_Prevention of Fraud
Fraud can be defined as “intentional deception.” Each year, billions of dollars are lost by
individuals and businesses due to fraudulent practices or activities.
Persons who commit fraud (can also be referred to as “con,” confidence game,” “scam,” and
“flim flam”) have somewhat different demographic characteristics than most other types of
criminals. Forty-three percent of those arrested for fraud are female, which is far greater than
the proportion of females arrested for other crimes. Approximately 41% of fraud arrests are
for middle aged persons (30 - 50 years old). Of fraud arrest, 85% are white and 16% are
black. Thus, of persons arrested for fraud, they are generally older, white and a significant
proportion are female.
Con Games
Con games involve face to face contact between the con artist and the victim. There are an
infinite number of con games, with more being devised each day. The following are a
number of examples of con games currently being employed:
� “Bank Examiner” Scam
There are many versions of this con game, but the basic premise is the same. A person
posing as a bank or law enforcement official will ask a victim to make a withdrawal from
a bank account in order to detect wrongdoings at the bank or to catch a criminal. Most
often, the culprit makes telephone contact at home. After identifying himself as the bank
examiner or law enforcement officer who is investigating a dishonest employee at the
victim’s bank, he requests the victim to make a cash withdrawal and to meet him at a
predetermined location. A variation of this scheme occurs when a cashier’s check is
provided for deposit before the withdrawal is made.
How to avoid:
_ Do not discuss finances with strangers.
_ Do not withdraw money on the advice of strangers.
_ Immediately report to the police or your bank’s security department anyone
telephoning and claiming he is a bank examiner.
NOTE: Under no circumstances will bank officials, police, or the FBI request you
to withdraw funds.
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� The Pigeon Drop
Two culprits are involved —— one will approach a victim, usually in a public area such
as a shopping center, and strike up a friendly conversation; the second will approach
telling of a large sum of money or valuables that were found. The victim, the “new
friend” and the “finder” agree that the money or valuables will be split, but only after the
victim, the “new friend” and the “finder” put up money as a sign of good faith. Once this
is done, the good faith, the money and the new found friends will rapidly disappear.
How to avoid:
_ Do not turn any money over to strangers looking for a quick profit.
_ Greed can blind you. Don’t expect something for nothing.
� Jamaican Switch
This is a very common con. The Jamaican Switch involves two con men. The first will
approach you claiming to be new in town and looking for a hotel or boarding house. He
may talk with a foreign accent and will display a large amount of cast. The second con
man approaches and cautions the first con man to hide his money while he goes to look
for a place to stay. He will insist that you place your money in the envelope to show good
faith. The con man will then pretend to show you how to hold the money, switching the
envelope. The con men leave and you soon find that the envelope contains only cut-up
newspaper.
How to avoid:
_ Do not turn any money over to strangers looking for a quick profit.
_ Greed can blind you. Don’t expect something for nothing.
� Three Card Monte
Three Card Monte is another bunco scheme played by three swindlers and is similar to
the Jamaican Switch. It is a basic skill game played with three cards. The victim is
enticed or pressured to play the game and must pick the odd card to win. You cannot win
at this game.
How to avoid:
_ Beware of strangers offering to pay a large sum of money for a ride.
_ Beware of strangers who exhibit a large roll of money.
_ Don’t gamble for any reason with anyone you just met on the street.
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� Home Improvement Frauds
Discount roof cleaning, driveway repairs, electrical work and plumbing repairs are
common scams. Some unscrupulous contractors prey on the elderly by quoting an
extremely low price for jobs and upon completion demand a higher price.
How to avoid:
_ Check out contractors with Better Business Bureaus and state or local licensing
agencies.
_ Don’t be high pressured into signing any agreements or contracts.
_ Take bids for the work from several contractors.
_ Never sign a certificate of completion unless all work is performed to your
satisfaction.
_ Always fill out checks yourself.
_ Never sign and give a contractor a blank check.
_ All work to be completed must be in the contract. “Promised Work” is not valid for a
complaint.
� Credit Card Fraud
Credit card frauds continue to increase. The most common consumer oriented frauds are:
_ Imprinting a larger amount than the actual purchase.
_ Imprinting two vouchers —— one for the actual transaction, the other to be used later
when a fraudulent amount is entered, a signature is forged, and the voucher is
submitted for payment.
_ Using valid credit card numbers obtained from the carbon paper inserts of the
voucher for mail or phone orders.
How to avoid:
_ Compare the imprinted and handwritten amounts before signing.
_ Retain all vouchers and reconcile your account monthly.
_ Retain and destroy all carbon paper inserts.
_ Report lost cards immediately.
Current Fraudulent Activity
� West African (Nigerian) Based Letter Schemes
Nigerian based letter scheme frauds have been circulating in North America since the late
1980’s. The letters target individuals, businesses, learning institutions and governments.
Unsolicited Nigerian fraudulent letters promote several products, services and investment
opportunities such as:
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_ Real estate;
_ Oil products;
_ Over-invoiced contracts and other contract fraud;
_ Distribution of monies from wills and currency conversion, etc.
Most of the fraudulent letters begin with an opportunity to receive a substantial return on
investment. Once the victims participate in the plan, the Nigerian promoter requests that
front monies be deposited in a bank account for transfer overseas. Once hooked, the
victims commit more and more money to the schemes as they do not want to lose the
money they have already invested.
Importance is always placed on urgency and secrecy in the negotiations. Anyone who has
received an unsolicited Nigerian letter should be urged to carefully research available
information before considering doing business in Nigeria.
� Pyramid Schemes on the Internet
There are a number of pyramid schemes on the Internet. Many of these schemes promote
themselves as multi-level marketing opportunities. Do not be fooled. Legitimate multilevel
marketing ventures sell goods or services through distributors. The pyramid
schemes concentrate on commissions that you earn for signing up new members who
then sign up additional new members, and so on. If the emphasis is on new members
rather than goods or services then it may be a pyramid scheme.
The United States Federal Trade Commission (FTC) caution consumers about clubs or
programs that promise quick money for recruiting new members. Beware of the promise
of easy money or “get rich quick” schemes through a downline, matrix or binary pyramid
plan. Do not fall for promises of quick money through new member recruiting instead of
sales of real products or services.
� Long Distance Telephone and Pager Fraud
There is a telephone fraud scam with calls unknowingly going to pay per minute
locations abroad. The scam uses pagers, voice mail and answering machines. The victims
receive a message that they are to call an unfamiliar number with an area code. Once the
victim calls the number they are transferred, put on hold and kept on the line as long as
possible. Meanwhile the minutes and dollars add up as the area code is used by an offshore
foreign telephone company. The objective of the criminals is to keep the caller on
the line as long as possible.
