Can Someone Actually Erase Your Debt? Don't Believe It!

You're paying your bills online one night and those nasty
credit card statements are making you ill. "If only there was some way
to get rid of them," you daydream.

PING. As if the advertisers were reading your mind up pops an
e-mail that reads something like this:

"Legally cancel your credit card debt! Totally! Terminated!
Completely legal! If you are in over your head in DEBT to credit card
companies, we can help you. Student loans or tax liens? Discharge these
debts quickly, painlessly, legally and without damaging your credit
rating!"

"Naah -- can't be," you think. Or could it? Should you look
into it?

Absolutely not, say credit and legal experts. These kinds of
spam and Web ads are just the latest versions of a long-running scheme.
Companies promise they'll help you fight the legality of your credit
card debt (or mortgage, student loan, tax bill or other debt) for a
"small fee," which often is several thousand dollars.

The icing on the cake is that some companies even tell you
they'll charge their service fee to your credit card, and then wipe out
that debt for you, too.

With the proposed new bankruptcy law on the verge of approval,
it will become far more difficult for consumers to qualify for
bankruptcy protection -- a development that is almost certain to send
more and more consumers scurrying for other answers. The notion that
through some obscure law there might be a quick and legal way out of
debt will no doubt lure people with credit card problems into these
scams.

"Quite frankly, many of these ads and Web sites look
legitimate and sound very good," says Bill Hodor, staff attorney for
the Federal Trade Commission. "But if a promise sounds too good to be
true, it usually is. As a consumer, you really have to be skeptical of
these ads."

Hodor says the companies behind these schemes use a variety of
tactics to convince consumers that it's possible to erase huge amounts
of debt. The so-called legal basis for how this mysterious
debt-elimination process can work is said to be based on Title 15
United States Code, Section 1692; the Fair Debt Collections Practices
Act, Section 1601; the Fair Credit Billing Act; and the Uniform
Commercial Code, Section 203. But the ads never say exactly what it is
about those laws that render credit card debt illegal.

"Their ads might say that banks are not really lending you
their own money or didn't disclose certain details to you when you
applied for the credit card, therefore the credit card company's
contract with you isn't legal," he explains. "That's just not true."

For a fee, these companies also say they'll show you how to
force your credit card company into legal arbitration so you can get
your debt fully discharged. "The truth is that if these kinds of
loopholes existed, financial institutions would already have figured
out how to close them," says consumer advocate Gerri Detweiler of UltimateCredit.com.

If you pick a fight with your credit card company and decide
not to pay your debt, you might, indeed, end up in court.

"But your chance of getting your debt dismissed is close to
zero," says Detweiller. "Your credit card contract probably includes a
mandatory arbitration clause, and the credit card company gets to
choose the arbitrator," she explains. "Those financial institutions
will haul you into court in a second, and they will almost always win."

Detweiller says she is familiar with many consumers who have
paid exorbitant fees to so-called debt elimination companies, along
with legal fees for taking the credit card issuer to court -- and still
ended owing every cent of their credit card debt. It's usually a no-win
situation for the consumer.

Beware, too, says the FTC's Hodor, of companies who argue that
you can send your credit card company a legal-sounding document such as
a "Bond for Discharge of Debt" of "Bill of Exchange," along with a
minimum debt payment. These companies may say that when your
credit-card company accepts one of these documents and cashes your
check, they've agreed to eliminate your debt. Not true, says Hodor. In
fact, the federal Office of the Comptroller of the Currency, the entity
that regulates national banks, has sent out several fraud alerts about
this issue.

Keep in mind that these companies are markedly different from
legitimate firms that offer debt consolidation or credit counseling
services. The companies to watch out for, by contrast, often use
phrases such as "totally eliminate debt" or argue that "credit card
debt is actually illegal."

The bottom line: "Never, ever respond to spam or other
unsolicited ads related to your debt," says Detweiller. "Companies who
advertise this way are not going to be trusted financial partners."

Hodor agrees. If you receive e-mail promoting a
debt-elimination program -- or if you have unknowingly been taken in by
one of these schemes -- you should contact the FTC at its Web site, www.FTC.gov,
or by calling 1-877-FTCHELP, he says. While the FTC can't help you get
your money back, the agency may use your information in its
law-enforcement efforts against suspicious companies. Hodor also
counsels you to file a report with your local Better
Business Bureau and your state's Attorney General's office.

Bankrate.com
is the Web's leading aggregator of information on financial products
including mortgages, credit cards, new and used automobile loans, money
market accounts, certificates of deposit, checking and ATM fees, home
equity loans and online banking fees. Visit Bankrate.com
to get the tools and information that can help you make the best
financial decisions.