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Laura Rowley Money & Happiness

Laura Rowley, Money & Happiness

Don't Get Taken

by Laura Rowley

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Posted on Thursday, April 2, 2009, 12:00AM

Several times in the past month I've received a recorded call from "Heather" with "Card Services" offering to lower the interest rates on all of my credit cards to 6.9 percent. She then instructs me to "press 1" to be transferred to a live agent.

Perhaps you've received the same call. Heather, who also goes by "Cathy," is ubiquitous. She brazenly contacts consumers on the National Do Not Call Registry. She's been featured in a YouTube video. A blog called Stopping Heather is devoted to discovering her identity and, as you may have guessed, shutting her down.

Exploiting People in the Worst of Times

It's a rip-off that's exploiting strapped consumers in the worst of times. Florida State officials, who have filed civil suits to stop the schemes, say the telemarketers typically operate from a "boiler room" full of young, unskilled, minimum-wage workers (who are known to curse and hang up when their services are refused). The agents mislead consumers into believing the firm can negotiate directly with creditors to lower credit card interest rates.

And what are they actually selling? In many cases, a common-sense, debt pay-down plan that can be found in any personal finance book (including my own): Stop using credit cards, and pay extra money toward the highest-rate card. For instance, if a consumer has three credit cards with different interest rates, he should pay the minimums on time, directing as much extra cash as possible toward the highest-rate card. When that's paid off, he takes the extra money earmarked for the first card and applies it to the second card, working his way down.

The telemarketers "have a software program and type in the person's credit card information and debt information, and punch out a savings based on that approach," says a spokesperson for the Florida Attorney General's office. "That's what the consumer gets in the mail. They charge $1,000 for a service that's worth two cents, and sometimes double the charges because they're desperate to make their weekly and monthly quotas."

The Scam Is Spreading

The scam is proliferating from state to state: Workers learn the operation and then open their own franchises, sometimes paying a percentage of the profits to an individual who gets them started, according to Florida authorities.

U.S. consumers have $800 billion in revolving debt on credit cards. Robert Manning, professor at the Rochester Institute of Technology and author of 'Credit Card Nation', says the scams are multiplying as credit card companies unilaterally raise interest rates, even when consumers haven't changed their behavior with the card.

"If your interest rate goes up, your minimum payment goes up -- and lots of people are trying to pinch pennies," he says. "A lower-rate credit card sounds like right thing to do, so a lot of people who think they are doing the right thing are falling into a trap they didn't know existed."

The Florida Attorney General filed a civil complaint against one telemarketer, IXE Accelerated Financial Centers, and its two owners, Jaime Hawley and Ivan Estrella (a.k.a. Ivan Torres). It charges them with violating the Florida Deceptive and Unfair Trade Practices Act and the state's Telemarketing Act, and seeks thousands of dollars in penalties.

Details of a Complaint

IXE claims it has been in business since 1991, but it has only been operating for a year, according to the complaint. (The company's Web site is still active.) Calling itself a "banking center," IXE promises that "licensed financial specialists" will negotiate with the consumer's lenders to reduce interest rates and get them out of debt "three to five times faster than your current rates."

The complaint says the firm charged consumers from $695 to $995, and told them they could save from $2,500 to $5,000 in 30 days or receive their money back. Those who asked for their money back or refused to sign the written contract they received in the mail did not receive refunds, the complaint says.

Consumers' credit cards were charged by a variety of other company names, including Dynamic Financial Resolution; Financial Trust Resources; Computer ER of Florida; Financial Discount GRO Ozone Park N.Y.; and Bank Tech Process, according to the complaint.

When I spoke to the Card Services agent who called me, he said his firm was a division of Experian, the credit reporting bureau. "We have pre-negotiated contracts with all 550 credit card lenders," he said. "There's no out-of-pocket expense to you, this is free of charge. We get paid from the card lenders by the interest and finance charges we save you."

Warning: Stay Vigilant

Experian is "not in the credit card business and does not provide account numbers to unauthorized companies," says Susan Henson, director, public relations. "Experian regrets that consumers have been targeted by this company and warns consumers to stay vigilant about protecting their identity and credit by only providing personal information when they themselves initiate a credit transaction." The credit bureau advises consumers who have given Card Services their personal information to place a fraud alert on their credit file.

