Credit Card Bust Out Scheme.

A bust-out scheme typically begins with building up credit access, often through small, timely payments on multiple accounts or other methods of inflating perceived creditworthiness. Once the credit lines are high enough, the scheme involves deliberately exhausting the available borrowing limits and then disappearing or filing for bankruptcy. This is very different from an ordinary unpaid credit-card balance, which might result from unexpected circumstances, poor financial management, or an honest inability to meet repayment obligations.

What makes a bust-out scheme distinct is that the acquisition and subsequent use of the credit lines involved deliberate deception. It’s not just about failing to pay; it’s about fraudulently obtaining credit that the individual or group never intended to repay. As a result, federal authorities view these cases as white-collar crimes rather than civil matters between a creditor and borrower.

When investigating potential bust-out schemes, federal prosecutors and investigators examine various pieces of evidence to substantiate their allegations. This can include:

• Credit card applications and any misrepresentations of identity or income
• Identity information, such as the use of stolen or fabricated identities
• Transaction records showing the types of purchases made and how they were converted to cash
• Communications between alleged co-conspirators
• Digital forensics on devices used to apply for credit online
• Repayment history, especially the patterns of payments leading up to the bust-out

It is important to note that a later inability to repay a credit-card debt does not, in and of itself, establish credit-card fraud. While inability to pay may be a symptom of a scheme, it is not sufficient evidence of criminal intent. The legal system distinguishes between honest defaults and calculated fraud.

Criminal fraud generally requires proof of a culpable mental state. The government must demonstrate that the defendant intended to defraud the creditor when obtaining or using the credit. In many cases, an unpaid balance is merely the result of financial misfortune, not a deliberate scheme to defraud.

A lack of intent can undermine a fraud charge, particularly if the individual can show that they had permission to use someone else’s credit or if there was a mistake involved. If there was no intention to commit fraud, a criminal defense attorney can use this to challenge the government’s case and potentially resolve the matter without criminal charges.

Which lawyer handles criminal fraud, civil debt, or bankruptcy after a bust-out allegation?

Depending on the allegations against you, you may need to engage different types of lawyers:

• Criminal-Defense Lawyer: If you are suspected of conducting a credit-card bust-out scheme, you need a criminal-defense lawyer who can handle issues like government investigations, search warrants, law enforcement interviews, arrests, and criminal charges.
• Consumer-Debt Lawyer: If you are facing lawsuits or other legal enforcement actions due to unpaid credit-card balances and you believe you have good defenses, you need a consumer-debt lawyer who can handle collection disputes, creditor lawsuits, and other debt-defense matters.
• Bankruptcy Lawyer: If you are facing numerous lawsuits for unpaid credit-card debt and have no viable defenses, you may need a bankruptcy lawyer. Bankruptcy lawyers handle discharge, repayment plans, and other issues related to credit-card debt due to insolvency.

Keep in mind that different types of lawyers often have different skill sets and that a single lawyer may not appropriately handle your criminal defense and bankruptcy strategy. A criminal-defense lawyer, for example, may be well-equipped to handle an investigation but not ideal for bankruptcy law.

Regarding legal fees, these vary widely. The amount that a lawyer charges for handling a credit-card bust-out allegation depends on several factors, including:

• The location or jurisdiction of the defendant and/or the creditors involved
• The complexity of the allegations and the number of charges or lawsuits
• The lawyer’s experience and reputation in the specific practice area
• Whether litigation or extensive pre-trial efforts will be necessary

The more challenging and time-consuming a case is, the higher the legal fee will likely be. Attorneys with decades of federal experience and good reputations will also command higher fees than those with few or no years of federal experience.

How far does the $50 unauthorized-charge rule reach?

The Truth in Lending Act (TILA) limits the amount that consumers may be liable for “unauthorized” credit-card use to $50. This liability protection appears in the text of 15 U.S.C. § 1643, and is codified in the U.S. Code. As you can see in the statute’s text, Section 1643 addresses consumer liability for unauthorized use, and is not about criminal punishment for credit-card fraud. For example, there is no provision that reduces a person’s punishment for unauthorized credit-card use because they have no more than $50 in credit-card debt.

While the statutory liability for an unauthorized credit-card charge may be no more than $50, many credit-card issuers voluntarily provide zero-liability protection that goes even further than required. Reporting a lost or stolen credit card promptly can also affect liability for unauthorized use under the Truth in Lending Act.

