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How to Identify Scams

How to Identify Scams
Mark Cappel
UpdatedMar 4, 2011
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    8 min read
Key Takeaways:
  • Last-dollar frauds target desperate consumers.
  • Six ways to detect a scam.
  • How to file a complaint if you are a scam victim.

Too Good to be True? How to Detect a Scam

You have probably seen the ads:

  • "Earn big money working on the Internet, guaranteed!"
  • "Be your own boss!"
  • "Make money at home stuffing envelopes!"
  • "Find jobs as movie extras!"

We have all heard the old adage, "If it sounds too good to be true, it probably is." However, for a desperate unemployed person running low on funds and hearing no replies to volleys of resumes sent to help wanted ads, the promise of income, even if far-fetched, is difficult to resist.

In early March 2011, the Federal Trade Commission (FTC) and local law enforcement official announced more than 90 actions against so called "last-dollar frauds" against companies that targeted unemployed people.

"The victims of these frauds are our neighbors — people who are trying to make an honest living," said David C. Vladeck, director of the FTC's Bureau of Consumer Protection. "Under pressure to make ends meet, they risked their limited financial resources in response to the promise of a job, an income — a chance at a profitable home-based business. But these turned out to be empty promises — and the people who counted on them ended up with high levels of frustration and even higher levels of debt."

6 Tips to Detect a Scam

Some opportunities are, of course, legitimate. The trick is knowing when an offer is real and viable, and when it is a fraud. The FTC offers these six tips to help consumers decide if an offer is legitimate or a figment of a criminal's imagination:

  1. Enter the company's name, or the name of the company's CEO or president, and words like "complaints" or "scam" into a search engine.
  2. Contact the state attorney general's office, local consumer protection agency, and Better Business Bureau, both where the business opportunity promoter is based and where you live, to see if complaints are on file.
  3. Interview previous buyers in person. This helps reduce the chance of being misled by phony references.
  4. Study any disclosure documents. Under the Business Opportunity Rule, which is enforced by the FTC, many business opportunity promoters are required to provide a document to potential purchasers that includes information about cancellation and refund policies, whether the seller has faced any lawsuits from purchasers or other legal actions alleging fraud, and contact information for references who have bought the opportunity.
  5. Do not rely on a refund policy or a money-back guarantee because you have "nothing to lose." No matter the guarantee, scammers will make it virtually impossible for you to get your money back.
  6. Legitimate business opportunities do not need to use high-pressure sales tactics: If an offer is good today, it should be good tomorrow.

Although a complaint record may indicate questionable business practices, a lack of complaints doesn't necessarily mean the company — or the opportunity — is legitimate. Unscrupulous dealers often change names and locations to hide a history of complaints.

Recent FTC Consumer-Related Actions

The March 2011 actions included:

  • Ivy Capital Inc. and 29 co-defendants. Ivy Capital's telemarketers asked consumers how much credit they had on their credit cards and then talked them into using a substantial portion of their available credit to purchase a business coaching program. But the promised products and services were worthless. Ivy Capital's "expert" coaches lacked the promised knowledge and experience, its Web site-building software programs did not work properly, and the lawyers and accountants the defendants said would provide assistance were nonexistent. Consumers paid up to $20,000 for a business coaching program and related products and services but got very little in return. On February 22, 2011, the FTC obtained an order that temporarily halted Ivy Capital's unlawful practices, froze assets, and appointed a receiver to take control of the corporate defendants.
  • National Sales Group. According to the FTC's complaint, they advertised nonexistent sales jobs with good pay and benefits on and other online job boards, and their telemarketers falsely told consumers the company recruited for Fortune 1000 employers and had a unique ability to get them interviewed and hired. The FTC alleged that the defendants charged fees they said covered background checks and other services, and often overcharged, taking $97 from consumers who had agreed to pay $29 or $38. They also charged some consumers recurring fees of $13.71 or more per month without their consent. According to other documents filed in court, the operation has generated more than 17,000 complaints to law enforcement agencies, online forums, and job boards. On February 22, 2011, the court temporarily halted the company's deceptive practices, froze the defendants' assets, and put the company into receivership.
  • Business Recovery Services LLC. Allegedly telemarketed products and services they falsely claimed would help consumers recover money they had lost to business opportunity and work-at-home operations, selling hundreds of variations of do-it-yourself kits tailored to particular schemes and priced up to $499. The FTC alleged that they violated the Telemarketing Sales Rule by misrepresenting the nature and effectiveness of their services. The Department of Justice filed the complaint on behalf of the Commission in U.S. District Court for the District of Arizona to bring a permanent halt to these practices.
  • Darling Angel Pin Creations. Allegedly claimed in online and newspaper ads that consumers who bought a starter kit could earn up to $500 per week assembling angel pins, with no experience, special tools, or sewing skills required. Consumers paid up to $45 to get started and sometimes paid hundreds of dollars more for supplies. They could not make any money until the company approved one of their pins, but nearly all pins were rejected regardless of quality.
  • Global U.S. Resources, a.k.a. American Publishing, American Publications, American Power Publications, ESM Group, and East Shore Marketing Group. allegedly misrepresented the earnings potential of their envelope-stuffing operation — one that claims you can earn money by putting circulars into envelopes. According to the FTC's complaint, consumers who paid a "refundable" fee, typically $40, did not receive the promised income ranging from $1,200 to $4,400 per week. Consumers typically received either nothing or a pamphlet listing other bogus work-at-home opportunities and instructions for marketing them. The court ordered the defendants to pay a $2.2 million judgment that, according to other documents filed in court, reflects the total amount of money lost by more than 50,000 consumers, and banned them from selling work-at-home opportunities.
  • U.S. Work Alliance, Inc., a.k.a. Exam Services. Falsely represented an affiliation with the U.S. Postal Service and claimed postal jobs were available in areas where their ads appeared. After a trial, the court entered an order requiring U.S. Work Alliance to pay a $1.6 million judgment that, according to other documents filed in court, reflects the total amount of money lost by consumers.
  • Preferred Platinum Services Network, LLC, a.k.a. Home Based Associate Program, The Postcard Processing Program, and PPSN LLC. Allegedly marketed and sold, for a supposed one-time $90 fee, a fraudulent work-at-home opportunity promising consumers they could earn $1 for each postcard they labeled. According to the FTC's complaint, no consumer earned the promised income, and few, if any, received any income at all. A court order imposed a $1.3 million judgment on the defendants that reflects the amount consumers lost.
  • Abili-Staff Ltd., a.k.a. Equitron LLC. Allegedly sold work-at-home opportunities online, promising that, in exchange for a fee of up to $89.99, consumers would have unlimited, password-protected access to more than 1,000 job listings and get a full refund if they did not get a job. They claimed to be "scam free" and "legitimate," but according to the FTC's complaint, Abili-Staff blocked customers from accessing its Web site before their membership expired, and exaggerated the number of jobs listed. The defendants will pay about $830,000 of a $3.6 million judgment, the balance of which is suspended due to their inability to pay.
  • Entertainment Work, Inc., a.k.a. Resource Publishing Co. and Resource Publishing of Delaware. allegedly sold trial memberships through a website by falsely telling consumers it listed local jobs as "extras" in movies and television. According to the FTC's complaint, the website in fact mainly listed jobs that were either out-of-date, unrelated to work as an "extra," or not local to the consumer. The settlement imposes a judgment of $2.4 million, which reflects the amount consumers paid Entertainment Work.
  • La Asociacion Nacional de Trabajo, also known as L.A.N.D.T., allegedly placed Spanish-language advertising throughout the country and told people who called them that, for a fee of about $25, they could begin earning up to $1,000 per week by working at home assembling products such as key chains. In response to an inquiry by the FTC staff, the company ceased all advertising and sales of its products.

The FTC offers Web pages to help consumers avoid eight common employment and money-making scams:

To file a complaint, go to the FTC Complaint Assistant page and the consumer complaint page at your state attorney general's office.