The Federal Trade Commission (FTC) released an alert last Friday, April 23rd 2010 warning US consumers to be on the lookout for automated calls from companies claiming that for a fee they will help negotiate a lower rate on credit cards. In the alert, Credit Card Interest Rate Reduction Scams, the FTC urges consumers to be highly skeptical of these automated calls.
This scam has been making the rounds for several years. According to the Better Business Bureau, complaints began to come in slowly around the summer of 2007 then escalated significantly in the latter part of 2008. There has been a fresh wave clogging the voicemail boxes of potential victims in early 2010 which led to the alert being issued by the FTC.
The automated calls make vague claims about saving big bucks for those in serious credit card debt. At the end of the recorded message, the recipient is given a call-back number to contact, if interested. Once the consumer returns the initial call, the real pitch begins.
Alison Southwick, a spokesperson for the Better Business Bureau, broke down how a typical scam call will go in a posting late last year. A typical consumer with two credit cards carrying interest rates of 12 and 14 percent is promised a drastic reduction in APR to between 4.99% and 6.99%. The consumer is then promised a savings of interest and fee payments somewhere in the neighborhood of $2,000 to $25,000, with additional assurances that the debt will be paid off three to five times faster than normal. After these non-binding promises are made, a large upfront fee is requested, normally $600-$900. The scammer gets the consumer’s credit card information, which includes the customer service number on the back of the card. The caller, which at that point has already charged the advance fee to the credit cards, then places a conference call to the credit card issuer. The scammer then makes a request with a customer service representative to have the interest rate on the card reduced during the three way conversation with the cardholder. With the majority of complaints the BBB has received, Southwick says, “that’s the extent of the negotiation process.”
During the sales pitch from these scammers, they often claim to have a special relationship with the credit card companies. Besides the guarantees of lower interest rates and speedy debt resolution, they regularly aggressively push the scam by saying the reduced interest rates are only being offered for a limited time and quick action is crucial. There have been reports that money-back guarantees were offered as incentive.
The FTC warns consumers to be wary of the hype. Those behind the automated calls are not capable of doing anything that any individual consumer couldn’t do for themselves for free. The individual has just as much cache with the credit card issuing companies as these scammers and both are just as likely to be accepted or denied for a reduction in interest rate payments.
Last week’s alert from the FTC stated plainly that their investigators, “found that people who pay for these services don’t get the touted interest rate reductions, don’t save the promised amounts, don’t pay off their credit card debt three to five times faster, and struggle to get refunds.”
Here are some tips to remember if you get one of these calls, whether automated or live:
– Call comes up as “unknown caller” on CallerID with no provided phone number.
– These scam calls are made cold turkey; the recipient might not even have a credit card. The calls are being made randomly in the hopes of discovering potential victims. Calls like this should be regarded as scams.
– If you are on the National Do Not Call Registry, companies can call you only if you have agreed to accept calls from the company the salesperson works for, have purchased something from the company in the last 18 months or requested information from the company in the last three months. If none of these apply, then you have been randomly called by an automated system. Do not call back. Information and links to the National Do Not Call Registry are provided at the end of the article.
– Don’t give out your credit card information. There is no reason to share this information with a third party when you can be dealing directly with your credit card issuer. After using the number to charge the upfront fee, some scammers might also make further fraudulent purchases in the future and/or sell the information to others.
– Never share personal information like your bank account or social security number during one of these calls. Scammers will often try to lure this information while bombarding the victim with multiple form questions they are “filling out” during these unsolicited sales pitches. Once they have this type of information though, you can be certain they will use it against you in future frauds.
– Unsolicited and automated calls should always be approached with caution. They are often simply scams in disguise. If you want to renegotiate but don’t feel comfortable taking on the task alone, the Better Business Bureau recommends using the services of a reputable credit counseling agency. Links for checking on a company’s accreditation can be found at the end of the article.
The Federal Trade Commission takes the stance that if a consumer is interested in trying to negotiate new interest rates with their credit card issuer their success is just as likely if they do it themselves for free. It really is as simple as calling the number on the back of your credit card and then asking the customer service representative about reducing your rate. Remember to stay calm and be persistent. There is no reason to pay someone else hundreds of dollars to complete a task you can perform for yourself. If an automated call with promises of reduced credit card rates tempts you – hang up immediately.
If you would like to report violations of the Do Not Call Registry, or would like to register, call 1-888-382-1222. Or visit the website -
Check a consumer credit counselor’s credentials at:
Better Business Bureau –
National Foundation for Credit Counseling –