The scam artists receive an inflated rebate from the foreign telephone company for each
call to the telephone number. A complicating factor is that the area code is legitimate.
Prosecution is difficult, because the victims voluntarily initiate the call. The local
telephone companies and long distance providers have trouble helping the victims for the
same reason —— the victim places the call and is therefore responsible.
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Telemarketing Fraud
Use of the telephone for the sale of a wide range of services or products can be an effective,
legitimate marketing tool for any number of businesses. However, the legitimacy provided
by the extensive number of well known companies involved in telemarketing has provided
an excellent opportunity for criminals. Criminals use the same techniques as the legitimate
companies, but hide behind the anonymity of the telephone and attempt to defraud thousands
and thousands of persons each year.
A few basic suggestions should be enough to ensure that individuals do not fall victim to the
activities of fraudulent telemarketers:
� DO NOT believe that everyone calling with an exciting promotion or investment
opportunity is trustworthy, especially if you do not know the caller or their company;
� DO NOT invest or purchase a product or service without carefully checking out the
investment, product, service and the company;
� DO NOT be afraid to request further documentation from the caller so you can verify the
validity of the company;
� DO NOT be fooled by the promise of a valuable prize in return for a low cost purchase;
� DO NOT be pressured to send money to take advantage of a “special offer or deal.”
� DO NOT disclose information about your finances, bank accounts or credit cards (not
even the credit card expiration date).
Business Fraud
� False or Deceptive Invoices
Businesses sometimes receive invoices requesting payment for merchandise never
ordered or services never performed. As a practice, they should examine each invoice
carefully and check to ensure it pertains to items or services that were ordered and
received.
� Advance Fees
Be wary of any offer of “guaranteed loans.” Some financial arrangers convince
borrowers that they can guarantee hard-to-secure loans with the payment of an advance
or finder’s fee. The “up-front” money (or advance fee) is said to be needed to cover the
costs for arranging the loan. The service fee is paid, but the arranger disappears and the
loan is never received.
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� Classified Directories
Fraudulent directory schemes succeed because the promoters misrepresent their
directories by associating them with well known similar publications. Unsuspecting
business are approached to pay to advertise in a worthless or non-existent directory.
Ensure that the listing you are paying for is one to which you have previously subscribed
or is beneficial to your advertising needs.
� Business Ventures
A promoter’s offer of a free trip to a franchise headquarters should be viewed with
caution. It may be part of a ploy to induce a financial commitment. The validity of
fabulous success stories should be verified with other franchise holders. Being pressured
to “invest today” to avoid losing out on a certain opportunity or location may be a clue
that the franchiser is not operating honestly. You may end up purchasing a franchise or
merchandise which does not meet your expectations.
� Distributorships
Be cautious of any promoter who appears to be more interested in selling distributorships
than promoting sales of the product or service to the consumer. It could be a “pyramid”
type distributorship that profits more from sponsoring new distributorships than selling
the product. Not all multi-level distributorships are fraudulent in nature, many are
legitimate businesses, but caution should be exercised before investing in a business
venture of this nature.
Prevention
There are many things that you can do to reduce the risk of falling victim to a fraudulent
business scheme. The best fraud prevention practices require that you take responsibility
to become an informed investor . . .
_ DO exercise caution, restrain your impulses: watch out for the smooth talker or the
offer of gifts. Gifts are often used as a distraction to relax the buyer’s judgement or
code of standards.
_ DO question all proposals and exaggerated claims for services, products or prices.
_ DO investigate before investing. Know who you are doing business with. Do your
home work, check with the Better Business Bureau, or Chamber of Commerce.
Check product reliability with other investors and purchasers.
_ DO read and understand the details of any contract that you sign. Do not be rushed
into signing. Get all claims and guarantees in writing.
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Theft of Telecommunications
The theft of long distance telephone service amounts to billions of dollars annually. Any
individual or business can be the victim of long distance thieves.
� Crime Prevention for Individuals
_ Never leave your calling cards unattended.
_ Protect your calling card number and keep it confidential.
_ Always maintain the confidentiality of your card information.
_ Always check your monthly statement.
_ When using your calling card in public, be aware that people near you may be
“shoulder surfing” to observe the card information for their use.
_ If you own a cellular phone, ensure that all calls billed to you were in fact made from
your telephone. Thieves may “clone” or copy your phone and have their calls billed
to you. To minimize the risk, keep your cellular phone off when you are not
expecting a call.
_ Report lost or stolen cards immediately.
� Crime Prevention for Businesses
Theft of long distance service, telecommunications services and toll fraud come in many
different forms. Understanding your telecommunications system and the techniques used
by the criminals are key to limiting your vulnerability to this type of crime.
_ Learn about your telecommunications system:
− know the safeguards and security features;
− learn about the inherent defenses;
− determine the vulnerabilities;
− ensure staff are trained in safeguards and procedures.
_ Know the access paths that open doors to fraud:
− Direct Inward System Access (DISA);
− Voice-Mail System;
− Remote System Administration (Maintenance Ports);
− Direct Inward Dialing;
− Tie Trunks and Tandem Network Services;
− Modems.
_ Monitor and analyze your systems information:
− Study call detail records (i.e., exception reports may provide a warning sign);
− Review billing records;
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− Know calling patterns and review them;
− Review voice-mail reports;
− Monitor valid and invalid calling attempts whenever possible.
_ Know the signs of a security breach:
− Sudden changes in normal calling patterns;
− Complaints that the system is always busy;
− Increases in wrong number calls or silent hang-ups;
− Increases in night, weekend and holiday traffic;
− Increases in 800 and WATS calls;
− Increases in international calling;
− Increases in odd calls (i.e., crank/obscene calls);
− Toll calls originating in voice-mail;
− Long holding times;
− Unexplained 900 calls;
− High tolls for any unauthorized trunk extension.
_ Secure your System:
System configuration:
− Restrict access to specific times & limit calling ranges;
− Restrict access to business hours only;
− Block all toll calls at night, on weekends and on holidays;
− Block or limit access to overseas calls;
− Require attendant assistance for overseas calls.
PBX (Private Branch Exchange) and DISA (Direct Inward System Access):
− Change default codes after installation of new equipment;
− Never publish DISA telephone numbers;
− Change your DISA access telephone number periodically;
− Issue a different DISA authorization code for all users;
− Warn DISA user not to write down authorization codes;
− Do not use sequential access numbers;
− Use longer DISA codes (i.e., 7 - 9 digits);
− Change codes regularly;
− Disconnect telephone extensions that are not in use;
− Restrict DISA access at night, weekends and on holidays (Prime time for fraud);
− Block or restrict overseas access;
− Program your system to answer with silence after five or six rings.
