Confessions of a Credit Card Telemarketer

by Bob Sullivan

What if there were a way to have your credit card debt erased if you lost your job or became disabled? That's the pitch behind debt cancellation, a service offered by many credit card issuers and retailers.

Debt cancellation doesn’t come cheap: it costs between $1 and $2 per $100 balance. A consumer with a $3,000 balance, for example, could pay nearly $60 a month for debt cancellation service.

That might not sound like such a great deal, but thousands of consumers sign up anyway. Why? One telemarketer who sells the service told msnbc.com recently that there’s only one reason: Sellers intentionally confuse cardholders about the programs and their costs.

"I hate flat-out lying to someone, but that's exactly what we do, 150 calls a day," said the telemarketer, who requested anonymity out of fear of losing his job. "I have seen so many people ripped off that I had to attempt to let people know."

He works in tiny Pennington Gap, Va., a small Appalachian town near the Kentucky border that’s been hit hard by the economic downturn. But he works for some of the biggest firms in America. For the past year, the telemarketer has sold debt cancellation for Macy's retail credit cards issued by Citigroup, working for a third-party firm named Aon Integramark, which contracts work to a local firm, the Kavanaugh CallCenter Group. Aon is one of the world's largest insurance firms, with 37,000 employees and 500 offices in more than 120 countries.

"Are you realizing the power of debt cancellation?" the firm asks of banks and retail stores on its Web site. "These programs provide lending customers with new power and control over their finances -- especially in tough times that can affect anyone."

Quietly, a huge industry

Debt cancellation is a large and profitable business for credit card firms and retailers who issued private-label credit cards. In 2003, the Center for Economic Justice estimated that consumers paid $2.5 billion in fees for such programs, but card firms paid only $125 million in benefits. In other words, the issuers kept nearly 95 percent of the premiums paid.

In standard insurance products, firms pay out about 80 percent of the premiums they collect. The enormous margins in debt cancellation are possible because the programs are not considered insurance and are not regulated as insurance products, thanks to a 1986 Circuit Court ruling.

Few financial products are more profitable than unregulated insurance products, and the bonanza that is debt cancellation (sometimes called debt suspension) have led to aggressive sales techniques for the products. Those have been redoubled during uncertain economic times.

Debt cancellation – and its predecessor, credit insurance -- has a soiled reputation. The Internet is littered with complaints from consumers who say they were signed up for the service and billed hundreds of dollars without their consent.

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