Learn how to spot and avoid the most common telemarketing scams
Buying Club Memberships If you join a "buying club," you may be agreeing to purchase merchandise or services automatically at regular intervals - often monthly - until you cancel. If you accept a free offer, you also may find yourself being billed for a product or service you never ordered. Sometimes, if you agree to a "free trial" offer it activates a bill for magazines, CDs, or some other product that is delivered regularly. These are called continuity plans, and they can end up being very expensive. When a caller makes you an offer, listen carefully. If you don't understand the terms, ask the seller to repeat them. Write down important information, like the customer service telephone number or address. Questions to ask a caller offering a free trial or a buying club membership: - Is the free trial offer related to a membership, a subscription, or an extended service contract?
- Do I have to contact the company to avoid receiving any merchandise or services? If so, how much time do I have? What is my deadline?
- Who do I contact to cancel? How do I cancel? By letter? By phone? By email?
- Will I get other products associated with the free trial offer or the buying club? If so, will I have to pay for them or pay to send them back if I don't want them? How long do I have to decide before incurring a charge?
- How do I stop getting additional merchandise or services?
- Is there a membership fee? If so, is it refundable?
- Will you automatically bill my credit card for the fee or the products or services?
- Who is offering the trial — you or another company? What is the name and address of the company?
Gifting Club "Gotcha" Sometimes, people pay to join a "gifting club," billed in promotional materials as a private club with members eager to help new friends - often from within their own neighborhood or church group. In reality, the clubs are pyramid schemes that must continually recruit. When the clubs don't attract enough new members, they collapse. Most members who paid to join the clubs never receive the financial "gifts" they expected, and lose everything they paid to join. If you're approached about joining a club but you aren't sure if it's legal, the Federal Trade Commission reminds you to: - Consider that a legitimate gift has no strings attached and is not an "investment."
- Remember that a gifting club is not legitimate just because the ads say that members consider their payments a gift and expect nothing in return. This is an attempt to make an illegal transaction look legal.
- Be wary of success stories or testimonials of tremendous payoffs. Very few members of illegal gifting clubs or pyramid schemes ever receive any money.
- Take your time. Don't buckle under to a high-pressure sales pitch that requires you to join immediately or risk losing out on the opportunity.
Return to top. Charities & Fundraising Fraud Charities perform a variety of valuable services in our society. Many are facing increases in costs and demands and decreases in funding. To meet these financial challenges, charities are asking for larger contributions from more donors - and they're asking more often than they used to, often using telemarketing and direct mail solicitations to raise funds for their causes. At the same time, fraudsters are using the phone and the mail to solicit for fraudulent charities. Consider the following precautions to ensure that your donation dollars benefit people and organizations you want to help. They're good practices whether you're contacted by an organization's employees, volunteers, or professional fund-raisers, soliciting donations by phone, mail or in person. How to avoid charity & fundraising fraud - Donate to recognized charities with a history. Look up the organization at the Better Business Bureau's Wise Giving Alliance, Charity Navigator, or the American Institute of Philanthropy. Ask the caller "Are you calling on behalf of a charity? What is the name of your organization?"
- Look closely at charities with names similar to well-known organizations. Some phony charities try to gain your trust by using names that sound or look like legitimate organizations. Ask the caller "Can you point me to a Website or another resource for more information about your organization?"
- Avoid giving cash gifts. They can be lost or stolen. For security and tax purposes, it's best to pay by check, made payable to the charity, not the solicitor. Ask, "Can you give me a receipt showing the amount of my contribution and stating that it is tax deductible?"
- Be skeptical if someone thanks you for a pledge you don't remember making. If you have any doubts about whether you've made a pledge or previously contributed, check your records.
- Reject high pressure appeals. Legitimate fund-raisers don't put you on the spot to give. Ask, "Can you mail me more information about the charity and how it works?"
- Do not do business with any charity offering to send a courier or overnight delivery service to collect your donation.
- Consider the costs. When you buy merchandise or tickets for special events, or get "free" goods in exchange for giving, remember that part of your contribution was used to pay for it.
- Be cautious of promises of guaranteed sweepstakes winnings in exchange for a contribution. According to U.S. law, you never have to give a donation to be eligible to win a sweepstakes.
- A special word about appeals that tug at your heart strings, especially pleas involving patriotism and current events, before you give, make sure the organization has the infrastructure to deliver the help it is claiming to provide.
