Debt Elimination Scams Can Hurt You

Have you been the victim of a debt elimination Scam? There are many of them out there. There are two types that I have seen and people are getting hurt by them. First there is the “money out of thin air” scam. This scam states that banks have not lent you money and as a result you do not have to pay them back, or you can pay them back with fake money, something called a sight draft. The second scams tell you to stop paying your bill and pay a company which will negotiate with your creditors to settle your claims for pennies on the dollar. Both are scams and you may have been taken by one.

The money-out-of-thin-air scam goes something like this. They will tell you that when you get a credit card the bank signs a promissory note for you and deposits it in their account. Then as you make charges they simply pay those charges based on that promissory note. This is bad accounting because they are taking a piece of paper and making it an asset. Because the bank engages in bad accounting they have breached their contract with you and you don’t have to pay. They advise you to stop paying your bills and demand a verification of all purchases you made on your credit card. They don’t do it and consequently your debt is discharged. Cool.

Only problem is it doesn’t work. Many of the banks will sue you at the end of the day. By then these scam artists will run, or supply you with some very confusing court documents that you have to file yourself. They will tell you that they are not attorneys and that most attorneys do not understand the complexity of their system. They will tell you not to hire an attorney because attorneys are stupid and cannot understand the law. Once you file their forms you are committed to the confusing legal theories. They are very confusing. The judges can’t understand them, you can’t understand them and the bank’s attorney will make you look like a donkey for using them. Besides, think about it, you run around with this piece of plastic paying for lunches, appliances, and all types of consumer goods, and now you come to court saying “it was fake money.” You are going to look like a donkey!

The only thing, and I mean the only thing that makes gives these programs an once of success is the Fair Debt Collection Practices Act. This is a federal law which governs the conduct of debt collectors. If the collection agency violates the act in the process of collecting the debt, you then have some leverage to negotiate some or all of the debt away. The rest of the program is nonsense. I have seen these programs sell for up to $6,000.00. But $2,500.00 is about the average.

The debt consolidation scams are based on you making payments to a company who negotiates settlements with your creditors. The contracts I have seen require a set up fee in the neighborhood of $500.00 and monthly maintenance fees of about $60. One program also charged you a 25% fee for any debt that they negotiate away for you. I calculated the total fees on these programs and they are in the neighborhood of 50% of the debt you owe. If you owe $10,000.00 in debt, they charge you $5,000.00 to eliminate it.

Here is the big problem. They pay themselves first. Your creditors do not receive any payments for the first four to six months because your payments to them are for fees. After you pay their fees then they save your money to “negotiate” with the creditors. Do you think your creditors will sit around for six months waiting for someone to negotiate a settlement with them on your behalf? Of course not. After a few months, they will start to send your debts to a collection agency, sue you, or sell the debts. In the meantime the late charges and extra interest are going to kill you.

After making 10 payments to these guys, you will probably get sued by one of your creditors, they will start to garnish your wages and then you can’t afford to pay the $245.00 per month to be in the program. They have made about $1,500.00 off of you, you might get a couple hundred bucks back and then you will end up in bankruptcy court. I am not speaking out of hand, I have seen this happen time and time again.

If something sounds like snake oil, looks like snake oil and leaves you feeling like you bathed in snake oil, it’s probably snake oil. If you are paying more than a hundred bucks for a solution to your debt problems you are paying too much.
Legal Credit Cures is a website developed to educate people about their rights under federal law. It gives you a step by step protocol for dealing with your debts. It covers the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Fair Credit Billing Act. It explains bankruptcy and foreclosure. You can try it risk free. The author guarantees your satisfaction. If you are not happy, you get your money back. No questions asked.

As a consumer attorney I have seen hundreds of scams out there.
Legal Credit Cures is not one of them. It is the program that is truly honest with the consumer, and does not try to hype some obscure legal theory to make it work. It is based on your rights guaranteed by federal law. The only reason you cannot tap into this power is because you don’t know about it. If you educate yourself, you will be able do battle with your creditors and come out ahead. Give it a try.

Do Not Use a Debit Card on Internet

Identity theft is a growing problem. If you take a few steps to protect your identity, you can alleviate some of the risks. One step is to avoid giving out personal information to strangers. As you know from reading my materials on this website, I advocate being a cash person. Pay for all your items with cash. However, the best method of payment for goods purchased over the internet is a credit card. There are several reasons for this.

First, a debit card is tied to your checking account. If someone steals your debit card information, they can wipe out your cash in your checking account. If someone steals you credit card information, they can rack up debt for you. Both of these situations are very bad, but it is much easier to deal with fraudulent debt than fraudulent loss of cash.

Second, the credit card companies monitor activity on your credit cards, whereas the bank does not monitor activity on your debit cards. If someone steals your credit card number and goes on a spending spree, the credit card company will step in and cancel the card. This will not happen with a debit card until all of the money in the account is gone.

Third, under the Fair Credit Billing Act, you are only liable for $50.00 in fraudulent charges, and it is fairly easy to dispute any fraudulent charges on the account. The process for disputing fraudulent charges on a debit card are not as easy, and until a credit is made, you are without cash.

This is one of those rare, and I mean rare, circumstances where I recommend using a credit card. All of the other rules still apply. Pay it off every month. Keep a card with a low credit limit, no annual fees, and a grace period of one billing cycle. This way you get all of the benefits with none of the headaches.  For more information on the proper use of credit, visit Legal Credit Cures.