Don’t Lie on Your Credit Card Applications

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[Disclaimer:  I'm not a lawyer, so nothing in this post should be considered as legal advice.  Please consult your lawyer for legal advice specific to your situation.]

Don’t lie on your credit card, or on any application for credit.  It is fraud and you could get prosecuted for it!  Sure, the chances of being prosecuted are extremely slim, and likely only if you don’t pay back your credit card debt and declare bankruptcy.

But why take the chance of spending time in jail?

Don't Lie on Your Credit Card Application

Don’t Lie on Your Credit Card Application

David Gaylord entered incorrect information about his income on 3 credit card applications from Advanta, Family First Federal Credit Union, & Bank of America.  According to this Department of Justice press release:

The defendant indicated that his income was anywhere between $90,000 to $122,000 when, in 2006, he reported to the Internal Revenue Service that his income was approximately $12,488.  Gaylord ended up leaving outstanding balances on the various lines of credit and filed for bankruptcy.

Gaylord charged up his credit cards, but was unable to pay them back and eventually declared bankruptcy.

He later pleaded guilty to bank loan application fraud which has a penalty of up to 30 years in jail and a $1 million fine.  He was actually sentenced to time served and 5 years of supervised release together with $46,914 in restitution.

Here’s a link to the specific section of the US code which makes lying on credit applications an offense.  And here’s a link to a study which suggests that 45 million folks (looks too high to me) deliberately manipulate their identity.

 What Does This Mean?

Quite simply:  don’t lie on your credit card applications.  Don’t say you’re employed when you’re not.  Or that you earn more than you actually do.

American Express occasionally conducts financial reviews where they will ask you to verify your income by sending them a copy of your tax returns.  And if your income doesn’t match your tax returns, they either slash your credit lines or close your credit cards.

Many banks will not prosecute you for fibbing on a credit card application, but they could prosecute to make an example of you or if you don’t pay back your debts and declare bankruptcy.

If you apply for a business credit card, don’t over state your income.  Many folks get approved for business credit cards even if they show annual revenue of $0.

Miles and Points are wonderful, but they’re not worth lying about.

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29 Responses to Don’t Lie on Your Credit Card Applications

  1. Somehow I feel there is something missing here in this story (and the related links).

    We don’t have “debtors prisons” in this country…so I’m curious as to how the charges were brought against this man for his filing from bankruptcy and somehow magically this case made the jump from “bankruptcy law” to “criminal law”.

    It is interesting to note though that credit card companies don’t ever ask you to prove how much you make when you apply for credit – or at least I’ve never been asked to produce pay stubs or tax paperwork when applying for a credit card. I recall only having to provide copies of my pay stubs over 20 years ago when I first applied for credit at a local credit union…a credit union that had an actual loan committee that made loan decisions like they should be – by collectively weighing the risks of providing a loan. I no longer see that – than again, I don’t apply for loans in the same way I did in the past.

    Anyway, interesting story… personally, I’ve never gone “too high” above my own income when applying for a credit card and have often wondered why no one ever questioned my income when applying for a credit card.

  2. @billybob What made it criminal is most likely a question of intent. When you make less than 15k in a year, report you made 100k and then proceed to rack up tens of thousands of dollars on credit cards it appears your intent was to defraud the bank. My guess is the government had more evidence to support that but it was not reported in the article.

  3. What Scott said.

    The only reason why this guy got into trouble is because he (with malicious intent) lied on his credit card applications and then proceeded to defraud the banks.
    I don’t think Chase or Bank of America or other CC are going to go after every person who adds a few extra thousand into his income on the application.

  4. in fact when youre asked about income on an application it allows you to “guess” yor projected income from investments etc.
    a person owning a business certainly isnt fraudulent for THINKING they will earn 10k more than they end up earning that year. Same with a person who has invesments that dont have a fixed percentage yield and they “guess” they will earn 8 not 4 percent. There would need to be proof of intent to lie AND to defraud a bank by gaining a credit card OR a higher credit limit. On a practical note, If you leave a zero balance and pay your cc in full every month I cannot imagine a bank prosecuting you while youre benefitting them. Same would go for a person who is consitently making payments with 17-29% apr lol. Theyll wait until you first stop paying !

  5. Now, if only similar penalties were placed against the WS Banksters, the National Debt would be extinguished this year…

  6. The way I see it is that a loophole is being exploited by people – I think the banks & creditors should be equally held responsible – just like the scrutiny on mortgage applications, similarly the onus is on the creditor to verify what has been put on the application is correct and that this person is creditworthy enough to be given loans to.

    this is a classic case where the banks and creditors are greedy – trying to make their bonus and commissions for issuing more cards and “acquiring” more customers. Surprised that the AG did not pull up the credit card issuer for this.