- After receiving a call asking for a donation, call the charity in question to find out whether it is aware of the solicitation and has authorized the use of its name.
Facts about Fire, Police, or Military Fundraisers - Simply having the words "police" or "firefighter" in an organization's name doesn't mean police or firefighters are members of the group or will benefit from the funds raised.
- An organization may claim it has ties with local police or firefighters, but that doesn't mean contributions will be used locally or for public safety. Call your local organization to verify the connection.
- Many solicitations for police and fire service organizations are made by professional fund-raisers who are paid to do the job.
- Donations to some police or firefighter groups may not be tax deductible.
The Department of Defense does not endorse specific war-related charities. Visit www.army.mil/operations/oif/FAQ.shtml a for more information about legitimate military relief societies that provide assistance to U.S. Service members and their families. Return to top. Credit and Loan Phone Scams Credit problems? No Problem!
You have been preapproved for an unlimited line of credit. We don't care about your past.
You deserve a loan! These are just a few examples of tempting "easy cash" offers that guarantee loans or credit cards, regardless of your credit history. Be cautious when dealing with credit and debt relief offers like these especially when they come by phone from strangers. Knowing the tell-tale signs of credit and loan scams can help protect you, and your money, from being taken. Some signs of a fraudulent credit or loan offer: - A lender who is not interested in your credit history. Callers who say "Bad credit? No problem!" or "No hassle guaranteed!" are not to be trusted. Why would someone out of the blue just call you up and offer you credit on easy terms?
- "Your loan is guaranteed." Legitimate lenders never "guarantee" that you will receive a loan before you apply.
- A lender who uses a copy-cat or "wanna-be" name. Crooks give their companies names that sound like well-known or respected organizations and create websites that look slick. Some scam artists have pretended to be the Better Business Bureau or similar reputable organizations.
- A lender who is not registered in your state. Lenders and loan brokers are required to register in the states where they do business.
- A lender who asks you to wire money or pay an individual. Don't wire or make any payment for a loan or credit card directly to an individual.
Credit Card Loss Protection Scams "I got a call from a woman who said I need credit card loss protection insurance. I thought there was a law that limited my liability for unauthorized charges to $50. But she said the law had changed and that now, people are liable for all unauthorized charges on their account. Is that true?" Don't buy the pitch. Telephone scam artists are lying to get people to buy worthless credit card loss protection and insurance programs. If you didn't authorize a charge, don't pay it. Follow your credit card issuer's procedures for disputing charges you haven't authorized. The FTC cautions consumers to avoid doing business with callers who claim: - You're liable for more than $50 in unauthorized charges on your credit card account
- You need credit card loss protection because computer hackers can access your credit card number and charge thousands of dollars to your account
- A computer bug could make it easy for thieves to place unauthorized charges on your credit card account
- They're from "the security department" and want to activate the protection feature on your credit card
Return to top. Government Grant Scams Because you pay your income taxes on time, you have been awarded a $12,500 government grant! To get your free grant, simply give us your checking account information, and we will deposit the grant into your bank account! You may receive a message like this, where the caller claims to be from a government agency or some other organization with an official sounding name. Or you may see an ad that claims you will qualify to receive a "free grant" to pay for education costs, home repairs, home business expenses, or bills. In any case, the claim is the same: your application for a grant is guaranteed to be accepted, and you'll never have to pay the money back. Offers of "money for nothing" grants usually are scams, whether you hear about them on the phone or see them in your local paper, a national magazine, or a slick looking website. How to Avoid Grant Scams - Don't pay any money for a "free" government grant. If you have to pay money to claim a "free" government grant, it isn't really free. The names of agencies and foundations that award grants are available for free at any public library or on the Internet. The only official access point for all federal grant-making agencies is www.grants.gov.
- Check the correct names of government agencies. Just because the caller says they're from the "Federal Grants Administration" doesn't mean that they are. There is no such government agency. Check your telephone directory.
- Take your time. There's no rush. Scammers pressure people to divulge their bank account information so that they can steal the money in the account. Always keep your bank account information to yourself. Don't share it unless you are familiar with the company and know why the information is necessary.
- Eliminate telemarketing calls you don't want by registering your number on the National Do Not Call Registry.
