Beware of Debt Elimination Schemes!
ALERT 2007-55OCC
ALERT
Comptroller of the Currency
Administrator of National Banks
Subject: Debt Elimination Fraud
Description: Fraudulent Schemes to Eliminate Mortgage, Credit Card, or Small
Business Debt
Date: September 5, 2007
RE: Fraudulent Debt Elimination Schemes
The Office of the Comptroller of the Currency (OCC) is aware that the volume and
variety of fraudulent schemes supposedly designed to “eliminate” debt is increasing.
These schemes are being promoted via the Internet and in seminars throughout the
United States. The fraudulent schemes are being marketed to ordinary people, not
just the wealthy or sophisticated, including borrowers who are current on their
payments and those approaching foreclosure.
The persons perpetrating the fraudulent schemes claim that they can eliminate borrowers’
various types of debt, including mortgages, credit card balances (including balances
on cards issued by nonbank companies), student loans, auto loans, and small business
loans. The variations on these schemes are endless. A recent variation includes
the fraudulent use of the OCC’s 3-page Customer Complaint Form.
The form is included
in the package of documents provided to the victim, falsely adding another pretense
of legitimacy to the worthless program. The victim is told to sign only the third
page of the form, not to date it or complete any other information requested on
the form. The date, customer, and financial institution information will be completed
by the perpetrators. The form is subsequently completed and filed with the OCC falsely
stating that the financial institution has acted improperly with regard to the victim’s
account.
These schemes are designed to defraud victims of an up-front fee, which typically
ranges from $400 to $7,500. As a result of using a fraudulent scheme, victims could
lose money and property, and damage their credit record. In addition, the creditor
may take additional legal action against a borrower to resolve a fraudulent attempt
to eliminate a borrower’s debt. A second,
extremely harmful, potential result of participating in any of these illegal schemes
is the theft of a victim’s identity. Based upon the information
provided to the perpetrators in a scheme, they may be able to steal a person’s identity
and run up substantial new debts before the victim is aware of the theft. Resolving
identity theft issues is an extremely difficult and time-consuming matter. The following
are sample variations of the fraudulent processes used to fool borrowers into paying
money to “eliminate” debt:
· A phony arbitration award from
an arbitrator not authorized under the debt
agreement;
· The use of a nonexistent “trust
account” supposedly held in a person’s
name at the United States
Department of the Treasury or some other part
of the federal government;
· The substitution of a debt instrument
issued by a company, group, trust, or
person for the obligor’s
original note or account at the creditor;
· The substitution of a fictitious
U. S. government debt instrument, which
claims to be payable or authorized
by the United States Department of the
Treasury or a related person
or entity, for the obligor’s original note or
account at the creditor;
· The substitution of a fictitious
U. S. government financial instrument, which
references an account located
at the United States Department of the
Treasury or with a related person
or entity, for the obligor’s original note
or account at the creditor;
· The substitution of a fictitious
U. S. government debt instrument, which
requires an official to authorize
or refute the authenticity of the instrument,
for the obligor’s original
note or account at the creditor;
· A notice to the creditor that
the contract or note is illegal and, therefore,
the borrower does not
have to pay the debt and may even be entitled to a
compensatory award;
and
· A notice to the creditor that
the creditor does not have authority to “lend its
credit” to the obligor and
has violated the law, and therefore, the borrower
does not have to pay
the debt and may even be entitled to a compensatory
award.
These schemes have no substance in law or finance. No one can eliminate an obligation
to pay a debt, simply by paying someone a small fee, relative to the debt to be
eliminated. In the guise of educating borrowers, these schemes provide inaccurate
or distorted information about applicable laws and finance. Some examples of inaccurate
information from these schemes include the following:
· Borrowing is a con game whereby a borrower’s
debt is money “created” by
and owed to the borrower.
· A borrower’s debt is an asset
of the creditor owed to the borrower.
· Secret information or laws can
be used to eliminate debt.
· Banks and other creditors do not
have the authority to lend money or issue
credit.
· Three or more persons can set
up individual arbitration companies, create
an arbitration award for
a fraction of the debt owed, have the award certified
by the two other companies,
and submit the award and payment to the
creditor in satisfaction
of the total debt.
Any information that you have concerning these matters should be brought to the
attention of appropriate local or federal law enforcement. If the fraudulent scheme
is presented via the Internet or e-mail, contact the Internet Crime Complaint Center
(IC3). Please go to the IC3 Web site at:
http://www.ic3.gov
and follow the instructions for filing a complaint. Other
sources, such as individual contacts or seminars, should be reported to the local
office of the Federal Bureau of Investigation or local financial fraud law enforcement
organization. If the proposal was received via the U.S. Postal Service, please file
a complaint with the U.S. Postal Inspector Service by telephone at 1-888-877-7644,
by mail at U.S. Postal Inspection Service, 222 S. Riverside Plaza, Suite 1250, Chicago,
IL 60606-6100 or via e-mail at http://www.usps.com/postalinspectors/fraud/MailFraudComplaint.htm.
Additional information concerning this matter that you believe should
be brought to the attention of the OCC may be forwarded to:
E-mail: occalertresponses@occ.treas.gov
Mail: Office of the Comptroller
of the CurrencySpecial Supervision Division,
MS
6-4250 E Street, SW, Washington, DC 20219
Fax: (202) 874-5214
For additional information regarding other types of financial fraud, please visit
the OCC’s anti-fraud resource at: http://www.occ.treas.gov/fraudresources.htm.
/signed/
Richard C. Stearns
Director for Enforcement
& Compliance
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