While these are important issues to consider, they are not issues in bust-out cases. The issues involved in the bust-out case you are facing are entirely different, and the protections available will depend on the facts of your case. While they are both types of credit card matters, they are completely different. One involves consumer protections while the other involves criminal allegations.

The primary legal protections available in criminal cases (including cases involving allegations of credit-card fraud) are those that stem from the U.S. Constitution, the U.S. Supreme Court, and common law. These protections apply whether you have been accused of committing the fraud or whether you have been accused of enabling the fraud by some action or failure to act. They also apply if the fraud you’ve been accused of is a bust-out fraud or some other type of fraud.

At Spodek Law Group the strategy on a case starts the same day the client calls.

Can Police Investigate Alleged Card Theft Below $5,000?

No, there is no nationwide rule that prevents police from investigating alleged card theft below $5,000. And, as mentioned above, a $5,000 amount does not create a universal cutoff for initiating federal investigations either.

Law enforcement officers’ decisions regarding credit-card investigations will depend on several factors, including:

• The evidence that is (or is not) available
• Department reporting policies and procedures
• Law enforcement resources that are available to devote to cases involving smaller amounts
• The applicable state law

Law enforcement’s response to suspected thefts will also depend on whether the underlying offense is classified as a misdemeanor or a felony. The classifications of different types of theft are governed by different state larceny statutes, which use widely varying dollar amounts as their thresholds. For example, in Texas, theft of property is generally a state-jail felony if the value is $2,500 or more but less than $30,000; a Class A misdemeanor if the value is $750 or more but less than $2,500; a Class B misdemeanor if the value is $100 or more but less than $750; and a Class C misdemeanor if the value is less than $100.

You may be confused because you’ve heard information about the $5,000 number in the context of federal jurisdiction or state charging thresholds. As a matter of course, these are two different legal questions. Whether federal authorities have the jurisdiction to pursue a case is a separate matter from whether a specific charge, such as theft, is appropriate. While dollar amounts are involved in determining jurisdiction and charging decisions, this is a separate legal question from the law enforcement investigation and prosecution process.

Along with this, you should also be aware that civil creditors will be able to pursue cases against you even if the amount that you allegedly owe is small. Credit-card companies and other financial institutions can use their own resources to pursue creditors in court, and they can also use third-party debt-collection agencies to take action against you.

Which federal or state charges can follow an alleged bust-out scheme?

Under federal law, federal prosecutors can also pursue charges against a defendant for the types of crimes that are listed below. Section 15 U.S.C. § 1644 separately addresses certain fraudulent credit-card use affecting interstate commerce. Section 1644 addresses fraudulent use, attempted use, or conspiracy involving counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently obtained credit cards in transactions affecting interstate or foreign commerce, including transactions aggregating $1,000 or more within a one-year period.

Along with Section 1644, 18 U.S.C. § 1029 is a federal statute that is commonly used to charge offenses involving alleged theft of credit cards and other means of access. Section 1029 covers access-device conduct including, but not limited to,

• Intentionally and knowingly producing or using any specified counterfeit access device
• Possessing a means of access to any account or facility, produced without authorization
• Trafficking in means of access to account or facility
• Possessing unauthorized means of access to any account or facility, in whole or in part produced through fraud
• Knowingly possessing devices for producing unauthorized access devices

Offenses under Section 1029 generally require proof of knowing conduct accompanied by an intent to defraud, regardless of what specific access device is involved. A later inability to pay an amount obtained under a credit card or other form of credit is not enough to establish a Section 1029 violation on its own. The federal government must establish the intent to defraud that accompanies an unauthorized use, possession, transfer, or production of an access device to justify punishment under Section 1029.

Along with Section 1029, prosecutors may charge defendants with these additional federal crimes:

• Identity theft
• Computer fraud or other crimes involving computers
• Mail fraud
• Wire fraud
• Bank fraud
• Money laundering
• Tax fraud or tax evasion

In some cases, a criminal charge under one or more of these federal laws is justified, but in many cases, federal authorities overcharge based on their interpretation of the fact pattern. As a result, it is common for federal prosecutors to file numerous charges based on a single alleged credit-card scheme.

If you are facing any of these federal charges, it is important that you immediately contact an experienced criminal-defense attorney. While these charges can carry serious penalties, many of them are similar in nature and many of them can be defended against. When confronting criminal charges, you should be aware of your legal rights and options for defense so that you can make informed decisions about your case.

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 888 348 8028 to speak with our team.