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_ Voice-Mail Systems
− Establish controlled procedures to set and reset passwords;
− Assign and change passwords regularly;
− Use maximum length passwords for system manager box & maintenance ports;
− Prohibit the use of trivial, simple passwords (i.e., 222, 123, etc.);
− Limit the number of consecutive log-in attempts to five or less;
− Change all factory installed passwords;
− Block access to long distance trunking facilities;
− Block collect call options on the auto attendant;
− Delete all inactive mailboxes;
− Limit your out-calling;
− In systems that allow callers to transfer to other extensions, block any digits that
hackers could use to get outside lines, especially trunk access codes;
− Conduct routine reviews.
_ Remote Access Ports
− Block access to remote maintenance ports and system administration ports;
− Use maximum length access codes and change them regularly.
_ Modems
− Use maximum length passwords and change frequently;
− Eliminate three-way calling on all extensions used with modems;
− Disconnect modems that are not in use.
_ On-Site Security
− Secure equipment rooms (lock up all telephone equipment & wiring frames);
− Limit access to authorized personnel;
− Require positive ID checks from supplier staff;
− Maintain an entry log;
− Secure system documents (i.e., manuals, configuration records and system
printouts).
_ General Security
− Restrict call forwarding to local calls only;
− Establish policies on accepting collect calls and providing access to outside lines;
− Delete employee codes immediately upon an employee leaving the company;
− Do not assign a previous employee’s code to a new employee;
− Ensure cards and passwords are returned when an employee leaves the company;
− Train staff not to discuss the telephone number plan outside the company;
− When using a cell phone, never discuss system access codes or calling card
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numbers;
− Protect calling card numbers and PIN at all times;
− Retain in a secure place or destroy the back sheeting to which the calling card is
attached when it’s mailed.
_ Employee Education & Policies
− Brief staff on security measures and policies and ensure compliance;
− Train staff on toll fraud detection (i.e., warning signs, alarms);
− Incorporate a confidentiality agreement in the conditions of employment;
− Warn personnel about “shoulder surfing”;
− Establish reporting procedures for calling cards or access codes that are
misplaced, lost, stolen or compromised;
− Educate switchboard operators and employees about “social engineering” (i.e.,
con-artists trying to obtain calling access or transfers through a PBX);
− Establish procedures for staff to report possible security breaches;
− Review training programs and security procedures regularly;
− Maintain regular contact with your local telephone company regarding potential
vulnerabilities and the latest security measures.
Fraud Information From the
United States Postal Inspection Service
The United States Postal Inspection Service has included the following fraud information on
their Internet web site.
http://www.usps.gov/websites/depart/inspect
� Chain Letters
A chain letter is a “get rich quick” scheme that promises that your mail box will soon be
stuffed full of cash if you decide to participate. You’re told you can make thousands of
dollars every month if you follow the detailed instructions in the letter.
A typical chain letter includes names and addresses of several individuals whom you may
or may not know. You are instructed to send a certain amount of money —— usually $5
—— to the person at the top of the list, and then eliminate that name and add yours to the
bottom. You are then instructed to mail copies of the letter to a few more individuals who
will hopefully repeat the entire process. The letter promises that if they follow the same
procedure, yuor name will gradually move to the top of the list and you’ll receive money
—— lots of it.
There’s at least one problem with chain letters. They’re illegal if they request money or
other items of value and promise a substantial return to the participants. Chain letters are
a form of gambling, and sending them through the mail (or delivering them in person or
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by computer, but mailing money to participate) violates Title 18, United States Code,
Section 1302, the Postal Lottery Statute. (Chain letters that ask for items of minor value,
like picture postcards or recipes, may be mailed, since such items are not things of value
within the meaning of the law.)
Recently, high-tech chain letters have begun surfacing. They may be disseminated over
the Internet, or may require the copying and mailing of computer disks rather than paper.
Regardless of what technology is used to advance the scheme, if the mail is used at any
step along the way, it is still illegal.
The main thing to remember is that a chain letter is simply a bad investment. You
certainly won’t get rich. You will receive little or no money. The few dollars you may get
will probably not be as much as you spend making and mailing copies of the chain letter.
Chain letters don’t work because the promise that all participants in a chain letter will be
winners is mathematically impossible. Also, many people participate, but do not send
money to the person at the top of the list. Some others create a chain letter that lists their
name numerous times--in various forms with different addressee. So, in reality, all the
money in a chain is going to one person.
Do not be fooled if the chain letter is used to sell inexpensive reports on credit, mail
order sales, mailing lists, or other topics. The primary purpose is to take your money, not
to sell information. “Selling” a product does not ensure legality. Be doubly suspicious if
there’s a claim that the U.S. Postal Service or U.S. Postal Inspection Service has declared
the letter legal. This is said only to mislead you. Neither the Postal Service nor Postal
Inspectors give prior approval to any chain letter.
Participating in a chain letter is a losing proposition. Turn over any chain letter you
receive that asks for money or other items of value to your local postmaster or nearest
Postal Inspector. Write on the mailing envelope of the letter or in a separate transmittal
letter, “I received this in the mail and believe it may be illegal.”
� Free Prize Scheme
It happens every day. Thousands of people are notified by mail that they have won a free
prize. Usually, it’s a postcard notice that says your prize will be one of four or five
“valuable” items--a new car, a vacation, a color television, or a $1,000 savings bond.
Major companies sometimes give away expensive items in special promotions, but they
usually don’t notify winners with a postcard. Typically, these notices are mailed by con
artists whose sole purpose is to rip you off.
If you contact the company by phone, as the postcard will tell you to do, your “free”
prize could end up costing you hundreds of dollars. The following examples illustrate the
point. A man in San Mateo, California, paid $398 for “shipping charges” to receive a
“free” 1988 Pontiac automobile. Needless to say, he got nothing. A Bergen County, New
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Jersey, resident paid a $69 “shipping and handling charge” to get his “free” $1,000
savings bond (with a maturity of some 30 years). He could have bought the same bond
from the U.S. Government for only $50.
Often you never get a prize. If you do get one, it typically is an inferior, overpriced, or
grossly misrepresented piece of merchandise. For example, an “all terrain vehicle” turned
out to be a lawn chair with wheels, a “sport fishing boat” was an inflatable raft, and a
“genuine fur coat” was a dyed rabbit pelt worth about $30. Beware if the notice lists
nice-sounding prizes like “designer” or “diamond” watches. They are likely to be cheap
or practically worthless junk.
Further, the scam artist makes you pay for your “free” item, either by requiring you to
order merchandise or by charging a shipping, handling charges, or processing fee. You
can almost be certain that the fees required to get the prize will exceed the true monetary
value of the prize itself. And the merchandise you are required to buy will be grossly
overpriced, as has been the case with the water filters and purifiers and the vitamins that
are often marketed to the lucky “winners.”