  7. But my understanding is that an unemployed spouse can use wife’s income because it house hold income correct? Somekind of new law?

  8. Robert Hanson

    Off topic, but it’s a need to know basis:
    Just read on another blog that Citi is getting even more difficult to churn. Supposedly, you can no longer get a second of a Citi card without first canceling the one you have. Worse, you need to cancel the old one and then wait 6 months before applying for a new one. I hope this is incorrect since that would put a huge hole in my upcoming churn plan. Please tell me this isn’t so…

  9. @Robert- I dont think anyone knows the truth about citi only that they are being very very strict recently. I doubt youll be able to have 2 of any of the same card with citi.

  10. A little off topic but I just had the strangest reconsideration call with Chase. Wife applied for both the Airtran card and Marriott card today from Chase. Instant approval on the Airtran but not on the Marriott.
    I called reconsideration for her (she talked to them first) and after the standard questions the rep agreed to close a Southwest card and move the 22K credit limit over to the new Marriott card. I got put on hold for a while while she did this and then the rep came back on and said that the application still needed “additional processing” and we would hear from them within 14 days.
    I’ve been thru several recon calls before and never had that happen. I figure she may be out of luck on this one

    Anyone else had experience with Chase on a reconsideration call before??

  11. traderprofit

    When I worked for an S&L in the 80′s, we made a home loan to a man, found out he lied about his income, he paid off the loan and we still turned it in for prosecution. No idea what happened.

  12. @traderprofit that’s great…and what about ALL those people who lied on their incomes for home loan int he 2004-2008 era of home bubble burst? They even called “stated income” loans, “liar liar” loans. It never gets old…

  13. Dear Jerry:

    YES. I had that happen to a chase sapphire preferred application I was helping my sister with (she was simply moving credit over from a card that earned nothing) and it needed additional processing. Long story short, they said they sent a letter saying the application was declined. After 3 or 4 phone calls, we got them to open the account. However, when it came, they were super cautious about the authorizations (aren’t we supposed to charge 3,000 in 90 days to get 40K ultimate rewards) It took no less than 10 30 minute calls, including one having us offer to send the card back to them or send in her drivers license. Good luck. I am going to have award time convincing my sister that 40 or 50,000 miles is worth all this hassle. Seems to be working find now….it’s kind of a cool card with noting on the frond and extra thick. Especially embarrassing when the guy at the restaurant thought we had a special card and then it was declined. Chase is getting very cautious.

  14. The last five words can be taken off of the title so that it just reads, “don’t lie.” If you don’t lie, you have nothing to worry about. Miles and points aren’t worth lying about and neither is anything else.

  15. i guess if you are sure that you are never gonna keep a balance on the card, and you have a nice score, whatever you put in the application doesnt really matter..

  16. @traderprofit
    Yet you and your cronies and the S&Ls committed crime after crime after crime and what happened? Massive bonuses and massive bailouts, eh? Hmmm, sounds familiar. Even a shrub in the white house!!! Hehehehe. History does repeat itself!! :))

  17. Interesting

    Interesting that Darius has advocated stretching the truth in the past about “businesses” and now all the sudden changed his tune. Maybe Chase who is giving him $250 per ink bold sign up is finally clamping down on those that give bad advice about credit, who are not licensed to give financial advice.

  18. Prosecutor

    MMS wrote, “but [banks] could prosecute to make an example of you…”

    That would be incorrect. Banks have no authority to prosecute. That’s for the local, state, or federal prosecutor’s office to decide. But, banks also run this country, so…

  19. Just to confirm, I gotten two business cards while reporting $0 income for the business and 0 years for the existence of it. The bank just called and asked if it was a new business.

  20. Dear Darius,

    I applied for citicard thank you preferred card three weeks ago and I was declined because of too many enquiries. I sent a letter to citibank executive office and still did not get any response. Today I made another phone call to citi reconsideration line and no luck. Before, citibank is the only bank gave me instant approval. Now I have totally 4 personal card and one business card with them. What should I do? Thanks!

    jenny

  21. @leslie – That is true in some states, but will soon be available to applicants across the US.

    @Robert Hanson - It wouldn’t surprise me, since Citi is tightening the screws. But I don’t have personal experience as yet. Can you point me to the source?

    @Interesting
    - Banks do issue credit cards for start-up businesses, so many folks qualify for them even if they have no revenue from the business as yet.