The Federal Trade Commission received 1.2 million consumer complaints in 2008. The FTC's list of "credit and loan phone scams" doesn't include the pitch from Heather and Cathy, although consumer protection offices in several states have issued warnings on their Web sites about the swindle. Florida authorities say the scam operators can shut down, move, and reopen fairly easily under another name or in another state.

Bottom line: Never give credit card information over the phone to someone who calls you. Get any offers mailed to you in writing before you agree to any service. Read the contract and make sure you are dealing with a brick and mortar establishment, and check with the Better Business Bureau before doing business with the firm. If you need debt relief, seek help from a non-profit such the National Foundation for Credit Counseling.

"The only entity that has that authority to reduce interest rates is the bank issuing that card," says Manning. Consumers should call the bank directly and ask for a lower rate, and if that is unsuccessful, contact a local credit union and see if they can transfer the balance to a lower-interest card that has no balance-transfer fees.

"We previously had one extreme of underwriting tools --- basically, if you had a pulse, you got a loan," Manning says. "Now it's the exact opposite, and it's hurting people who are good credit users."

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  • Vegas - Sunday, April 5, 2009, 9:53PM ET  Report Abuse

    • Overall: 1/5

    Dave Ramsey is nothing but a fraud who spent all summer claiming the banking system was fine even though he had no facts to support his claim. He's nothing but a charlatan who doesn't even understand simple math. Look at his listeners, they are all uneducated and impoverished, that is the type of person sleazy hucksters like Dave Ramsey prey on because anyone with a brain sees him for the fraud that he really is.

  • Yahoo! Finance User - Sunday, April 5, 2009, 7:22PM ET  Report Abuse

    • Overall: 1/5

    Anyone listening to Dave Ramsey deserves to lose whatever few pennies they have. Uneducated hicks listening to another uneducated hick with a radio show who has twice gone bankrupt for financial advice? Besides going into multiple bankruptcies, Dave Ramsey spent last summer saying the banking system was fine and anyone saying otherwise was just "chicken little". If you listen to Dave, you are an idiot. Plain and simple.

  • Yahoo! Finance User - Sunday, April 5, 2009, 10:16AM ET  Report Abuse

    • Overall: 1/5

    Very poor and pointless article. I guess we are all such rubes, though, that we do need someone to help us sift through the scams. Here's a tip: disconnect your worthless landline and get only a cell phone with a new number. In fact, that's what this article should really be about because once these guys are gone another one will just come along.

  • Yahoo! Finance User - Saturday, April 4, 2009, 11:45PM ET  Report Abuse

    • Overall: 1/5

    "He was really good at doing his job — we respected him for that," Lukas told the Los Angeles Times. "He's never late, he's always punctual. And when he finishes his job, he goes home. He doesn't complain, he doesn't argue with people. He gets along." Nine DOLLARS an HOUR? In LOS ANGELES? Hey, I would be pissed off too! How not to get taken? A virtual impossibility for honest workers!

  • John - Saturday, April 4, 2009, 12:55PM ET  Report Abuse

    • Overall: 3/5

    Not bad. A worthwhile topic. But a missed oppourtunity to do some investigative journalism. Get some more names of principles of these companies, what towns they live in, what other legal problems they have, what their backgrounds are, etc...