Every day, consumers throughout the U.S. lose many thousands of dollars to these
unscrupulous free prize promoters. Their operations, known as boiler rooms, are staffed
by high pressure sales people armed with sophisticated selling techniques designed to get
you to send them money. Don’t be swayed by their carefully scripted sales pitches and
pressure tactics. Even better, arm yourself in the best possible way against falling victim
to these kinds of frauds--by knowing how these con men operate and being prepared to
ignore their come-ons.
If you receive a mailing promising you a free prize, or if you have been victimized in a
free prize promotion through the mail, contact your local postmaster or the nearest Postal
Inspector.
� Hot Tip on Playing Foreign Lotteries By Mail: “Don’t Do It!”
You hear the state lotto jingle on the radio. The jackpot has been raised to $10 million.
You’ve got lotto fever. Next thing you know there’s a brochure in your mail urging you
to participate in some foreign country’s lotto--maybe one in Australia or Canada--via
convenient mail-order purchase of lottery tickets, or of a share in a pool of lottery tickets.
So you start thinking that getting into a new game might improve your luck, and you ask
yourself, “Why not do it?” The U.S. Postal Inspection Service can give you the answer.
Don’t do it because:
_ It’s illegal. A federal statute prohibits mailing payments to purchase any ticket, share,
or chance in a foreign lottery.
_ It’s impractical. Unlike playing in your state’s lottery, you could not be certain that
you would obtain the play you paid for.
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Most foreign lottery solicitations sent to addressees in the U.S. do not come from foreign
government agencies or licensees. Instead, they come from “bootleggers” who seek
exorbitant fees from those wishing to play. The activities of bootleggers are neither being
controlled nor monitored by the government of the country in which they are located.
Typically, those who pay the required fees never see any lottery tickets issued by the
government-operated lottery they are hoping to enter. They are left to rely on various
forms of entry “confirmation” issued by the bootleggers.
As a general proposition, sending lottery material through the mail is prohibited by
federal law. This material includes, among other things, letters or circulars concerning a
lottery, tickets or any paper claiming to represent tickets, chances or shares in a lottery,
and payments to purchase any such tickets, chances, or shares.
Congress has enacted limited exemptions from this prohibition, including some which
allow such material for a lottery conducted by a state of the United States to be mailed to
addresses in that state. No exemption has been enacted which would make it lawful for a
foreign lottery enterprise to use the U.S. Mail, or cause it to be used, to operate, promote,
or enter one of its lotteries.
First-time offenders convicted of knowingly violating the postal antilottery statute would
face penalties of up to a $1,000 fine and two years in prison. However, persons falling for
foreign lottery sales pitches and mailing purchase payments in ignorance of the statutory
prohibition normally are not prosecuted, and would face no more than a stern warning
from the Postal Inspection Service. Such a warning usually is sufficient to dissuade them
from further attempts to enter foreign lotteries through the mail. If you receive a mailed
lottery solicitation that you think may be illegal, turn the entire mail piece over to your
local postmaster or the nearest Postal Inspector.
� Government Look-Alike Mail
That brown envelope in your mail box looked so official you thought it was from a
government agency. Even the name, the return address and seal looked official. Such
mailings can be deceptive and confusing, and are sometimes illegal. They typically
contain sweepstakes solicitations or requests for donations to political causes.
Official-looking mailings the Postal Inspection Service has seen in the past include one
from the “FBI”--actually, Fountains Bureau of Invitations--which turned out to be an
invitation to attend a high-pressure sales pitch for a real estate development. To make the
mailing look even more authentic, messages such as “Important Notice,” Official
Business,” or “Open Immediately” are often hand-stamped or printed on the envelopes.
The problems caused by these look-alike mailings led to the passage of the Deceptive
Mailings Prevention Act of 1990. This law, Title 39, United States Code, Sections
3001(f) and (g), places certain restrictions on these look-alike mailings. Such mailings
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are no longer allowed, unless:
_ The entity actually has a government connection, approval or endorsement;
_ The mail matter and its outside wrapper bear a notice prescribed by the U.S. Postal
Service which disclaims such connection, approval, or endorsement; or
_ The mail matter is contained in a publication purchased or requested by the
addressee.
If you are uncertain about a mailing, carefully read the material inside the envelope. If
the mailer is not being totally deceptive, it should become clear whether the mailing is a
deceptive government look-alike mailing from a private organization not connected with
any government agency or program.
If you have received an unsolicited government look-alike mailing from an entity with no
governmental connection, approval, or endorsement, and the required disclaimer is not
present, please send that mailing with a brief transmittal letter to a Postal Inspector, care
of your local postmaster.
� The Free Vacation Scam
“Congratulations! You have won a free, 4-day, 3-night vacation for two in beautiful,
sun-drenched Bermuda.” Sound too good to be true? It is. When you get a postcard or
letter in the mail (or an unexpected phone call from an unknown company) promising a
complimentary vacation in an exotic spot, someone is probably trying to make you a
victim of the free vacation scam. Don’t fall for it.
If you are first contacted through the mail, you will be asked to call the company to claim
your vacation. But there’s always a catch. In the most common form of this scam, to be
eligible for the free vacation you will be required to pay a service charge or to purchase a
membership in a travel club, and that may cost you as much as $200-$300. Don’t pay it.
And do not, under any circumstances, give the company your credit card number or even
just its expiration date.
If you do join a travel club that happens to be run by a con man, here’s what you can
expect. You will receive a travel packet describing your vacation. But there will be many
restrictions on when you can take your trip. You may also be required to pay an
additional handling charge of up to $100 to book your reservation. The travel dates you
prefer will very likely be unavailable. If you complain, you may be offered an upgraded
plan for still another additional fee.
If you are one of the few people who actually receives a vacation, you will most likely be
booked into substandard accommodations. Most people who join a fraudulently operated
travel club will never receive anything. Ultimately, as the law closes in, some vacation
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scam operators will close down, move on, and set up operations elsewhere and bilk other
unsuspecting consumers of their money. You will be left without the promised vacation
and a much smaller balance in your bank account.
Many recently detected vacation scams have operated out of Florida, Houston, and the
Los Angeles-Orange County area. But such operations can originate anywhere in the
country and can be easily recognized by their common characteristics, as outlined above.
If you have been victimized by a free vacation scam or fraudulent travel club, or if you
receive a suspicious solicitation from one in the mail, please contact your postmaster or
the nearest Postal Inspector.
� 900 Telephone Number Schemes
In recent years, 900 telephone numbers, in which the caller pays a fee per minute, have
been used by television stations to elicit viewer participation and to offer services, such
as current weather conditions. But beware of swindlers who want to lure you to call a 900
number without giving you anything in return for your money.
