Not all unsolicited, pre-approved credit card offers are created equal.
Some aren’t even legal.
But when the good, bad and ugly card offers are all pitched the same way (with a flashy mailing, an official-looking e-mail, or a friendly sales call) how can consumers protect themselves, their credit and their money?
One way is by taking to heart lessons learned the hard way by allegedly scammed customers who signed up for the Gainesway Credit credit card.
Group One Networks, a Largo, Fla.-based direct marketing company that dabbled in plastic, marketed the Gainesway Credit card as a general purpose charge account with 0% interest and up to in $10,000 available credit, from September 2006 to September 2008. But many, who neither asked questions nor scrutinized the fine print, found out the offer had a couple of catches.
One catch was an up to $250 fee charged before customers could use the card. And the fees didn’t stop there. According to the Federal Trade Commission, the Gainesway Credit card was not a credit card at all but an online shopping card that could only purchase goods from one of Group One Network’s online catalogues.
After an investigation of Gainesway.com, and no fewer than six other sites under the Group One Networks umbrella, the FTC froze the company's assets and placed the company into receivership Feb. 25. The commission also charged the company, its president James Nicholson and its CEO Brett Fisher with multiple violations of the FTC Act and the Telemarketing Sales Rule including:
- Passing off online shopping cards as general purpose credit cards.
- Failing to disclose the total cost of the card to consumers.
- Debiting money from customers’ bank accounts without permission.
- Failing to report credit activity to the major credit bureaus.
Neither Nicholson nor Fisher were available for comment. Their attorney, Robert Eckard, says that the pair will appear in court on April 3.
Protect Yourself: What You Can Do
No matter what the court outcome, those who claim to have been bilked by Group One Networks can take solace in knowing that other consumers can learn from their experience.
Here are a few tips that will protect your credit from companies associated with sub-prime lending:
2. Find out if your lender is legit. According to Curtis Arnold, founder of CreditCardRatings.com, many subprime lenders are not actual banks. If you get an offer from “CitiFirst” instead of Citibank (Stock Quote: C) or “Bank of North America” instead of Bank of America (Stock Quote: BAC), there is a chance that someone is trying to mislead you.
Your lender may or may not have a bad reputation, but you can find out for sure by contacting your local Better Business Bureau or the Federal Trade Commission either online or at 877-382-4357.
3. Avoid lenders who don’t care about you. Few lenders will give you money before they determine how much of a credit risk you are. If a lender doesn’t ask about your credit history, beware.
4. Don't send money to strangers. According to the FTC, legitimate lenders will never ask you to wire or mail a payment to an individual. They will never ask you to send a money order either. So, if a potential lender requests payment in any form other than a check, do not do it.
If you suspect that you may have already fallen prey to a sub-prime lender, contact the FTC.