  • looneytarian - Saturday, April 4, 2009, 12:46PM ET  Report Abuse

    • Overall: 4/5

    Wow, Yahoo User - Friday, April 3, 2009, 8:52PM ET... maybe you're drinking too much Suze Orman koolaid? Lighten up on Valhalla. The approach stated by Dave Ramsey is not off base by any means. First, Val clearly stated that the Ramsey's method was more emotionally satisfying and there is something to be said for reducing the number of debts you are paying on. It is less mentally distressful and gives you a feeling of making progress and sense of control. I set up a spreadsheet using 3 cards with amounts ranging from balances of $2000 - 5000. Yes, for the most part, you will pay more in interest by using Ramsey's method, but one variation of amounts was not that much different between paying the smallest debt first vs the highest interest first. For some people, paying a few hundred dollars extra over a period of 3 or 4 years may be worth feeling like they are exercising greater control over their finances. In one of scenarios I ran, there was only about $300 difference in interest, but by paying the smaller debts first, the cards were paid off about 1/2 year sooner and the last year was spent in paying one card. Financial calulators are OK, but they only give you the interest rate based on the same monthly payments, without taking into account additional amounts paid on principle as you pay off one card and apply that money to the next. The best thing to do is to set up your own spreadsheet and do like I did - run different scenarios using your own debt amounts and figure out which method works best for you. Doing the interest calculations is not that difficult if you stay away from trying to compount the interest. The difference between a flat monthly rate and daily compounded is not significant in most cases.

  • Yahoo! Finance User - Friday, April 3, 2009, 8:52PM ET  Report Abuse

    • Overall: 3/5

    Vallahalla360 (yesterday 9AM), apparently you are drinking Dave Ramsey Kool Aid. You just emphasize the fact that the "way people work" is stupid and look to waste money even when "attacking debt". You freely admit paying off highest interest rate debt first has "the math" working out better (i.e. IT COST YOU LESS MONEY FOOL), but you still say it is better to eliminate the debt with the least amount outstanding first and interest rate doesn't matter? Then you claim that is "Personal Finance"? That is outright stupidity, and Dave Ramsey loves you for being so stupid. http://biz.yahoo.com/usnews/090403/03_suze_orman_and_the_new_rules_of_credit_card_debt.html?.&.pf=banking-budgeting "Pay off the highest-interest rate card first. The next step is to direct any extra cash toward the card with the highest interest rate, while making the minimum payments on the others. As soon as the first card is paid off, start on the next one. That way, you can minimize the amount of money you're paying on interest. BankRate.com also offers calculators that can tell you, based on your balance and interest payments, how long it will take to pay off the card and how much you will have doled out in interest."

  • ANDY - Friday, April 3, 2009, 9:23AM ET  Report Abuse

    • Overall: 5/5

    A good piece. It's hard to believe that people still fall for these type scams. Speaking of which, Laura would you please do a piece on these tax relief companies such as JK Harris. They need to be exposed as well.

  • Yahoo! Finance User - Friday, April 3, 2009, 2:19AM ET  Report Abuse

    • Overall: 5/5

    Right on, Laura! "ASK NOT HOW YOUR COUNTRY HAS SCREWED YOU... BUT RATHER, ASK HOW CAN YOU SCREW YOUR COUNTRY."

  • Yahoo! Finance User - Friday, April 3, 2009, 1:15AM ET  Report Abuse

    • Overall: 3/5

    I think some people are so stupid that they need someone else to explain a common-sense, debt pay-down plan that can be found in any personal finance book. In the last few years we have seen that a substantial percentage of our fellow citizens who take on adjustable rate mortgages are not smart enough to think of doing the math to make sure they can afford the payment after the interest rate adjusts and the payment increases. There are also people who thought they could also refinance a home before the payment increases because they are too stupid to think of the possibility that they might not be able to refinance because of changes in underwriting standards, interest rates, or home prices. Taking that into consideration, it should be no surprise that there are people who are too stupid to figure out that they need to pay more than the minimum payment on a credit card in order to pay it off in a reasonable amount of time. I do agree that telemarketers are scum though. That's why I have an unpublished phone number.

  • Sparks - Friday, April 3, 2009, 12:43AM ET  Report Abuse

    • Overall: 1/5

    Ok, First, I agree that some of the telemarketers doing this are possibly taking advantage. I do believe they have helped at least some people though. But you say, they're marketing the same approach that is sold in your book. SO, for me to learn that approach I must first purchase your book. So, it is ok for you to profit(I don't care if it's a dime or a dollar) but not ok for a telemarketing firm to profit from it. Just because they paid more attention in marketing class than you gives you no reason to hate them. Again, I think selling basic knowledge, either through a telemarketer or a book are both wrong BECAUSE these ideas are freely available. So, before you hop on your soap box Ms. Suze Orman(hate that woman) wanna be, you might wanna make sure it can hold your weight.

