About these ads that claim if you have ten grand or more in credit card bills you don't have to pay?

[NNN0LHI]

These ads are everywhere and are run constantly.

They start out saying: If you have more than ten thousand dollars in credit card bills you can get off paying only pennies on the dollar.

Don't ads like this encourage some people to run their credit card bills up past ten grand so they too can get off paying a few cents on the dollar? Kind of like the more you spend the less you have to pay.

They give the impression as soon as you hit ten grand worth of credit card debt the card companies are going to contact you and see if they make a deal to have you pay a few pennies on the dollar and then everything will be alright.

Who is behind these scam ads. And doesn't it sound like false advertising?

Anyone else been wondering about this?

Don

[Meeker Morgan]

1. Here's how it works. It's very misleading, but not 100% a lie.

Let us say you charge your credit card to the limit and simply do not pay. What happens then?

At some point the bank will write it off and sell the debt at a discount to a bill collector. The bill collector tries to collect and the profit is whatever is collected over the discounted price of the debt. Your credit is ruined and you will never borrow again, but other than that you "get away" with it.

The scammer will negotiate a payment lower than the debt but higher than the discounted price a bill collector would pay. The bank writes off the debt and your credit is ruined all the same.

Alternatively, the debt is already in the hands of the bill collector and the scammer will negotiate a payment lower than the debt but higher than the discounted price the bill collector already paid. However your credit is ruined all the same.

The scammers take a cut of course.

So the scammers aren't lying when they say they will negotiate a settlement. They do not actually claim you will be able to borrow again, they just let gullible people draw that conclusion.

[Statistical]

2. It is simply loss management.

CC debt that is 90+ days overdue is almost worthless.

Usually gets bought for $0.10 on the dollar or less.

The company gets you to sign a contract. That take all your credit cards lump them together and negotiate a rate with your creditors.

Say then can get the CC down to $0.30 on the $. They then tell you good news we elimated 50% of your credit card debt. You make payments to them and they make payment to CC companies. You pay $0.50 they pay $0.30 and keep $0.20 as profit.

[Tom Rinaldo]

3. Be ready for a big tax bill

The IRS considers forgiven debt of this sort as taxable income. If you owe $10,000 and negotiate to pay only $3,000, the IRS treats that as $7,000 of income, and they are automatically informed when this happens.

[dionysus]

4. here's how it works, in a nutshell. there's something they don't mention.

in order to settle your debt, first you have to purposefully go into default.

credit card companies are insured, so after 90 days of you not paying, they make an insurance claim and collect the money.

after they collect their money from insurance, then they'll start offering you deals, sometimes pennies on the dollar, to get what they can out of you.

meanwhile, your credit score takes a horrible beating for being in default.

[Lance_Boyle]

5. Just like the ones with the tax cheats who settle for 'pennies on the dollar.'

It's disgusting how we encourage greed and overconsumption and then REWARD people when their greedy overconsumption should be biting them on the ass.