In the credit card world, scam operators are taking money from innocent customers without adding value, misrepresenting claims and simply performing shoddy service. Fortunately, customers have an avenue to complain and the FTC has also taken pretty tough actions. Below are some examples of the actions that the FTC has taken against some shady companies. After reviewing these examples, you will realize a common thread among these cases and at the end, I would like to conclude by making a few points on how to avoid being susceptible to such scams. So let’s begin.
CompuCredit is a company that issues sub-prime credit cards (i.e., credit cards for bad credit folks). Below are some of the charges (which they eventually settled) made by the FTC.
The FTC charged CompuCredit for deceptive marketing of their Visa credit cards to consumers with subprime credit ratings. These Visa Cards, which include the Aspire Visa credit card and the Aspen credit card, were marketed in such way to make consumers believe that they would get a credit card with $300 credit limit and with no up-front fees. Instead, CompuCredit immediately charges consumers as much as $185 in fees that it did not adequately disclose. These fees left consumers with as little as $115 in available credit. These fees include:
CompuCredit also marketed to consumers with slightly higher credit scores its Visa credit card offering up to $3,250 in available credit. CompuCredit failed to disclose adequately, that half of the available credit would be withheld for the first 90 days. CompuCredit also failed to disclose that for the first 90 days, the company would monitor consumers’ purchases, and might reduce their credit limit based on an undisclosed behavioral scoring model.
This one was the worse of all. CompuCredit and Jefferson Capital marketed a Visa credit card to consumers with charged-off debt. They represented that the consumers’ old debt balance would be immediately transferred to the card and reported to consumer reporting agencies as paid in full. Consumers who accepted the offer, however, were immediately enrolled in a debt repayment plan and did not receive a Visa card until they paid 25 percent to 50 percent of their charged-off debt.
The FTC has also targeted scores of credit repair companies for deceptive marketing and business practices. In 2008, the FTC cracked down on 33 firms offering credit repair services. Most of these firms made the following outrageous claims:
If you look at this case carefully, you will realize that there are a few common threads here.
These practices are not just confined to the credit card industry. But instead, it is practices in so many businesses. For example, take cable companies. How many bait and switch tactics do you see on TV ads everyday? Get bundled service for only $X for 6 months, but what they don’t tell you is all the fees after that. Another example is weight loss programs. Just look at the promises and testimonials. Lose X pounds in 3 months. Give me a break. How about get rich quick stock trading programs? Many of us fall for these too easily.
Well, I guess that is the six million dollar question. Here are some tips to help you stay clear of these traps.
We all make mistakes. The important thing is that we learn and be careful as a consumer.
Reviewed and updated April 23, 2011.
|700 - 750||Good|
|640 - 700||Average|
|580 - 640||Poor|