Like some other large banks, this one is creating money out of thin air (checkbook money), which is against Federal Reserve regulations. The Supreme Court has ruled that a bank can lend its assets, but not its credit. This is a major scam.
When I sent them a letter questioning this procedure they refused to comment. I have sent them several letters and have yet to receive a sensible reply. They did call me several times asking for money and pretending ignorance.
They are violating banking and contract laws. A contract (for a credit card or anything else) is only valid if it contains both full disclosure and consideration.By failing to disclose that they were not actually lending money, and IN FACT not lending money, their contract with consumers is invalid. But when I pointed this out and asked for an explanation, they refused to answer.
Basically, it works this way:
You apply for a credit card with a limit of, for example, $500. The bank then creates a voucher for that amount, opens an account in your name, and lends you the $500 (or less) that it just created with nothing more than a computer entry (there is no actual money involved). They then charge you for the account and tack on fees for something that doesn't even exist except inside a computer. That is an admittedly simplified explanation, but accurate enough.
So, when I caught them doing this, and they failed to refute the charge, I cancelled the account on the basis of breach of contract. I then threw the matter into dispute. They responded by putting false information on my credit reports regarding late payments—in violation of the FCRA. I pointed out to them (all communications by certified mail) that they were breaking laws and credit statutes. They responded by putting ANOTHER account on my credit reports of a lost card with past due balances. They completely invented that one.
Naturally, the credit bureaus verify account information by contacting the creditor. No amount of legal documentation sent to them affects anything. That is because their creditors are paying them to list any information the creditor wants on a file and they will not respond to the consumer because that would cost them money.
My next step is to contact the California Attorney General's Office and the FTC. We'll see what happens.
If what I have said above seems obtuse, I apologize. This is a complex issue and I have had to truncate my report here in order to avoid ending up with a treatise on the Federal Reserve, US banking practices, and contract law. However, I will be glad to answer questions if anyone has any.
Tony
Bakersfield, California
U.S.A.
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