    @Prosecutor - I meant that the banks could make a recommendation or turn over information to prosecutors.

    @jennifer – Did you include your telephone number in the letter? They usually do call you back.

  22. It would probably be helpful to know this guy racked up over $340,000 on his CCs before declaring bankruptcy.

  23. Robert Hanson

    “Churning Citi Cards”, an email from the Frequent Miler Trips and Tricks Newsletter, May 6, 2013.
    “In fact, as I write this (April 2013), some people have speculated that it is now necessary to cancel a card at least 6 months before applying for it again. I don’t know whether that is true or not, but it probably is good practice. ”

    Strangely, I just skimmed thru the blog, which I don’t typically read, and I didn’t see a post on this in the last two months. So, yeah, a long way from definitive, that’s why I asked what you might have heard. My next app will be the AA MC, which I haven’t had for several years. But I was planning on waiting several days, then applying for the Citi HHonors 50K. Which I do currently have one of, but am planning on canceling at the 10 month point immediately before applying for another. No two identical cards I can live with, but having to wait 6 months after canceling to reapply would really hurt.

  24. bankruptcy court will not protect you from false statements on loan apps. Generally these types of cases would be prosecuted on wire fraud which, if strictly enforced would be terrible for trying to prevent others from accessing your private accounts. Wire fraud is much broader and from my (layman’s) understanding easier to prosecute than the loan and credit fraud.
    Strict enforcement of wire fraud would prosecute anyone creating a security answer with a false answer such as What is your mother’s maiden name? Typing in “Millionmiles”. Obviously, the strictest interpretation and enforcement is extremely unlikely, but if they are looking to pin someone, then you better have your i’s dotted and t’s crossed.

    The sad thing is they didn’t use these same laws to prosecute the mortgage brokers using crayon to fill in incomes and other information to make a loan look better so they could originate toxic loans. Even executives were involved with doctoring the mortgages.

  25. I did include my phone number but nobody call me. I prepare send them another letter.

  26. @Robert Hanson – I do know that you very likely will get the AA MC if you apply for the Gold MasterCard version with 30K miles (even if it is less than 18+ months from when you were last approved for the Citi personal AA cards). I also know that the business card approvals are tougher, but don’t have very much data on the Hilton or Thank you cards. Some readers say they have got another card while others say that they have to wait 4 to 6 months to get another one.

  27. traderprofit

    @j– My cronies? Do all employees of a bank get the tar and feather job? I was a low level employee, and I didn’t say “I” turned him in. It was not my call. Apparently if you fill out the 4506-T and the bank happens to send it in and find out you were lying–not sure by how much–then the institution is obligated by law to turn it in to the government. I think the Secret Service handles fraud on an insured institution.
    I know the feds prosecute every case of theft by a postal employee, no matter how small. I have heard about a case involving $50, and recall the Speaker of the House,Rostenkowski got 18 month for using $1200 in postage from the House Post office (I believe it was 1200 and he was Speaker).
    I’m not saying it’s appropriate to prosecute when there is no loss, but if you get caught in the government’s crosshairs, you can’t argue they are selectively prosecuting you.

  28. @traderprofit the fbi generally handles the fraud investigations along with the bank regulators (OCC). The bank regulators (OCC) generally don’t refer too many cases for prosecution since every politician allows their ability to regulate to diminish. Ever since GHWBush’s administration prosecuted the S&L’s, the number of OCC referrals for prosecution has declined with each successive presidency (Clinton, GWBush, Obama). It used to be that banks had at least some leeway in picking their regulator as well. The fbi focuses most of their limited resources on consumer fraud, instead of institutional.

  29. unknown001

    Two questions that are on my mind now-

    1. What about cards applied for before the new regulations required individual income be listed? I have a Costco AmEx that I’ve basically been walking on eggshells with because when I applied for it, the person signing me up told me if I applied right then I was allowed to include their income at the time, but not for much longer if I wanted to wait. I’m trying to lay low by not applying for any other cards with them and keeping a spotless history on my other cards, but I worry because it’s my oldest card (yes, I managed to get an AmEx as my first own-name card) and as such, I definitely don’t want to lose it.

    2. I am also in the unusual and fortunate situation of going to school, but having tuition and living costs paid for by family- as things are now, I run my tuition and other costs on my cards and get money from them to pay it off, which makes meeting minimum spend on personal cards a cinch twice a year. Do I get to count this as income? I did back when the AA 75k mile offers were in effect, but with this post, I’m kind of scared.

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