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Watch out for rate-reduction scam

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Highlights
  • A scam alert has been issued by Better Business Bureau.
  • One company just transferred balance to new card -- and charged $1,500.
  • If you fall victim and can't get refund, dispute the charge with your credit card issuer.

Teresa Bower feels like a sucker. In an e-mail to Bankrate, she explained that a live person from a New York-based company, which she identified as Easy Financial (see screenshot of the Web site), called her Nebraska home and offered to negotiate lower credit card interest rates. The caller promised APRs between 6.99 percent and 4.99 percent on her two credit cards, which carried interest rates of 12 percent and 14 percent.

Her credit card was charged immediately for the $1,500 fee for the service, and she was told she had 30 days to cancel the service. A conference call was set up and, though the company failed to get her rate reduced, her balance was transferred to another card. "I told them that night that I could have done that, and they are charging me $1,500," she writes.

The company refused to refund her money, contending that they had done what they had promised and saved her thousands of dollars in future interest.

"I feel like such a sucker; a hard lesson learned," says Bower.

Bower is not alone. A recent flurry of complaints prompted the Better Business Bureau and U.S. Sen. Chuck Schumer, D-N.Y., to issue a scam alert about automated calls to consumers from a company that promises to lower their credit card interest rate.

The BBB reports that it has received about 300 complaints from dissatisfied consumers who paid for these services, but says the number of people who have gotten such calls is unknown. Complaints started to trickle in mid-2007 but escalated during the latter half of 2008.

BBB spokeswoman Alison Southwick says some of the calls do come from live human beings. Either way, the gist remains similar. "From most of the people we talked to or that we received complaints from, they received a call that said the company could help negotiate a lower interest rate with their credit card company and then as a result they would save money in the long run."

Southwick says it's difficult to find out where the calls come from because the scammers often spoof Caller ID to display different numbers, and may purport to be with "card services" or "cardholder services." Callers often hang up if you ask their whereabouts, she says.

Southwick says these outfits promise to save the consumer anywhere from $2,000 to $25,000 in interest, but charge a large upfront fee, typically around $600 to $900. The caller asks consumers for their credit card information, including the customer service number on the back of the card. The advance-fee company then places a conference call with a customer service representative at the credit card issuer and asks to have the consumer's interest rate reduced. "That's the extent of the negotiation process from some people that we've heard (from)," she says.

Read the fine print ...

The Better Business Bureau has no rating for Easy Financial Solutions, and it has resolved three complaints about the company in the past 36 months, according to its reliability report.

We did a Google search on one of the testimonial quotes on the Easy Financial Web site ("Wow! Your financial advisors are extremely knowledgeable and take the time to listen to my concerns. absolutely fantastic!! This is such a change in my life for the better."), and found the exact quote not only on ezfinancial.info but also on six other Web sites with different domain names.

Bankrate checked with the New York State Consumer Protection Board to see if the agency had heard complaints about these companies, some of which list contact addresses in New York. Chairwoman Mindy Bockstein says they have received a "handful" of complaints about Easy Financial and two other similar companies based in New York, and many complaints and questions from consumers about the scam.

Something for nothing

Depending on the specifics of the offer, these companies may be violating Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive practices, according to Bockstein. The calls may also violate the Telemarketing Sales Rule and the National Do Not Call list.

At best, these companies charge a high price for something consumers can do for free. They have no more pull with your credit card company than you do, and you could still get turned down for a rate reduction despite their promises. Just call the customer service phone number on the back of your card and ask for a lower rate. Use this script if you need guidance.

Even if the company does get your rate lowered, you've made an immediate payment for savings realized over many months.

Where to report the scam

If you receive one of these calls, do not give out any credit card information. Once they have your data, they can charge your credit card.

Report violations of the National Do Not Call Registry at Donotcall.gov. You can also report the scam to the Federal Communications Commission, the Federal Trade Commission, the Better Business Bureau and your state attorney general.

If your credit card has been charged and you can't get a refund, dispute the transaction with your credit card company. First call to try to stop the payment, and then follow up in writing. Under the Fair Credit Billing Act, you have the right to dispute charges for services you didn't receive or transactions you didn't authorize. Read the Bankrate feature How to dispute a credit card purchase for more information. If the firm did get your interest rate lowered, you may have a weaker case, says Southwick.

If you are struggling with credit card debt, you can do your own balance transfer by finding a low-interest card. Use Bankrate's search to find one.

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Product Rate Change Last week
Balance Transfer Cards 15.80% --0.00 15.80%
Cash Back Cards 16.42% --0.00 16.42%
Low Interest Cards 11.09% --0.00 11.09%
 
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