Consumers struggling to rebuild their credit after years of recession are facing yet another obstacle to fixing their finances: scams that offer fraudulent shortcuts to higher credit scores. One of those traps, Philadelphia-based Platinum Trust Card and Express Platinum Card, was recently shuttered in a settlement with the U.S. Federal Trade Commission (FTC), which alleged that its owners ran an illegal telemarketing operation that preyed on customers who were trying to regain their financial footing.
The scammers allegedly targeted applicants for payday loans and offered a “platinum” credit card with a credit limit of up to $9,500. But their cards came at a steep price—a $99 “advance” fee and a monthly fee of $19. And instead of being the general-purpose credit card they were promised, victims found themselves unable to buy anything except off-brand, overpriced products at an online store run by the credit-card company.
The operators will pay more than $7.5 million to settle charges and have agreed to a permanent ban on telemarketing and offering credit cards, according to the FTC. But the case is noteworthy for several reasons, says Gerri Detweiler, director of consumer education for Credit.com.
The catalog scam—offering a card that can be used only at an online store—is common. But zeroing in on consumers who are not on solid financial footing is a newer problem, given the large numbers of consumers who are exiting the global recession with low credit scores.
These consumers make easy prey and are less likely to complain, because they believe they should be paying higher rates for their cards, and in so doing, atoning for their financial past. Wrapping a credit-repair offer in a bogus credit card is a clever scam; calling it a “platinum” card made the deal irresistible to some.
“You can call it whatever you want— platinum, titanium, gold—it’s still a piece of plastic,” says Detweiler. People who are trying to rebuild their credit need to read the fine print on credit-card offers and to be wary of promises that seem too good to be true, she adds.
Consumers can avoid bogus offers like the Platinum Trust Card by following a few simple rules. Look for a credit card offered through a legitimate bank or credit union, always compare rates before accepting a card offer, and be wary of offers that seem too impossibly good, say experts.
As for the precious-metal designation used by credit cards, those are not regulated by any government or credit-card company, says Detweiler, and they probably never will be. “The color doesn’t really matter,” she says.