Return to top. Identity Theft & Telemarketing Your personal information is valuable. Protect it! Guard your: - Social Security number
- Bank and credit card numbers
- Driver's license number
Some criminals lie on the telephone to get your personal information. They may lie about who they are, claiming that they're from a legitimate company and that you have a problem with your account. Or they may pose as representatives of a bank or government agency and ask you to confirm your billing information. Once they have your personal information, they can use it to commit identity theft charging your existing credit cards, opening new credit card, checking, or savings accounts, writing fraudulent checks, or taking out loans in your name. Many people learn that their identity has been stolen only after the damage has been done. The Federal Trade Commission (FTC) wants you to know that you can minimize your risk of identity theft, especially by pre-texters - people who misrepresent who they are and why they're calling. If you think you're a victim of identity theft, take these steps IMMEDIATELY: - Place a "Fraud Alert" on your credit reports, and review those reports carefully. The alert tells creditors to follow certain procedures before they open new accounts in your name or make changes to your existing accounts.
- Close the affected accounts. Close any accounts that have been tampered with or established fraudulently.
- File a police report. This is an essential step in claiming your rights.
- Report it to the FTC. Your report helps law enforcement officials across the country in their investigations. Visit ftc.gov/idtheft or call 1-877-ID-THEFT.
Place a Fraud Alert* If you think your accounts have been compromised place an initial fraud alert on your credit report by calling one of these companies. This fraud alert lasts for 90 days. *Placing a fraud alert entitles you to free copies of your credit reports. Return to top. Medical Discount Plans Affordable Health Care Plan! Pre-existing conditions? No problem! No Deductible or Co-pays! Thousands of providers in our PPO network! Discounts up to 60%! Medical discount plans can be useful for consumers looking to save money on health care, but it is important to understand that these plans are not health insurance. If someone calls out of the blue to offer you a medical discount plan or if you see an ad for such a plan on the Internet or in a newspaper, these are some things you should know: Medical Discount Plans: Investigate the details. Some medical discount plans claim to provide big discounts from hundreds of providers for a wide range of services, from doctor visits and dental exams to hospital stays and prescription drugs. But many plans fail to make good on those claims. The FTC and many states have found that although some medical discount plans provide legitimate discounts that benefit their members, many take consumers' money and offer very little in return. If you receive an offer for a medical discount plan investigate the details before making a decision. - Ask for a list of providers who participate in its plan. If the plan doesn't provide a list of providers in writing promptly, consider taking your business elsewhere.
- Ask for a Web site where you can get more information. If your medical or dental providers don't participate, see whether other doctors in your area accept the plan and will give you the discount the plan promises.
- Investigate the details of any plan carefully. Pay special attention to the refund policy.
- Do the math. Try to calculate what your total payment for a discount plan will be for a given amount of time.
- Call your local consumer protection office, state Attorney General, or Better Business Bureau to find out whether other consumers have complained about the business offering the discount plan.
Return to top. Reloading Phone Scams If you've been a victim of telemarketing fraud once, chances are you're on a list to be called-and scammed-again. Telephone hucksters call these 'sucker' lists. They include names, addresses, phone numbers, and other information, and they are created, bought, and sold by crooks. They're considered invaluable, because dishonest promoters think that consumers who have been tricked once are likely to be tricked again. How Reloading Scams Work Double scammers are known as "reloaders." They use several methods to rip off consumers: - They call - claiming to work for a government agency, a private company, or a consumer organization that could recover money you lost or a product or prize that hasn't been delivered yet - for a fee. The catch is that the second caller is following up on the first fraud, and may even work for the company that took your money originally. If you pay the recovery fee, you will have been fooled twice. You can expect more calls - and more convincing stories. Report the company to the FTC.
- Another scam uses prizes as incentives to get you to continue to buy merchandise. If you make one purchase, chances are you will get a second call claiming you're eligible to win a more valuable prize if you keep buying. The second caller makes you think that buying more merchandise increases your chances of winning. If you act on the offer, you may be called yet again with the same sales pitch.
How to recognize a reloader - Their offer requires a "recovery fee." Legitimate organizations, like national, state, and local consumer enforcement agencies and non-profit organizations, do not charge or guarantee results for their services to help you get your money back from a telemarketing fraud.
- Their offer requires you to wire money or send it by a courier.
- They contact you several times to urge you to buy more merchandise to increase your chances of winning so called valuable prizes.