  • William - Thursday, April 2, 2009, 10:48PM ET  Report Abuse

    • Overall: 2/5

    Some comments are very harsh and cruel. Unfortunately, we are bombarded by the media which is less than honest and intelligent in financial matters, and that influences our financial decisions. The banks are like the fox inviting the chickens (us) back into the hen house. After this depression is over, we will be a wiser people. Many are starting to see how things work with our government officials and the banks. My firm has been working for 11 years educating Americans about the insanity of carrying long term debt, and then extending it with costly refinances that do not save anyone any money. The Ohms Law of finance is that the longer you prolong a loan, the more money it costs! Period. The rich understand this rule of thumb very well and pay off their loans as quickly as humanly possible. Doesn't that suggest something profound? It's unfortunate that there are bozos out there looking to exploit the current situation. But, as we counsel on our domain, always check out a company with The Better Business Bureau - and even the State Attorney General's Office if you want to be thorough - before doing any business with them. Give a plus to those, like us, that don't ask for any fees to reduce debt. We offer free shareware for a biweekly loan reduction program where the lenders pay servicing fees. This is the way to go for America's middle class. We've been shouting this news out for the past 11 years. When you have the time, take a look at our domain which starts at www.debt-freeusa.com

  • Fillup - Thursday, April 2, 2009, 7:09PM ET  Report Abuse

    • Overall: 3/5

    Don't worry about your valuable skin as you can always skip to Canada like your dad did. Women are treated like crap in the middle east and than some. We won't ask you to participate in something to save them.

  • Yahoo! Finance User - Thursday, April 2, 2009, 6:15PM ET  Report Abuse

    • Overall: 1/5

    I live in Scamerica so i just expect this greedy behavior. ....since the financial meltdown, very little attention is on the wars which cost us more than our stinking money.

  • Yahoo! Finance User - Thursday, April 2, 2009, 6:04PM ET  Report Abuse

    • Overall: 1/5

    You just scammed me out of 4 minutes of my life. I could have been smoking a 50 cent cigarette.

  • Yahoo! Finance User - Thursday, April 2, 2009, 5:25PM ET  Report Abuse

    • Overall: 1/5

    Ok, now, just what in the heck was the purpose of this article again????

  • Yahoo! Finance User - Thursday, April 2, 2009, 5:02PM ET  Report Abuse

    • Overall: 1/5

    Listen up people. First off, get rid of your friggin credit cars. How many people have to explain to you idiots that a credit card is a total scam. If you cant afford something now, what makes you think you can afford it later, with interest? And as for everyone complaining how there are all the scammers out there trying to prey on the little guy, understand that banks lent people this money, they didnt give it to them free of charge. Im sick of people being irresponsible by racking up their credit cards for every little thing, and then when the bill comes due they are all of a sudden suprised. Or if the bank raises the rate they are somehow suprised. Banks are in the business of making money and if you dont know that by now your a sucker who deserves to be suckered even more by these con artist cold callers. Lack of financial education is to blame and the person to blame for that is only yourself. There are countless books at the bookstore on every aspect of finance and if you cant get your lazy butt to read one then shame on you! I dont feel bad for people with 20k credit card debt even if they lost their job. Thats their fault for being so stupid with money!

  • Yahoo! Finance User - Thursday, April 2, 2009, 4:21PM ET  Report Abuse

    • Overall: 4/5

    Interesting to see how they work this scam and to realise how may scum bags there are who prey on the vulnerable. As someone who pays off his one card each month, I'm not tempted and just say no thanks and hang up. If it is a computer generated call, I hang up immediately without even listening to the pitch. However, I guess that some people must be so deep in debt that they grasp at any thing that seems to offer a way out. However, I don't expect that they will be reading this column. Still Laura, where is the "happiness" part of your column?

  • Yahoo! Finance User - Thursday, April 2, 2009, 3:36PM ET  Report Abuse

    • Overall: 3/5

    Don't forget all those mortage savior scams going out there. My office voice mail has suffered through at least 30 of those calls since October 2008. And they're getting worse.

  • ibdsuccess - Thursday, April 2, 2009, 3:24PM ET  Report Abuse

    • Overall: 1/5

    i have never been more convinced of a bogus rally as i am of this one. Of course I bought 4 weeks ago when everything is dirt cheap. and of course i am in the process of closing them out.

