By Charles J. Phelan
Consumers seeking debt assistance are faced with a bewildering assortment of debt companies, services, programs, books, ebooks, and websites. How to tell the scams from the legitimate options? The purpose of this article is to help consumers easily spot and steer clear of one particular scam that is growing through network or multi-level marketing schemes. It goes under different names, such as debt elimination, debt termination, or debt reduction. Such names can certainly apply to legitimate programs as well, and the scammers purposely name their bogus programs with the intention of deceiving consumers and stealing them away from legitimate companies. For the purpose of this article, I’ll refer to it as the debt elimination scam, but be aware that it may be called something different.
So how can you tell this scam from legitimate debt elimination techniques? It’s pretty easy, actually. The scam is based on the bogus “no money lent” argument, where the claim is made that credit card banks cannot loan money legally. Through strange leaps of logic, the scammers claim that credit card banks are actually operating illegally, and so you never really borrowed any money when you used your credit cards! Therefore, you don’t really need to pay anything back. You just have to follow their system and the debts will go away because the banks don’t want this knowledge disclosed to the public!
I realize this may sound ridiculous at first glance, but the con artists are very convincing, and there are dozens of websites promoting this dangerous scam. They refer to publications by the Federal Reserve Board, the Uniform Commercial Code, the Truth in Lending Act, and other public laws to bolster their claims and give an aura of legitimacy to their “program.” I’ve talked with numerous consumers who have been conned out of $2,500, $5,000, even up to $15,000 because they believed the hype that these snake-oil salesmen were peddling. If you’re $30,000, $50,000, or $100,000 deep in credit card debt, it can be very tempting to believe in a magic pill. What if you could pay someone 15% of the debt and make the rest of the debt disappear?
As tempting as the promoters make it sound, the debt elimination techniques they are using simply do not work. About the only thing they accomplish is getting you sued by your creditors. As you might expect, creditors hate this scam, and they come down hard on people trying to use this bogus “no money lent” system. You don’t need to take my word for this. Check out the complaints on ripoffreport.com about Liberty Resources, a debt elimination scam that was shut down in Ohio. Or do some research on New Leaf Associates out of Florida, a scam that was shut down by the Florida Attorney General after consumers were ripped off for millions of dollars. I’ve personally talked to people who were caught up in both of these scams, as well as others who were involved in scams that have not yet been shut down.
I also sometimes receive calls or emails from people promoting this system. Because I am easy to reach and I’m a well-known debt expert, they seem compelled to convince me of the worth and merit of their system. Often, the people contacting me are ignorant of the nature of the scam. That’s because this program is frequently sold through MLM or network marketing systems, and a lot of the people involved simply don’t know any better. I respond by making a simple request, and any “true believers” in this system who happen to read this article can take this as a challenge. All I ask is for a single verifiable court case where a judge agreed with the “no money lent” argument and ruled in favor of the debtor. It’s really that simple. After asking this question for several years, I’m still waiting. No such case exists, despite false claims to the contrary. The response is usually that the company must protect the clients’ privacy, but they have “hundreds of success stories” and have dismissed “millions of dollars” of debt.
Nonsense! The only way this system could possibly work is if a judge ruled on it in court. And since court cases are public record by definition, privacy cannot be an issue here. The “client” gave up any right to privacy when he or she tried to convince a judge that the 50 grand they owed on their credit cards was really just “funny money.” And yet the con artists cannot provide a single solitary case in support of their outrageous claims. (Note to scammers: Don’t waste my time emailing me with your threats or your legal mumbo-jumbo. I’ve heard it all before. Just send me the civil docket number for a single case where your “client” won in court using this system, and identify the court venue so I can look up the case myself online. Simple enough, right? I won’t hold my breath though.) In fact, the “no money lent” argument has been shot down in court on multiple occasions. When confronted with this embarrassing fact, the scammers simply reply that the courts are part of a “conspiracy” to keep this information from the public!
The absence of any verifiable documentation is the red flag that tells you this scheme simply doesn’t work. But let me take this a step farther. Let’s set aside for a moment the whole question of the legal basis for the “no money lent” argument. Let’s take a huge silly leap for a moment and say that the system is valid from a legal perspective. Well, it’s STILL not going to work for the average consumer! Why? Two reasons. First, it requires a fight in court, and the average consumer wants to go to court over debt-related matters about as much as they want to have multiple root-canals without anesthetic.
Second, nothing gets resolved this way. I’ve worked with thousands of people struggling with serious debt problems. I talk to people in this situation every day. I can’t think of a single instance where the person’s priority was anything other than to GET THE MATTER RESOLVED PERMANENTLY. The techniques used by the debt elimination scammers do not achieve any resolution at all. Even if the debtor successfully gets a creditor to back off from its collection effort, all that will happen is the creditor will sell the account to a debt purchasing company, who will then try to collect all over again. So the whole process will have to be repeated, over and over again as the debt gets sold multiple times down the line. There is no resolution here. Just a bag of useless tricks. Boil it all down and here is what the debt elimination scammers are telling you: Walk away from your debts, don’t pay, and duck and cover. That’s it. It’s a lot of hot air and bogus nonsense, and it only exists because debt-weary consumers are desperate for solutions.
If you have become the victim of a debt elimination scam, I urge you to take action. Demand a refund in writing. Complain to the Better Business Bureau where the company is located (assuming you can even find them), complain to your state Attorney General and the Federal Trade Commission. And then get on the phone with your creditors and explain that you were misled and that you would like to work things out in good faith. It may be necessary for you to formally retract any documentation that the scammers sent to your creditors. Consumers may also feel free to email the author for further advice or information on this subject.
Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former executive with a large national debt settlement firm, he has created the Debt Elimination Success Seminar™, a 5-hour audio-CD course that teaches consumers how to take control of their own debt relief. The course focuses on instruction in do-it-yourself debt negotiation at Zip Debt
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