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How To Spot And Stop Them
|Make sure you and your family
never fall prey to the schemes and cons that pervade all aspects of
American life. Learn to recognize con artists and send them on their
way before parting with any of your hard-earned money.
TABLE OF CONTENTS
Who Are The Victims?
Buzz Words And Tip-Offs
Areas In Which Con Artists Operate
Some Successful Con Games Described
Five Questions That Will Reveal A
Ten Steps For Avoiding Scams
Some Specific Suggestions For Telemarketing
Tip-Offs That A Caller Could Be A Crook
The successful con artist approaches victims with a nice guy
approach. Behind this friendly exterior is a shrewd psychologist who can
break down his victimsí resistance to his proposals. The typical con
artist has a good sense of timing and sincerely believes his victims
deserve to be taken advantage of.
Being well-informed and skeptical are your best means of protection.
This Financial Guide tells you how to spot a scam. It provides lists of
"buzzwords" used by con artists, strategies for knowing which
sales pitches are legitimate, and ways to fight back.
Anyone can be fall victim to a con game, even someone considered too
intelligent or sophisticated to be conned.
Many victims share certain characteristics. Often, but certainly not
always, they are older, female, and live alone. They trust others and
either need or want more income. Loneliness, willingness to help, and a
sense of charity are characteristics a con artist will exploit to gain a
The con artist exploits his victim's life insurance benefits, pensions
or annuities, retirement nest eggs, home equity, or other
assets. And he will usually have the willing cooperation of his victim.
It is difficult to spot a con artist by his looks alone. But his words
or expressions often give him away. These buzzwords include the following.
A red flag should go up immediately when you hear these:
Few things are really free.
If you are told it's a free vacation, free cellular phone, free gift,
investigate it. What else do you have to do to get the
"freebie?" Pay shipping and handling charges? A gift tax or
redemption fee? Get yourself to some distant destination? Sign up for a
month or two of service? Buy three and get the fourth free?
It's 50% off. Off of
exactly what? The regular retail price? The manufacturer's suggested
price? The bulk price? The sticker price? Ask for written verification of
the original price.
It's a going-out-of-business sale.
Stores along parts of Fifth Avenue in Manhattan have been going out of
business for years...and are still in business. Be particularly cautious
in the crowded tourist and shopping sections of any major city or resort.
Even when a company is honorably closing its doors, they could be posting
artificially high prices and then marking them down. Their incentive to
unload merchandise is strong. If you find what you believe is a good deal,
read the warranty carefully -- if something goes wrong with your CD player
or refrigerator, you cannot take it back if the store is closed. But can
you take the item to a service center or other designated repair place?
It's factory to you. We
match lower prices. It's the
lowest price in town. You have
been specially chosen. These are more often than not
just come-ons to get you into the store. Will you really shop around to
make certain it is the lowest price in town? Will you really ask
management to lower the price because another store has a better deal? You
need time and assertiveness to make these deals really work.
You've just won! Sweepstakes and
vacation prizes cram everyone's mailbox. Some are real, but many are not.
If you are asked to pay a fee in advance in order to be a possible winner,
donít grab the bait. This practice is known as an illegal lottery. And
those low cost vacation trips generally come with extra charges or
difficult-to-meet conditions; the Federal Trade Commission is constantly
issuing warnings about them. You may be asked to join a travel club, be
charged extra for in-season rates, or get air fare only one way. Be sure
Work at home and make a fortune. Some
of these offers are legitimate, but there are also hundreds that are
pyramid schemes requiring you to make a high initial investment that
you are unlikely to ever get back or requiring you to bring a number of
other people into the business. A recent deal that swept the country
involved sending $5 for information about stuffing envelopes at home. Once
you did that, you were asked for $200 to $500 for supplies, and then
another $25 or $50 for something else. . .the pyramid, made up of your
money, simply grew higher and higher.
We'll get you money for your down payment.
New home buyers are ripe for this one. The caller promises you money
for a pre-paid fee, which is often an outrageous amount -- $1,000 or more.
Later on he gets back to you with the surprising news that he just
couldn't get you credit. Now you're out the $1,000 and no closer to buying
These coins will put your child through college.
One year the Pennsylvania Attorney General's office received over 300
complaints from people who had lost money on phony coin deals; the average
loss per person was $10,000. The coins were never delivered. We do not
wish to discourage you from buying legitimate coins; just make sure to
use a reputable dealer.
We have an IRS-endorsed retirement plan. Phony
telemarketers have promised people a retirement with an IRS-approved,
IRS-endorsed plan. To set the record straight, the IRS does not endorse
anything. Don't put your money anywhere but the bank, mutual fund or
brokerage firm where you have an established IRA.
