Credit Repair

Overwhelmed by debt? Hey, pay a company to get rid of it by saying it never really happened in the first place.

In early July, the AG's office obtained a temporary injunction against Lindsey's company, freezing its assets. Prosecutors accused Lindsey of violating the Texas Deceptive Trade Practices Act, and of acting as an unregistered and unbonded credit service organization, among other things. (While the AG's office certainly had reason to suspect Lindsey, the swiftness and ease with which prosecutors obtained an injunction is a bit troubling. Under questioning by Lindsey's lawyer, the AG's investigator said that, although she signed an affidavit affirming all the allegations in the AG's petition were true, she didn't actually investigate the Network's complaint against Lindsey. All the Texas Attorney General's Office needed to obtain an injunction was a single complaint and an investigator's rubber stamp).

Lindsey interpreted the injunction to say that he was not barred from offering debt services outright, only that he had to abide by state laws. So he proceeded under a new name, Freedom From Debt Alliance, convinced that this company was coloring within the lines.

By this time, the Network was already trying to get more money out of Lindsey's clients. In an e-mail to the consumers, Colleen Lock, the wife of the Network co-founder Robert Lock, wrote, "No one else has our vast nationwide network of attorneys, nor is anyone else capable of providing you this exceptional and proprietary process."

Bob Lindsey's business skyrocketed once he posted videos online.
Bob Lindsey's business skyrocketed once he posted videos online.
Robert Lock's company used the Texas Attorney General's Office to shut down a competitor.
Robert Lock's company used the Texas Attorney General's Office to shut down a competitor.

And that "exceptional and proprietary process" was this: After clients pay thousands of dollars, they receive an instructional booklet containing form letters they're supposed to send to the debt collector, and one letter where the client supposedly grants power of attorney to the Network. (Clients are also referred to The Fulfillment Center, a credit-restoration company operating out of a Maine drop-box by a massage-school graduate named Bruce).

The first form letter is an "affidavit" requiring the collector to swear that, under a host of laws including the Patriot Act, the collector has the authority to actually collect on the debt. If the initial letter somehow fails to make the collector quake in his or her boots, the follow-up letter demands that the collector once again prove that a lawful debt ever existed by vomiting a hodgepodge of Uniform Commercial Code citations and references to IRS forms, none of which have anything to do with unsecured credit card debt. Things just get weirder from there.

Because the Network has instructed the client not to make any payments in the meantime, the client is supposed to keep a detailed log of every collection call. The hope is that, at some point within the 12-24 months the client is supposed to do this, the collection company will violate the Fair Debt Collection Practices Act. Each violation, the Network tells its clients, is worth $1,000. Once enough violations are racked up, the Network will have one of its "vast network of attorneys" file a federal lawsuit against the debt collector. The client's contract with the Network allows the Network-provided attorney to keep up to 75 percent of any award.

Of course, 75 percent of nothing and 25 percent of nothing are about the same.

By the end of 2008, Americans' credit card debt reached $972 billion, with the average household credit card debt totaling $10,769, according to industry newsletter The Nilson Report.

And thanks to the contract's fine print, signing a deal with a card issuer can be like signing a deal with the devil. According to a study by, the contracts for American Express, Chase, Bank of America, First National Bank and US Bank allow the issuers to change annual percentage rates at any time, for any reason. Discover will raise rates after two late payments.

Also, zero-percent or low introductory rates can cause cardholders to have two interest rates on the same card, with payments going first to the balance accrued under the lower rate. The appropriately points out how Chase Bank puts it: "You may authorize us to allocate your payments and credits in a way that is most favorable to or convenient for us."

Contracts also allow credit card issuers to choose the arbitration panel, should any dispute arise. Historically, the majority of issuers just happened to pick the Minnesota-based National Arbitration Forum. In July, Minnesota Attorney General Lori Swanson sued NAF, accusing the company of working "alongside creditors behind the scenes [and] against the interests of consumers."

This enormous pool of debtors is the reason why "debt elimination" or "debt consolidation" companies are spreading like fungi online and on television. Debtors are promised a lifeline and a sympathetic ear, but mostly they wind up deeper in debt. After years of action by state attorneys general and Federal Trade Commission warnings, it's a wonder how anyone can still fall prey to these companies, but apparently the warnings underestimate some debtors' desperation.

Enter Bob Lindsey.

Thanks to a series of "educational" videos Lindsey posted on his site and on YouTube, by early 2009, he had become one of the Network's biggest contractors. The no-budget clips showed the gray-haired, avuncular 56-year-old sitting in his home, explaining how banks don't lend money, they create it out of thin air.

Critics call this the "no money lent" or "vapor money" theory. The thinking goes like this: Congress never gave banks the right to extend credit, so for all this time, banks have been acting ultra vires — beyond the scope of their charters. (Vapor money theorists like to curl up at night with a well-thumbed copy of Black's Law Dictionary). Credit is the opposite of money, and some theorists go so far as to say the only "real" money is gold and silver; cash is worthless because it's merely paper created by an illegitimate Federal Reserve.

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