These swindlers may promise you a product or service, such as credit repair or a travel
package, but what you actually receive will be quite disappointing. Those with bad credit
hoping to receive a credit card by calling a 900 number might receive a list of banks to
which they can apply for such a card. Those who are told to call because they’re winners
in a sweepstakes receive nothing at all. But you’ll be even more unhappy with the
charges that appear on your phone bill--sometimes $30 or more.
In the past, swindlers have used toll-free 800 numbers to carry out many of the scams
they now promote via 900 numbers. They include phony free prize and free vacation
offers, as well as deceptive credit card promotions. They often begin when the swindler
sends you a notification in the mail claiming that you have won something for free or
have qualified for credit.
Sometimes, when you call a 900 number, you will be required to listen to a long recorded
sales pitch. Remember, the longer you are on the telephone, the higher the phone charges
will be. To add insult to injury, at the end of the sales pitch, you will often be directed to
phone a second 900 number for additional information or to order your product or
service. If you call the second 900 number you will then be billed for an additional 900
number telephone call. Remembering the following can help you avoid becoming a
victim of 900 number frauds:
_ Be suspicious when you receive a prize notification or other promotion which asks
you to call a 900 number. There is always a charge for a 900 number call.
_ Never dial a 900 number unless you are absolutely sure of how much you will be
charged and are willing to pay it.
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_ Be wary if after dialing one 900 number you hear a message asking you to dial a
second 900 number.
_ If you have never heard of the company making the promotion, check it out with your
local Better Business Bureau or consumer protection agency.
_ Trust your own common sense. If it sounds too good to be true, it probably is.
If you have been taken by a 900 number fraud scheme and the U.S. Mail has been used in
any way, report your experience to your local postmaster or the nearest Postal Inspector.
� Advance Fee Loan Schemes
Have you had difficulty obtaining a loan through normal sources? If so, you may become
the target of an advance fee loan scheme. In such a scheme, a con artist offers you a
“guaranteed” loan for a fee paid in advance.
The advance fee swindler claims to be able to obtain a loan for you with ease from a
legitimate lending institution, such as a bank or a savings and loan association. However,
the swindler has no ability to secure a loan for you. Instead, he either steals your fee and
disappears or remains in the area to bilk other unsuspecting victims while stalling you
with various excuses as to why your loan has not been funded.
Advance fee swindlers frequently ask for a percentage of the gross loan amount as their
fee. For example, if a five percent fee is requested, you would have to pay $500 to obtain
a loan of $10,000. There is much to lose if you lower your guard. If you are not dealing
directly with a lending institution on your own behalf, the following guidelines will help
you avoid being victimized by an advance fee swindler.
_ Know who you are doing business with. Obtain the name of the loan representative
and the name, address, and telephone number of the company.
_ Don’t accept the promoter’s claims of guaranteed loan services at face value.
_ Insist on being told the name of the lending institution which supposedly will fund
your loan.
_ Verify with the supposed lender all oral and written representations made by the
promoter regarding support from that lender.
_ Ask for names, addresses, and phone numbers of other customers of the promoter,
and contact them to see if they got their loans.
_ Consider consulting an attorney or accountant for advice.
Remember: Ask yourself why the promoter can obtain a loan for you from a legitimate
lender when you yourself have been turned down for a loan, perhaps many times. Take
care of your precious assets by exercising caution when asked to pay a loan fee in
advance.
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If you have been victimized in an advance fee scheme in which the U.S. Mail was used,
report your experience to your local postmaster or the nearest Postal Inspector.
� Advance Fee Loan Tips (from National Fraud Information Center)
_ Don’t pay money up front. It’s against the law for a telemarketer that is offering to
help you obtain a loan to ask for any fees in advance. You must have the loan in your
hands for at least 7 days before the company may ask for payment. This applies to
telemarketers that offer loans directly and companies that offer to help you obtain a
loan through a third party.
_Apply for loans through local banks and credit unions. Dealing with someone
locally makes it easier to resolve problems if they arise. Ask if the financial
institution is licensed by a state or federal agency and then check to make sure that it
is.
_Don’t fall for promises of a loan regardless of past credit problems. If you have
poor credit, it is unlikely that any legitimate bank or other financial institution will
give you a loan. Your credit history is one of the main criteria used determine
whether you will be able to repay a loan.
_If you can’t get a loan yourself, get a co-signer. A friend, relative or employer may
be willing to apply with you for a loan. But bear in mind that your co-signer is
equally responsible for the debt; if you don’t make your payments on time, that
person can be held liable for the loan, and his or her credit record will also be
affected.
_Get it in writing. If a company offers you a loan, get all of the terms of repayment,
including interest rates, in writing. Shop around for the lowest interest rate. Make
sure that any promises that are made are included in your written agreement.
_You can get free or low-cost help with credit problems. If you’ve got bad credit or
no credit, you can get advice on how to build a good credit record from your local
Consumer Credit Counseling Service. This nonprofit organization may also be able to
negotiate payment plans with your creditors if you have fallen behind. To find the
nearest CCCS office, call toll-free, 1-800-388-2227.
� Charity Fraud
Throughout the year, and especially during the holiday season, you probably get appeals
in the mail or by telephone urging you to contribute financially to a good cause. But the
U.S. Postal Inspection Service warns those who want to give that there are plenty of
fraud operators out there who are scheming for your money--and the last thing on their
mind is charity. Not only do such come-ons bilk you of your money, but they also put
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money you intended for the needy into the hands of con artists.
But just how do you know who is legit and who isn’t? The Salvation Army and the
American Cancer Society--those are among the obviously worthy organizations. But
what if you receive a charitable solicitation from an organization you’ve never heard of?
To guard against being taken advantage of, the Postal Inspection Service offers the
following guidelines when donating to charities:
_ Check out organizations you’re unfamiliar with, or whose names are similar to
well-known charities. You can do this by contacting:
− The Philanthropic Advisory Service, Council of Better Business Bureaus, 4200
Wilson Blvd., Arlington, VA 22203
− Your local Better Business Bureau
− The National Charities Information Bureau, 19 Union Square West, New York,
NY 10003.
_ If you’re unfamiliar with the charity, ask for its annual report and financial statement.
If the organization is not willing to provide these financial documents, you should
immediately be suspicious.
_ Make checks payable to an organization only--never an individual.
_ Be suspicious of solicitors who say they will accept your donation in cash only. (Con
artists want cash so there will be no paper trail for authorities to follow.)
_ If the charity uses a post office box to receive contributions, the post office where the
box is located can give you box application information, such as the name and
address of the individual who rented the box.
_ Report any suspicious organizations to your local postmaster or Postal Inspector.
The Postal Inspection Service encourages giving others a helping hand, but cautions
those who give to make sure that the organization they’re giving to is a legitimate
charity, and not one that was set up for the sole purpose of bilking the public.
