Credit Card Debt Termination Scheme | CreditShout

Credit Card Debt Termination Scheme

By Kevin / February 26, 2009

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Like the tax scams in the 1970s, more and more supposed “debt relief” or “debt termination” companies are proliferating on the internet claiming to be able to “eliminate credit card debt legally, lawfully, and ethically” for free (besides their hefty upfront fee of course). Many of these companies charge fees in excess of $3000 just to get started. In exchange, you receive a document to take to the credit card companies or circuit court in the event you are sued that completely absolves you of your responsibility to pay back what you owe.

The scheme we are describing here has absolutely nothing to do with legitimate Debt Settlement (or Debt Negotiation). The most straightforward way to distinguish the “Credit Card Termination” scam from legitimate programs is to realize that the con artists make an impossible claim right up-front. Based on a misinterpretation of obscure banking and accounting rules, they claim that you really do not owe any money to the credit card banks!

With Debt Consolidation or Credit Counseling, you pay back all of your debt balances in full. With Debt Settlement, you pay back a lower amount (usually 50% or less), while the creditor agrees to forgive the remaining balance. However, the promoters behind the “Credit Card Termination” scam claim that you do not need to pay anything at all (except their huge fees, of course)! They claim you can wipe away your debts forever with a few simple documents that magically prove you really didn’t borrow any money from your creditors.

This scheme has its roots in the income tax protest movement of the 1970s, where people were claiming that paying taxes was unconstitutional. Among professionals in the collection industry, the “Credit Card Termination” scam is called the “monetary protest movement.” The common theme with these programs is that our banking system prohibits banks from lending out their own money. So how does a credit card bank extend credit then? The protesters claim that the credit card agreement itself becomes a form of money the moment you sign it. The idea here is that the bank “deposits” your agreement as an asset on their books, and then any credit you use is offset as a liability against that asset. In other words, the core concept here is that you literally borrowed your own money from the credit card bank! The scam promoters claim that all you need to do to wipe out your debt is demand your original “deposit” back from the bank, which will be offset against what you borrowed. This is truly “smoke and mirrors” nonsense!

Now, as you can imagine, the banks do not take kindly to such tactics. Many of the consumers using this technique are getting sued by their creditors. But the scammers have more tricks available, as if the “smoke and mirrors” financial nonsense was not enough. One of their techniques is the use of bogus “arbitration” forums. Arbitration is of course a legitimate system that allows businesses and individuals to resolve disputes without going to court. What do the scammers do? They coach people on how to set up a fake arbitration forum, for the express purpose of making a dispute against their creditors! Naturally, the creditors will not send representatives to some non-existent arbitration forum, so the consumer gets to rubber-stamp their own arbitration award. If they get sued in a regular court, they present their bogus award to the judge in the hopes that the creditor’s lawsuit will be dismissed.

There are other techniques used by promoters of this scheme, but the key point to remember is the central claim that your credit card debt does not really exist. Of course, it’s all nonsense based on a misinterpretation of our monetary system, and if you step back and think about for a minute, the truth seems obvious. What these scammers are saying is that the entire $700 billion credit card industry is operating on an illegal basis! Even if the legal theory used by the promoters were true, do you think for a moment the government would allow this giant industry to go under? That is exactly what would happen if the promoter’s claims were proven true and used on a widespread basis.

The Federal Trade Commission, which has jurisdiction here, has not stomped on these con artists yet, but it is only a matter of time. Unfortunately, in the meanwhile, consumers are being bilked out of millions of dollars for a worthless program that will only get them into deep trouble with their creditors. If you are approached by someone offering to wipe away your debts using this system, I strongly recommend you run in the other direction while you hold on tightly to your wallet or purse.

Remember, you can eliminate your debts if you take a disciplined approach to your finances, make a budget and stick to it, and do not use your credit cards unless you can pay off new balances in full each month.
Source: Federal Trade Comission

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