Return to top. Sweepstakes & Lotteries Congratulations, it's your lucky day! You've just won $5,000! If you get a phone call or a letter with a message like this, be skeptical. Scam artists often use the promise of a valuable prize or award to entice consumers to send money, buy overpriced products or services, or contribute to bogus charities. People who fall for their ploys may end up paying more and more for the products — if they ever get them at all. How to avoid prize and sweepstakes fraud The next time you get a "personal" telephone call or letter telling you "it's your lucky day," remember: - Don't pay to collect sweepstakes winnings. If you have to pay to collect your winnings, you're not winning — you're buying. Legitimate sweepstakes don't require you to pay "insurance," "taxes", or "shipping and handling charges" to collect your prize.
- Hold on to your money. Scammers pressure people to wire money through commercial money transfer companies because wiring money is the same as sending cash. When the money's gone, there's very little chance of recovery. Likewise, resist any push to send a check or money order by overnight delivery or courier. Con artists recommend these services so they can get to your money before you realize you've been cheated.
- Phone numbers can deceive. Some con artists use Internet technology to call you. It allows them to disguise their area code: although it may look like they're calling from your local area, they could be calling from anywhere in the world.
How to recognize a reloader - Their offer requires a "recovery fee." Legitimate organizations, like national, state, and local consumer enforcement agencies and non-profit organizations, do not charge or guarantee results for their services to help you get your money back from a telemarketing fraud.
- Their offer requires you to wire money or send it by a courier.
- They contact you several times to urge you to buy more merchandise to increase your chances of winning so-called valuable prizes.
Fake Check Scams It's your lucky day! You just won a foreign lottery! The caller says so. And they are sending a cashier's check to cover the taxes and fees. All you have to do to get your winnings is deposit the check and wire the money to the sender to pay the taxes and fees. You're guaranteed that when they get your payment, you'll get your prize. There's just one catch: this is a scam. The check is no good, even though it appears to be a legitimate cashier's check. The lottery angle is a trick to get you to wire money to someone you don't know. If you were to deposit the check and wire the money, your bank would soon learn that the check was a fake. And you would be out the money: The money you wired can't be recovered, and you're responsible for the checks you deposit - even though you don't know they're fake. International Lottery Scams “Congratulations! You may receive a certified check for up to $400,000 U.S. CASH! Tax free! Your odds to WIN are 1-6.” “Hundreds of U.S. citizens win every week using our secret system! You can win as much as you want!” Sound great? It's a fraud. Scam operators — often based in Canada — are using the telephone to entice U.S. consumers to buy chances in high-stakes foreign lotteries from as far away as Australia and Europe. These lottery solicitations violate U.S. law, which prohibits the cross-border sale or purchase of lottery tickets by phone or mail. The FTC has these words of caution for consumers who are thinking about responding to a foreign lottery: 1. If you play a foreign lottery —on the telephone or through the mail — you're violating federal law. 2. There are no secret systems for winning foreign lotteries. Your chances of winning more than the cost of your tickets are slim to none. 3. If you purchase one foreign lottery ticket, expect many more bogus offers for lottery or investment “opportunities.” Your name will be placed on “sucker lists” that fraudulent telemarketers buy and sell. 4. Keep your credit card and bank account numbers to yourself. Scam artists often ask for them during an unsolicited sales pitch. 5. The bottom line: Ignore all phone solicitations for foreign lottery promotions. If you receive what looks like lottery material from a foreign country, give it to your local postmaster. Return to top. Travel Telemarketing Scams Have you ever been tempted to sign up to win a "free" trip at a fair, a trade show, or a restaurant? If you do so, you may get a phone call, a letter, an unsolicited fax, an email, or a postcard telling you that you've won a vacation. Be careful. It may be a "trip trap." The vacation that you've "won" likely isn't free. And the "bargain-priced" luxury travel package you're offered on the telephone or Internet may not fit your idea of luxury. While some travel opportunities sold on the phone or offered through the mail, Internet, or fax are legitimate, many are scams. The word "offer" can be a clue to hidden charges. How to Avoid Travel Scams - Verify and clarify. Call to verify your reservations and arrangements. Get the details behind vague promises that you'll be staying at a "five-star" resort or sailing on a "luxury" cruise ship. When you have the names, addresses, and telephone numbers of the airlines, car rental companies, and hotels you'll be using, confirm all arrangements which each vendor for yourself.