Cash only. Why is cash necessary for a proposed
transaction? Why not a check?
Secret plans. Why are you being
asked not to tell anyone?
Get rich quick. Any scheme should be
Something for nothing. A "retired"
swindler once said that any time you are promised something for nothing,
you usually get nothing.
Contests. Make sure they are not
"come-ons" to draw you into a money-losing scheme.
Haste. Be wary of any pressure
that you must act immediately or lose out.
Today only. If something is worthwhile today, it
is likely to be available tomorrow.
Too good to be true. Such a scheme is probably
neither good nor true.
Last chance. If it is a chance worth taking, why
is it offered on such short notice?
Left-over material. Left-over materials might also be
stolen or defective.
In fact, any cold call trying to sell you a half-acre ranch in some
faraway state, aluminum siding, a new chimney flue, or even tax shelters,
cattle, or anything else you know nothing about, should set off alarms.
We can clean up your credit card debt. The latest version of
this scam claims to give you a new credit report within 30 days for a flat fee.
However, after paying for the service, the scam artists call back, informing you
that they couldn't get get job done. Only you can repair
your credit report. Also, watch out for those who tell you that by obtaining
a new Taxpayer Identification Number or TIN, you get a new credit report. The TIN
is your Social Security number.
The possibilities are infinite, but some of the more common con games
you should be aware of involve the following (some of which are described
in more detail below):
- Home improvement: Home repair or
improvements you donít need that are recommended by a phony city
inspector, or termites or pests you donít have.
- Bank: A false bank examiner, or a pigeon
drop (false bank employee who takes your deposit or "tests
the honesty of bank employees" and thereby gets his or her hands
on your cash.
- Investment: Franchises, vending
machines, land frauds, theft of inventions, securities investments,
- Postal frauds: Chain letters, magazine
subscriptions, unordered merchandise, correspondence courses.
- Others: Bait and switch, charity rackets, computer
dating, debt consolidation, contracts, dance lessons, freezer plans,
psychic fraud, fortune tellers, health clubs, job placement, lonely
hearts, medical quackery, missing heirs, referral sales, talent
scouts, pyramid schemes, fake officials.
Most successful cons are modern versions of old schemes. For example,
the old "salting the gold mine" scheme is still being practiced,
but today's salting occurs in living rooms rather than
In the old ruse, mine owners would place a few gold nuggets in used-up
mines so they could sell them for inflated profits. In one recent scheme a
con artist bought six color television sets at the regular price from a
retail store, then sold them, still in their cartons, to six prominent
local persons for one-fifth of their original price. Later, he hired
several high school students as telephone solicitors to sell carloads of TV sets purchased new from a bankrupt retail
chain. When potential customers balked, the con artist used as references
the original six customers who had been salted. Before the
police were alerted, he collected almost $60,000.
The old "bank examiner" scheme still exists, and it is
working well, particularly among older widows. In this scheme, the con
artist, posing as a bank examiner, asks the victim to help him test the
honesty of bank employees by withdrawing substantial funds. When the funds
are handed over to the con artist for "examination," he issues
the victim a worthless receipt and disappears.
Postal authorities warn against mail-order swindles, such as phony
work-at-home schemes requiring cash deposits or payments. Among all arenas
for con-game activity, these are probably the most active and productive
for the con artist
The most insidious scam involves the perpetrator offering you false
legal assistance after he has already swindled you. For instance, you have
already lost money in an illegitimate deal and you get a call from someone
posing as a federal official or lawyer who claims he can get your money
back, for a fee or a percentage of the total amount.
Here are five simple questions that will expose even the most clever of
1. How did you get my name? If you fail to get a believable
answer, you can assume it was from the phone book, which suggests a
randomness in the selection of your name that should make you
2. What risk is involved? You know that every investment
carries some risk and a 100% fully guaranteed deal does not
3. Can you send me written information? Scamsters would
rather hang up and risk losing you than put something in writing. They
often try to get around this question by saying there isn't time.
4. Will you explain your offering to my lawyer? You will
either be told there isn't time, or the caller will ask for your
lawyer's address and never send anything. You can, of course, check this
out by asking your lawyer if he or she has been contacted by this
5. Can you give me references? Follow up on any you are
down the answers you receive; they may amaze you.
by some miracle you are satisfied with the answer to all five
questions, then make two phone calls, to:
The National Financial Fraud Exchange (800-822-0416) and the
North American Securities Administrators Association (202-737-0900).
They will run the person's name through their systems to see if any
complaints have been filed against him or if any SEC violations are
on record. Details on both groups given at the end of this column.
