Credit Card Debt Relief: Scams to Watch Out For

Facing credit card debts is challenging particularly at this time when the economy is at its worst. Unfortunately, some unscrupulous companies are trying to capitalize on this worsening problem, taking advantage of unsuspecting victims who are trying to find credit card debt relief. Essentially, all credit card debt relief scams offer the same thing, they promise people relief from debt later for payment now.

Several years ago, lump-sum debt settlement was the number one debt relief scam because fly by night companies charges exorbitant fees before their customers even pay their creditors, which is a step back towards better credit management. Thanks to new federal rules, formalized in 2010, it is now illegal to ask for upfront payments for debt settlement services. In this article, we will discuss various scams you should watch out for as you find credit card debt relief programs.

Redemption Certificate or Bond For Discharge of Debt

The Federal Reserve Bank and the Office of the Comptroller of the Currency has identified this credit relief program as a type of “fraud” because this may cause criminal liability to the debtor.

Arbitration Awards

Unfortunately, many credit card agreements still feature an arbitration clause in them. This clause states that you and your credit card company agrees to settle disputes with arbitration, not court action. This means you will be charged hundreds of dollars when you get an arbitration award from a licensed arbitration firm that says you do not owe any money on your account. Anyone who uses this strategy risks having poor defense for any potential court action.

Companies That Purchase Your CC Account and CC Debt

Some credit card agreement indicates that an account may be sold to another entity. However, because credit card debt are unsecured type of loan and being handed to a corporation, credit card banks will have no choice but to charge it off.

Novation

Novation refers to the substitution of a new contract for an old one or the substitution of a party in contract with the other party. The act of using the credit card under the new contract is regarded as the holder agreeing to the new terms and conditions. It’s important to check the new terms and conditions as most credit card company use this type of agreement to trick you into not paying your bills without establishing a legal defense or dispute for doing so. 

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