November 19, 2012

Look out, Cardholder Services: The FTC is calling back

The Federal Trade Commission says it has shut down five more companies engaged in a widespread scheme: deceptive robocalls, or automated pitches, promising help reducing consumers' credit-card interest rates.

The companies, based in Arizona or Florida, are allegedly responsible for many of the robocalls that have lately generated a huge flood of complaints to the FTC: about 200,000 a month in recent months, according to spokesman Mitch Katz, ahead even of 2011's remarkable pace that topped out at 130,000 a month.

If you've gotten one (or many) of these calls, you'll probably recognize the script. The recording starts by announcing the caller as "Rachel" or as someone else from "Cardholder Services" - plainly designed to trick recipients into believing that their credit-card issuer is calling. The pitch then invites them to speak to a live operator.

The companies temporarily shut down by federal courts at the FTC's request were identified as Treasure Your Success, Ambrosia Web Design, A+ Financial Center L.L.C., Green Savers, and Key One Solutions L.L.C.

The new lawsuits, the latest in a series of civil actions against robocallers, come two weeks after the FTC announced a $50,000 prize for the best technological solution to the robocallers, who have evaded many other efforts at crackdowns because they have learned how to disguise, or "spoof," the calls' originating numbers to confuse Caller ID. The screen may just say something generic, such as "Card Services," making it much harder to report. That's one reason the volume of complaints is so astounding - and a sign of how the robocallers have annoyed so many people that FTC Chairman Jon Leibowitz declared, “At the FTC, Rachel from Cardholder Services is public enemy number one."

Here's what the FTC says happens when victims bite:

Consumers who reach a live telemarketer are then pitched allegedly deceptive offers to have their credit card interest rates substantially reduced, sometimes to as low as 6.9 or even zero percent. The telemarketers allegedly guarantee that lowering card interest rates will save the consumers thousands of dollars in finance charges in a short period of time and will allow them to pay off the balances more quickly. Some telemarketers allegedly claim that consumers will save at least $2,500 in finance charges and will be able to pay off their balances two to three times faster, without increasing their monthly payments.

In some cases, according to the FTC, the telemarketers claim to be calling from the consumer’s credit card company. In other cases, they use “Cardholder Services” to suggest a relationship with a bank or credit card company. If the consumer expresses an interest in the rate reduction offer, the telemarketer sometimes conducts a purported “audit” to determine whether the consumer qualifies. Consumers provide their financial and personal information, and are then put on hold while the “audit” is completed. According to the FTC, the “audit” typically is used only to determine whether consumers have enough credit available on their credit cards to pay the company’s fee.

After consumers have been “approved” for the program, according to the FTC, the telemarketer informs them that there is an up-front fee, typically ranging from several hundred dollars to nearly $3,000. To convince them to pay the fee, telemarketers often say that it will be more than offset by the money the consumer will save through the program. In some cases, the FTC alleges that consumers’ credit cards were charged even if they did not agree to pay for the service. In other cases, the defendants allegedly do not disclose a fee at all, or claim there will be no fee.

The companies allegedly often claim to have a no-risk guarantee, saying that if they don’t provide consumers with the promised rate reductions and finance charge savings, they will refund the fee. However, consumers who later complain to the companies find it difficult, if not impossible, to get their money back.

After consumers pay the up-front fee, the FTC alleges, they typically find that the companies do little or nothing to lower their credit card interest rates. The only thing that some companies do, according to the FTC, is to initiate three-way calls with consumers’ credit card issuers and orally request a rate reduction, a request that consumers could make on their own and that invariably is denied. In some cases, the companies may also apply in the consumer’s name for a new credit card with a low- or zero percent introductory interest rate. But according to the FTC, even if a new card is issued, the consumer is unlikely to see the promised savings, as the credit limits likely are low and the introductory rate often goes up after six or 12 months. Consumers often find that they cannot transfer their balances to these new cards.

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