- Put it on paper. Get the details of your vacation in writing. Get a copy of the company's cancellation and refund policies, and ask "What if...?" Consider whether some form of travel cancellation insurance may be appropriate.
- Use a credit card to purchase your trip. If you don't get what you paid for, you may be able to dispute the charges with your credit card company. However, don't give your account number to any business until you've verified that the business is reputable.
- Avoid a travel club flub. Ask questions before joining a travel club. Sometimes, a "free trial" membership can result in unauthorized charges on your credit card. Find out what you'll get for your money and how you can cancel.
- Slow down if you've won a "free" vacation. Scam artists may tell you you've won a "free" vacation, but then claim to need your credit card number for "verification." Tell 'em to take a hike. If the promotion is legitimate, you never need to pay for a prize.
Return to top. Work-at-Home & Business Opportunities Scam artists lure both would-be entrepreneurs and people looking for home-based work with false promises of big earnings for little effort. They pitch their fraudulent offerings on the phone, and through websites, infomercials, and classified ads that are designed to get you to call them. If you receive a call from a telemarketer offering you a way to make lots of money, remember that financial success generally requires hard work. Think twice before you invest your money or your time. Here are some tips to keep in mind: If you're considering a work-at-home opportunity: Legitimate work-at-home program sponsors should tell you — in writing — what's involved in the program they are selling. Ask the promoter: - What tasks will I have to perform? (Ask the program sponsor to list every step of the job.)
- Will I be paid a salary or will my pay be based on a commission?
- Who will pay me?
- When will I get my first paycheck?
- What is the total cost of the work-at-home program, including supplies, equipment, and membership fees?
- What will I get for my money?
Then ask yourself whether the claims are based on wishful thinking — or real market conditions. The answers to these questions may help you determine whether a work-at-home program is appropriate for your circumstances, and whether the claims can be realistic. If you're considering a business opportunity or a franchise: A franchise or business opportunity seller must give you a detailed disclosure document at least 10 business days before you pay any money or legally commit yourself to a purchase. Make sure you get this disclosure document before you agree to invest. Use the disclosures in this document to compare business options or simply for information. The disclosure document includes: - Names, addresses, and telephone numbers of at least 10 previous purchasers who live closest to you.
- A fully audited financial statement of the seller.
- Background and experience of the business's key executives.
- Cost of starting and maintaining the business.
- The responsibilities you and the seller will have to each other once you've invested in the opportunity.
Before you buy a business: - Study the disclosure document and proposed contract carefully.
- Interview current owners in person. (They should be listed in the disclosure document.) Visiting them in person may help you identify any who are "shills" - people paid to give favorable reports.
- Investigate claims about your potential earnings. Some companies may claim that you'll earn a certain income or that existing franchisees or business opportunity purchasers earn a certain amount. Companies making earnings representations must provide you with the written basis for their claims. Be suspicious of any company that does not show you in writing how it computed its earnings claims.
- Sellers also must tell you in writing the number and percentage of owners who have done as well as they claim you will. Keep in mind that broad sales claims about successful areas of business - "Be a part of our $4 billion industry," for example - may have no bearing on your likelihood of success. Also, recognize that once you buy the business, you may be competing with franchise owners or independent business people with more experience than you.
- Listen carefully to the sales presentation. Some sales tactics should signal caution. For example, if you are pressured to sign immediately "because prices will go up tomorrow," or "another buyer wants this deal," slow down. A seller with a good offer doesn't use high-pressure tactics. Under the FTC's Franchise and Business Opportunity Rule, the seller must wait at least 10 business days after giving you the required documents before accepting your money or signature on an agreement. Be wary if the salesperson makes the job sound too easy. The thought of "easy money" may be appealing, but success generally requires hard work.
- Get the seller's promises in writing. Any oral promises you get from a salesperson should be written into the contract you sign. If the salesperson says one thing but the contract says nothing about it or says something different, it's the contract that counts. If a seller balks at putting oral promises in writing, be alert to potential problems and consider doing business with another firm.
- Consider getting professional advice. Ask a lawyer, accountant, or business advisor to read the disclosure document and proposed contract. The money and time you spend on professional assistance, and research - such as phone calls to current owners - could save you from a bad investment decision.
Return to top. Source: Federal Trade Commission press release.
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