  • Yahoo! Finance User - Thursday, April 2, 2009, 2:35PM ET  Report Abuse

    • Overall: 1/5

    No, the only way to not get taken is to leave this country...the author does not address the real government sanctioned scam. This article is entirely misinforming by not addressing the issue that the government is failing us by promoting a ponzi.

  • XX - Thursday, April 2, 2009, 1:58PM ET  Report Abuse

    • Overall: 5/5

    Laura, again, a timely article. I knew scams were happening, but not the detail and not the extent. Thank you for sharing this. Please ignore those idiots who disparage you.

  • Heroine Worshipper - Thursday, April 2, 2009, 1:23PM ET  Report Abuse

    • Overall: 1/5

    Yeah. We really needed a genious to tell us telemarketing scams are bad. We had no idea. What would we do without these Rowley revelations.

  • d_diggler - Thursday, April 2, 2009, 1:07PM ET  Report Abuse

    • Overall: 1/5

    This is an awful column. The author is admitting her own advice can be found in "any financial book"...including her own. So what I'm hearing is this woman can't even publish something original. The real scam is: 1. Beg, or weasel your way into a "financial" blog. 2. Publish a book that is a complete re-hash of other people's advice. 3. Log on as "Harry" or a hundred other aliases to post glowing comments on your own work. 4. Censor out the "crazies" who point out obvious flaws in the article. 5. Collect book royalties. What I don't fully understand in this particular case is how a person so grossly in debt has the money to spend on a debt counselor? Maybe they just charge it...the ultimate irony.

  • Irving - Thursday, April 2, 2009, 12:53PM ET  Report Abuse

    • Overall: 3/5

    Good advice, although repetitive. I would like to see a section on "legitimate" offers from major institutions, that make it easier for these illegal and/or unethical operations to operate ala copycat. I am undersiege from AMEX, Citi, VISA and others with offer after offer--sometimes with blank check with my name on them. The marketing people who design such programs should be neutered, so at least the next generation is free from this mindless infestation.

  • Yahoo! Finance User - Thursday, April 2, 2009, 12:44PM ET  Report Abuse

    • Overall: 2/5

    I'm getting bored with Laura's collumn. Telling people to beware of telemarketing scams is like telling people that credit card debt is bad... We already know this. Does this subject need to be written about?

  • HarryE - Thursday, April 2, 2009, 12:23PM ET  Report Abuse

    • Overall: 5/5

    Great article Laura, I always enjoy reading them and appreciate the heads up that you provided this week. To the person who posted at 10:47 AM, are you so narcissistic that you think that anyone cares if you post? When I read your post it just confirms to me that there are some real crazies out there, and you are one of them! GAD! You won't even identify yourself. And "stiffsam", which I seriously doubt, what in god's name are you babbling about? Nothing that has anything to do the article...another crazy!

  • Yahoo! Finance User - Thursday, April 2, 2009, 11:53AM ET  Report Abuse

    • Overall: 3/5

    To the reader a few posts below threatening to leave Yahoo!, stop posting, etc: You're right, absolutely no one will care that you've stopped making use of this free service. You sound like a professional whiner. Thanks for sharing.....

  • Donald - Thursday, April 2, 2009, 11:48AM ET  Report Abuse

    • Overall: 4/5

    OKay Laura Good common sense article with the few extras about filing a claim.... however maybe you can also expand this into the area of the "GRANT SCAM" going on right now. You should also be aware of those, "GET $12,000 in 15 days FREE!!!" BS Bait and suck your credit card every 2 weeks until you catch on schemes.... The schemers truly test peoples common sense about these matters with the 'get something for nothing' schemes. Where can we go to get the "Government backed!" Grants schemers off the internet also?

  • Yahoo! Finance User - Thursday, April 2, 2009, 11:35AM ET  Report Abuse

    • Overall: 5/5

    The entire American "economy" is a fraud. Insurance companies, banks, etc. are in business of screwing consumers. These outfits just follow the trend. I am not saying they shouldn't go to jail but most definitely they shouldn't feel lonely there!

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