� Charitable Solicitation Tips (from National Fraud Information Center
Charitable Solicitation Tips
_ Do not give cash. Legitimate charities will take a check.
_ Do not succumb to pressure. No legitimate organization will insist that you
contribute immediately.
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_ Do not give to unregistered charities. Check with your State Department of Justice/
Attorney General’s Office Charities Division to see if your state requires registration.
If it does, check the charity out.
_ Be careful of pledges you don’t remember making. If you have doubts, check your
records.
_ Be careful not to give personal information such as your social security number
or mother’s maiden name to anyone soliciting over the phone.
_ Recognize false claims of tax-deductability. Ask for written proof of tax-exempt
status.
_ Never give out your checking account number or credit card number to anyone
you don’t know soliciting for a charity over the phone. Ask for an address and
offer to send a check.
_ Check with the National Charities Information Bureau to make sure that the
charity is abiding by certain ethical and financial standards.
_ If the solicitation is for a law enforcement charity, ask your local or state police
if they’ve ever heard of the group. If they haven’t, chances are it’s not real.
_ Ask how much of your donation is going to the charity. Even if professional
fundraisers are truly soliciting for a charity, they may be keeping most of the
donations as fees. It’s often better to give directly to support charities and public
services in your area.
� Credit Card Schemes
Do you have poor credit? Are you having trouble obtaining a VISA or MasterCard or
other major credit card because of a poor credit rating or other reason? Beware of con
artists and their phony credit card offers. Some seemingly legitimate programs to extend
you credit will end up costing you lots of money, and you won’t get the credit cards you
think are being offered.
The scam can start with a phone call, a postcard, or a letter, which claims that for a fee
you can obtain a VISA or MasterCard or other major credit card, or establish that you are
credit worthy enough to obtain one of these cards. Typically, the promoters of these
phony offers indicate that your card is pre-approved and that it can be obtained without
any credit check. The fee charged typically ranges from $35 to $50.
When your card arrives in the mail, you find out it can only be used to pay for orders
from a specific store or catalog. The store or catalog, which is owned by the company
that issued the credit card, may not even offer merchandise of interest to you.
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This kind of “single-use credit card” is not a new concept, but recently unwary victims of
this scam are being sold these credit cards by con artists who misrepresent them as being
all-purpose bank credit cards. At times, the deception is magnified by the fact that the
merchandise in the catalog from which you must choose your purchases is either inferior
or grossly overpriced.
You can protect yourself against the phony “one-shot” credit card offers by being very
careful when you are considering opening a new credit card account. If you have poor
credit, be skeptical if you are offered a pre-approved card with no credit check. Be sure
you know the specific purpose of the card. If you are not satisfied with the information
provided by those marketing the cards, do not pay the required fee. Otherwise, you may
become a victim. You may also wish to check with your local Better Business Bureau,
State Attorney General’s office, or Postal Inspection Service office to determine if the
company offering you a credit card is under investigation.
If you have been victimized in a deceptive credit card promotion through the U.S. Mail,
report your experience to your local postmaster or nearest Postal Inspector.
� Schemes that charge money for services the government provides for free
A variety of false representation schemes involve mailed solicitations that offer for a fee
certain services available free of charge from the government. Often the company’s name
and mailing design deceptively imply that the company is or has ties to a government
agency. If you receive such a solicitation, you should call the government agency that
maintains the information being sold by the promoter and ask if it is available for free
from that agency. Beware of the following schemes that fall into this category:
Child support collection scheme. Advertises assistance to custodial parents in collecting
delinquent child support payments. Anyone needing such assistance should contact their
local district attorney’s office or other government agency that monitors and enforces
payment of child support.
Schemes involving Social Security. Offers various social security services, including
obtaining social security numbers for newborn children, obtaining statements of personal
earnings and benefit estimates, and notifying the Social Security Administration of name
changes for new brides. Anyone needing these services should contact the SSA, which
provides them at no cost.
Unclaimed income tax refund scheme. Tells consumers they may be the recipient of
unclaimed federal income tax refunds from the Internal Revenue Service. Consumers are
led to believe the promoter will conduct individualized searches, but no searches are
done after the consumer pays the required fees. Consumers who think unclaimed federal
income tax refund checks are being held for them need only contact the IRS. If there is a
check, the IRS will reissue it.
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Unclaimed funds scheme. Promises to assist consumers in obtaining unclaimed funds
held by state and other agencies. Some promoters state there “may” be money held in the
consumer’s name just to get the consumer to pay a fee for a search. Other promoters get
lists from agencies holding funds, contact persons on the lists, and offer to get their
money for them for “finders’ fees.” Unclaimed funds held by state and other agencies are
available to consumers at no cost directly from the state or other agency holding the
funds.
Property tax exemption scheme. Advertises assistance to homeowners in obtaining
property tax exemptions in California. Such tax exemptions are available from the local
county tax assessor’s office at no cost to a homeowner upon completion of a simple
form.
If you have been victimized in one of these schemes, or if you have received a suspicious
solicitation in the mail, report your experience to your local postmaster or nearest Postal
Inspector.
� Cut-rate Health Insurance Fraud
Senior citizens, perhaps moreso than any other group of people in America, are aware of
the high cost of medical care. While Medicare does cover many bills, it does not pay for
everything. Seniors, who generally live on fixed incomes generated by Social Security,
interest, and small pensions, sometimes buy supplemental insurance to pay for medical
expenses not covered by Medicare.
There are sources for legitimate supplemental medical insurance. However, some
policies offered to seniors through mailed advertisements and in other ways are offered
by unscrupulous companies and salesmen who will try to sell anything they can, whether
there is a need for it or not. Such policies will provide inadequate or inappropriate
coverage. Don’t be like one 93 year old woman who thought she was purchasing a
valuable health insurance policy, only to learn that she had bought maternity insurance.
Reduce your chances of falling victim to health insurance fraud by carefully reading any
sales promotion you may receive in the mail, including the “fine print” in the policy. Be
suspicious if a company requests that you pay your premiums in cash, pay a year’s
premium in advance, pressures you to buy immediately because “it’s your last chance,”
or requests that you sign a blank insurance form.
Be cautious about companies that offer policies that will protect you and your loved ones
for “only pennies a day.” Such low premiums will be effective only for a short time
(usually 30 days); thereafter, the premium will increase dramatically. You may also find
you have purchased a policy which does not include the kind of coverage you need. Be
careful if a company uses a name which suggests it is connected with the federal
government, the Medicare program, or a well-known company. Unscrupulous companies
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will choose titles, business addresses, and stationary styles purposely to mislead you into
thinking you are purchasing something of value from the government or a respected
private company.
