, FTC cracks down on ‘credit repair’ scammers, How debt settlement works, how if affects credit scores

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