Here are 10 steps you can take to avoid becoming the victim of
a con artist:
1. Donít let yourself be hurried. No matter what you are told,
almost every good deal will remain a good deal for at least a week. The
small percentage of good deals that will not be available tomorrow is
not worth the risk needed to find out. There may be times when you will
want to make a prompt decision, but not when it is an irrevocable
financial commitment to buy a product or invest in something you are not
familiar with from a caller you don't know. Purchase decisions should
never be made under pressure.
2. Always ask for information by mail about the product, service,
investment or charity and about the organization selling it. For
legitimate firms, providing written information should not be a problem.
But con artists will not want to give you time to consider the
legitimacy of their offer, may not have written material available, or
may not want to risk a run-in with legal or regulatory authorities by
putting fraudulent statements in writing. Always insist on having enough
time to study any information provided before being contacted again or
agreeing to meet with anyone. Certain high-pressure telephone calls are
solely for the purpose of convincing you to meet with an even
higher-pressure sales person in your home.
3. Do not make any investment or purchase you don't fully understand.
Unless you fully understand what you are buying or investing in, you can
be burned. Swindlers seek out individuals who do not know what
they are doing, often attempting to flatter them into thinking
they are making an informed decision.
4. Ask what state or federal agencies the firm is regulated by
and/or is required to be registered with. If you get an answer, ask for
a phone number or address to verify it. If the firm says it is not
subject to any regulation, increase your level of caution.
5. Check out the organization. Swindlers want you to
assume the information they provide is accurate. They know most people
never bother to follow check references. It is far better to contact the
relevant agency and obtain the information while you still have your
6. If an investment or major purchase is involved, request that
information also be sent to your accountant, financial advisor, banker,
or attorney for evaluation. Swindlers do not want you to seek a
second opinion. Their reluctance or evasiveness could be your tip-off.
7. Ask what recourse you would have if you make a purchase and
are not satisfied. If there is a guarantee or refund provision, be sure
to get it in writing, and be satisfied that the business will stand
behind its guarantee before you make a final financial commitment.
8. Beware of testimonials that you may have no way of
investigating. They may involve nothing more than someone being paid a
fee to speak well of a product or service.
9. Don't provide personal financial information over the phone
unless you are absolutely certain the caller has a bona fide need to
know. That goes especially for your credit card number and bank account
information. The only time you should give anyone your credit
card number is when you have decided to make a purchase and want to
charge it. If someone says they will send a bill later but they need
your credit card number in the meantime, be cautious; first make certain
you are dealing with a reputable company.
10. If necessary, hang up or walk away. If you are simply not
interested, if you become subject to high-pressure sales tactics, if you
can not obtain the information you want or get evasive answers, or if
you hear your own better judgment whispering that you may be making a
serious mistake, just say good-bye.
The FTC (Federal Trade Commission) offers these tips to avoid
fraudulent vacation offers:
- Be wary of "great deals" and low-priced offers. Few
legitimate businesses can afford to give away products of real value.
- Don't be pressured into buying. A good offer today should be
- Ask detailed questions.
- Get all the information in writing before you buy anything.
- Don't give your credit card number over the phone unless you know the
The FTC has published a free brochure, Telemarketing Travel Fraud, to help
you avoid these scams. For a copy, contact the agency at 1-877-FTC-HELP,
or see its Website at http://www.ftc.gov, and
click on "Consumer Protection."
Most telephone sales calls are from legitimate businesses. But wherever
honest firms search for new customers, so do swindlers. Phone fraud is a
multi-billion dollar business that involves selling everything from bad or
non-existent investments to the peddling of misrepresented products and
services. Everyone who has a phone is a prospect; whether you become a
victim is largely up to you.
There is no way to determine whether a sales call is on the up and up
simply by talking on the phone. No matter what questions you ask or how
many you ask, skilled swindlers have ready answers. For this reason, sales
calls from persons or organizations that are unknown to you should always
be checked out before you actually buy or invest. Legitimate callers have
nothing to hide.
Phone swindlers are likely to know more about you than you know about
them. Depending on where they got your name in the first place, they may
know your age and income, health and hobbies, occupation and marital
status, education, the home you live in, what magazines you read, and
whether you've bought by phone in the past.
Even if your name came from the phone book, telephone con men and women
assume that you would be interested in having more income, that you are
receptive to a bargain, that you are basically sympathetic to people in
need, and that you are reluctant to be rude. As admirable as such
characteristics may be, they help make the swindler's job easier.
Swindlers also exploit less admirable characteristics, such as greed.
Fraudulent sales callers have one thing in common: They are skilled
liars and experts at verbal camouflage, and their success depends on it.