If you have any doubts about a health insurance policy that someone is trying to sell you,
discuss the offer with a knowledgeable friend or relative or with an accountant, attorney,
or other trusted advisor. And remember to notify your local postmaster or the nearest
Postal Inspector about deceptive health insurance promotions received through the mail
so action can be taken to prevent other people from getting taken.
� Investment Fraud Schemes
Fraudulent investment schemes are often marketed by telephone salespersons armed with
high pressure and sophisticated selling techniques. Some swindlers surround themselves
with the trappings of legitimacy -- rented office space, a receptionist, investment
counselors, and professionally designed color brochures describing the investment.
Seniors are a prime target for fraudulent investment schemes since many have saved a
good amount of money for their retirement years. Fraudulent schemes require you to
invest your money -- often lots of it. Most promise you either a large increase in the
value of your investment or higher-than-market interest on your capital, or both.
These schemes are fraught with danger: in most cases, you will never again see the funds
you invested. And you may not even receive the promised interest. If you do receive
interest, you will often be paid late. Often, unbeknownst to you, your interest will be paid
from the investments of others who are newly brought into the program in order to keep
it alive. The swindler hopes these payments will allay any suspicions you might have as
to the strength of your investment.
If answers to any of the following questions are yes, you may be dealing with a swindler
who wants you to put money in to a fraudulent investment:
_ Does the salesperson make it sound as you can’t lose?
_ Are you promised an unusually high rate of return or interest payment on your
capital?
_ Are you pressured to make a decision immediately or within a short period of time
because new investment units “are selling fast?”
_ Does the salesman have any prior successful experience in the investment area he is
promoting?
Protect yourself. Be suspicious of any deal that promises fantastic return at little risk.
Know whom you are dealing with. If you are not sure, check the company’s reputation
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with your local Better Business Bureau, Postal Inspector’s Office, or District Attorney’s
Consumer Protection Unit. Protect your retirement nest egg. If you’ve been the victim of
an investment fraud where the mail was used, contact your local postmaster or the nearest
Postal Inspector.
� Solicitation Disguised as Invoices
Don’t be victimized by con artists who try to get your company to order goods or
services by mailing you solicitations designed to look like invoices. The unscrupulous
individuals who mail these know that some unsuspecting managers and employees will
be fooled by their appearance and will automatically remit payment, thinking the
company had placed an order.
Title 39, United States Code, Section 3001, makes it illegal to mail a solicitation in the
form of an invoice, bill, or statement of account due unless it conspicuously bears a
notice on its face that it is, in fact, merely a solicitation. This disclaimer must be in very
large (at least 30-point) type and must be in boldface capital letters in a color that
contrasts prominently with the background against which it appears.
The disclaimer must not be modified, qualified, or explained, such as with the phrase
“Legal notice required by law.” It must be the one prescribed in the statute, or
alternatively, the following notice prescribed by the U.S. Postal Service: THIS IS NOT A
BILL. THIS IS A SOLICITATION. YOU ARE UNDER NO OBLIGATION TO PAY
THE AMOUNT STATED ABOVE UNLESS YOU ACCEPT THIS OFFER.
Some solicitations disguise their true nature. Others identify themselves as solicitations,
but only in the “fine print.” In either case, protect your company’s assets by withholding
payment until you have verified whether your company actually ordered and received the
goods or services reflected on the document. If not, do not pay. You may have received a
solicitation in the guise of an invoice.
A solicitation whose appearance does not conform to the requirements of Title 39, United
States Code, Section 3001, constitutes prima facie evidence of violation of the federal
False Representation Statute (Title 39, United States Code, Section 3005). Therefore,
solicitations in the form of invoices, bills, or statements of account due which do not
contain the large and conspicuous disclaimer required by the law will not be carried or
delivered by mail if they come to the attention of the Postal Service, and will be disposed
of as the Postal Service shall direct.
Con artists often make large mailings of illegal solicitations. Even if you are not fooled,
you can help the Postal Inspection Service learn of such mailings by reporting the receipt
of non-conforming solicitations to your local postmaster or the nearest Postal Inspector.
The Postal Inspection Service may be able to prevent other business people from being
victimized.
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� Oil and Gas Investment Frauds
If you are contemplating investing a large amount of money, oil and gas wells may be
among the options you are considering. Regardless of what investment opportunities
you’re considering, it is wise to gather all the information you can so you can make an
informed decision. And beware.
Some oil- and gas-well deals are offered by “boiler rooms,” or fly-by-night operations
that consist of nothing more than bare office space and a dozen or so desks and
telephones. Boiler room operators employ slick telephone solicitors trained to use
high-pressure sales tactics. These con artists will make repeated unsolicited telephone
calls in which they follow a carefully scripted sales pitch that guarantees high profits.
Some swindlers surround themselves with the trappings of legitimacy, including
professionally designed color brochures.
In a fraudulent oil and gas scheme, scam artists promoting the investment often usually
offer limited partnership interests to prospective investors who live outside the state
where the well is located and outside the state the scam artists are calling from. This
reduces chances for an investor to visit the site of a well or what may be a nonexistent
company headquarters.
If you are subjected to a high-pressure sales pitch in an unsolicited telephone call, watch
for the following tip-offs that you may be dealing with a swindler:
_ The oil well investment “can’t miss.”
_ There is very little risk involved.
_ The promoter has hit oil or gas on every other well previously drilled.
_ A lot of oil or gas has been found in an adjacent field.
_ A large reputable oil company is already operating near the company’s leased
property, or is planning to do so.
_ A decision must be made immediately to invest in order to assure the purchase of a
one of the few interests remaining to be sold.
_ The deal is only available to a few lucky and specially chosen investors.
_ The salesperson has personally invested in the venture himself.
_ A tip from a reputable geologist has given the company a unique opportunity to make
its venture a success.
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You can reduce your risk of being swindled by being suspicious of any deal that
promises a fantastic return at little risk. If you are unsure whom you are dealing with,
check the company’s reputation with your local Better Business Bureau, the U.S. Postal
Inspection Service, or State Attorney General’s Consumer Protection Unit. If you have
been the victim of an oil and gas investment fraud in which the U.S. Mail was used,
contact your local postmaster or the nearest Postal Inspector.
� Land Fraud Schemes
Whether you’re looking for an investment, a vacation home or a place to retire, you need
to exercise caution before buying a piece of land. Attractive real estate brochures in the
mail may indicate the land is in a warm and hospitable climate with recreation and
conveniences nearby.
However, if you don’t personally see the land, you may later discover too late that it is in
the middle of nowhere, far away from utilities and other amenities, and cannot be resold
for even a fraction of the price you paid.
Before buying real estate, a wise and cautious investor should:
_ Visit the property before deciding whether to buy.
_ Get any verbal promises and guarantees put into writing.
_ Obtain a property report from the salesperson or developer.