Many are coached to say whatever it takes by operators of the boiler rooms where they work at rows of phone desks, making
hundreds of calls. Indeed, most victims of
phone fraud think the caller sounded so believable.
Perpetrators of phone fraud are good at sounding as though they
represent legitimate businesses. They offer investments, sell
subscriptions, provide products for homes and offices, promote travel and
vacation plans, describe employment opportunities, solicit donations, and
the list goes on. Never assume you will know a phone scam when you hear
one. Even if you have read lists of the kinds of schemes most commonly
practiced, innovative swindlers constantly devise new ones.
Sadly, some families part with savings they worked years to accumulate
on the basis of little more than a 15-minute phone conversation, less
time than they would spend considering the purchase of a household
Be aware that the initiator of the phone call may be you.
It is not uncommon for phone crooks to use mailings and advertise in
reputable publications to encourage prospects to make the initial contact.
So just because you may have written or phoned for additional information
about an investment, product, or service does not mean you should be any
less cautious about buying by phone from someone you do know.
Victims of phone fraud seldom get their money back or, at best, no
more than a few cents on the dollar. Swindlers generally do the same thing
other people do when they get money; they spend it.
- High-pressure sales tactics.
- Insistence on an immediate decision.
- The offer sounds too good to be true.
- A request for your credit card number for any purpose other than to
make a purchase.
- An offer to send someone to your home or office to pick up your
payment, or some other way of getting your funds more quickly.
- A statement that something is free, followed by a
requirement that you pay for something.
- An investment that is without risk. Except for
obligations of the U.S. Government, all investments have some
degree of risk.
- Unwillingness to provide written information or references (such as
a bank or name of satisfied customers in your area) that you can
- A suggestion that you should make a purchase or investment on the
basis of trust.
|Shows the due dates for filing tax returns, reporting tax information
and taking certain actions to obtain a tax benefit.
Keep this list of sources and turn to it whenever you are tempted to
invest in something that sounds too good to be true. Or use it if you feel
you've been taken.
Government and Non-Profit Agencies
- Federal Trade Commission Tel. 1-877-FTC-HELP
The FTC has published a free brochure, Telemarketing Travel Fraud, to help
you avoid these scams. For a copy, contact the agency at 1-877-FTC-HELP.
- U.S. Office of Consumer Affairs:
The Consumer's Resource Handbook. This 120-page booklet is
the best available guide for fighting consumer fraud. It not only
tells you what steps to take if you've been taken, but has sample
complaint letters, addresses, telephone hot lines, government agencies,
etc. Topics covered are car repair, telemarketing, home improvement, home
financing, travel scams, rent-to-own, product safety, insurance, nutrition
labeling, door-to-door sales, and credit.
- National Highway Traffic Safety Administration:
This agency has recall and safety information on new and used cars,
child safety seats, tires, seat belts, bags, etc.
National Financial Fraud Exchange:
Collects public information about financial and real estate fraud from
some 100 government and private watchdog groups. Among those it taps: New
York and American stock exchanges, the five regional exchanges, the SEC,
National Association of Securities Dealers, Commodities Futures Trading
Commission, state real estate regulators, HUD, FDIC, the National Credit
Union group, mortgage bankers, appraisers, and even the U.S. Postal
Cost: $29 to run a name through the system. If the person you're
checking up on has been reported and is in the system, you'll be told on
the phone. A written or faxed report is an additional $5. An individual is
in the system if he/she has SEC violations or infractions, fines,
sanctions, other official complaints.
- U.S. Tour Operators Association
Members of the U.S. Tour Operators Association are required to post a
$1 million bond to protect consumer funds. For information and a list of
211 East 51st Street,
New York, NY 10022
National Fraud Information Center:
Sponsored by the National Consumers League, this manned hot-line will
help you deal with telemarketing fraud other types of scams. They have a
series of pamphlets on how to avoid fraud plus advice on specific
promotions, such as work-at-home offers.
Federal Trade Commission Public Reference Section
6th & Pennsylvania Ave, N.W.
Washington, DC 20580
Ask for the FTC's list of no nonsense publications. They are up-to-date
and on target. The FTC will also give you advice over the phone and refer
you to another source if need be to resolve a problem.
North American Securities Administrators Association
One Massachusetts Ave, N.W., Suite 310
Washington, DC 20001
Call NASAA for the phone number of your state's Securities Division;
then, use it to check out any promoter or sales person trying to sell you
an investment. Also, request a free copy of IRA Schemes.
The National Futures Association
200 West Madison Street
Chicago, IL 60606
Books And Other Publications
- "The American Lawyer: When & How to Use One," $2.50 + $1
shipping, is full of good information.
American Bar Association
750 North Lake Shore Drive
Chicago, IL 60611