_ Contact the local Better Business Bureau to determine if there have been any
complaints against the developer.
_ Contact a local real estate broker and obtain comparative prices for other plots of land
nearby.
The Interstate Land Sales Full Disclosure Act (Title 15, United States Code, Sections
1701-1720) requires full disclosure of all material facts in the sale or lease of certain
undeveloped land through the U.S. Mail or interstate commerce. The developers must
provide each purchaser or renter with a property report containing certain information
before the signing of any contract or agreement for the sale or lease of the land.
To file a complaint or determine if there are complaints on file against a developer, a
prospective buyer should contact the Department of Housing and Urban Development’s
national Office of Interstate Land Registration, 451 7th Street, S.W., Washington, D.C.
20410. Remember, under the law, you have the right to cancel your sales agreement
within seven days of signing if you have already seen a property report (you may have
more than seven days under some state laws). You also have the right to cancel the
agreement within two years if you have not seen the property report before signing the
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agreement.
If a land developer or promoter has materially misrepresented what he has sold you, you
may take legal action to get your money back. If the U.S. Mail was used to promote the
land or obtain your money in a purchase or lease transaction, report your experience to
your local postmaster or nearest Postal Inspector.
� Distributorship and Franchise Fraud
Legitimate distributorships and franchises can be profitable forms of business enterprise.
Examples include fast-food franchises and new car dealerships, which offer great
opportunities to those willing to invest substantial amounts of money and time to operate
such businesses.
Unfortunately, not all franchise opportunities are legitimate. Con artists seeking to
capitalize on the franchise boom create their own “investment” opportunities, which they
promote to inexperienced investors. To induce the unwary to invest, these con artists
promise the world, but deliver little to nothing. Be cautious if you are given following
typical come-ons:
Promises of unrealistic profits. Use your common sense when evaluating such claims.
Will it really be as easy as it is claimed to make the substantial profits promised?
Promises of guaranteed earnings in a “protected market area.” A bona fide business
opportunity will usually not make such a sweeping guarantee. An investor in a fraudulent
promotion often finds that there are other unwary investors operating in the same
“protected market area.”
Guaranteed money-back refund if not completely satisfied, as long as the investor
“operates according to instructions.” Such guarantees are usually worthless. The
promoter determines what “operating according to instructions” means, and the investor
is often judged not to have met the criteria -- hence, no refund.
Be wary if the promoter is more interested in selling the distributorship or franchise than
in marketing a product or service. Also, if you are not encouraged or allowed to contact
other investors to ask about their experience and results with the promotion, think twice
about investing.
Your local Better Business Bureau or the Consumer Affairs Branch of your State
Attorney General’s Office may have information on the reputation of the promoter of any
distributorship or franchise operation you are considering investing in. You may also
wish to check with the newspaper or magazine where you saw the promoter’s
advertisement to see if there are any complaints against the promoter. If you have been
victimized in a fraudulent distributorship or franchise promotion where the U.S. Mail was
used, contact your local postmaster or the nearest Postal Inspector.
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� Business Opportunity & Franchise Tips (from National Fraud Inforamtion Center)
_ Study the disclosure document and proposed contract carefully. Under the FTC
Franchise Rule a franchise or business opportunity seller must provide you with a
detailed disclosure document at least 10 days before you pay any money or legally
commit yourself to the purchase. This document must give 20 important items of
information including; the names, addresses, and telephone numbers of other
purchasers; a fully-audited financial statement of the seller&; the background and
experience of the business’ key executives; and, the responsibilities you and seller
will have to each other once you buy. If a seller claims to be exempt from the FTC
Rule, check with the FTC first to make sure. Don’t sign up through a website until
after you’ve had a chance to look over all documentation.
_ Talk to current owners. Use the list or other purchasers in the disclosure document
to contact and find out about their experiences. Make sure to check whether the
information in the disclosure document and promotional materials matches their
experiences.You should be especially interested in the amount of work claimed vs.
actually required and the promised profits vs. actual profits. Remember, a list of
company-selected references cannot be substituted for the required list of franchisees
or business opportunity owners.
_ Investigate earnings claims. Promised earnings are only estimates. If companies
make earnings claims, they are required to have in writing the facts upon which those
estimates are based. A seller must tell you the number and percentage of owners that
have actually met the claimed profit margins. Beware of broad and unsubstantiated
claims.
_ Shop around: compare franchises with other available business opportunities.
Use the Franchise Opportunity Handbook published by the Department of
Commerce,to check out other sellers and compare their offerings. If your seller is
making claims that are way out of line for the industry, beware. And if you shop
around, you may find a better deal somewhere else.
_ Listen carefully to the sales presentation. If you notice high pressure being used
during a sales presentation, especially attempts to get you to sign up now, beware.
The FTC rule requires at least 10 business days between getting the disclosure
documents and paying or signing any agreements. If the salesperson tries to go faster
than that, don’t do it.
_ Get the seller’s promises in writing. If the salesperson makes statements that are
different from the contract, disclosure documentation or promotional materials, make
sure you get them in writing. If there is a dispute later, the written contract is what
counts. If a seller refuses to put the promises in writing, for whatever reason, take
your business elsewhere.
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_ Consider getting professional advice. Before you make any decisions, you should
always get professional advice. Check with a lawyer for the legality of the business
and to make sure you fully understand the contract. Have an accountant look over the
finances and promised income. Remember, the initial money and time you spend
getting professional advice could save you from big losses on a bad investment.
� Phony Job Opportunities
Beware of advertisements that make unbelievable claims about job opportunities. The
ads misrepresent wages and the number of jobs actually available, and you must always
pay a fee to receive more information. You should beware of job opportunity pitches
that:
_ Guarantee placement in a job,
_ Claim no experience or special skills are needed to qualify,
_ Offer too-good-to-be-true wages, or
_ Offer overseas employment.
Frequently, a con artist who promotes a job opportunity scheme offers job training in a
specific field (such as truck driving, oil rigging, or heavy equipment operating) to fill a
“critical” shortage at double or triple the applicant’s current salary. The pitch assures a
successful graduate of work with the same company offering the training.
Such a fraudulent promotion will typically appear as a “business opportunity” rather than
a “school” listing. The training program offered will be over-priced and often uncertified.
Graduates will not be placed in jobs because the school will not be able to provide any
jobs with it and will not be associated with private industry employers.
Sometime con artists try to sell you a catalog containing the names of companies
supposedly hiring workers for various jobs. Frequently, these jobs are said to be
high-paying positions overseas. If you buy the catalog, which often costs $30 or more,
you may find the companies listed are not hiring. Any money-back guarantee that comes
with your catalog will often have requirements that may be difficult for you to meet.
Be wary of ads that promise to get you a job with the U.S. Postal Service. In 1991, the
Postal Service began to significantly reduce the number of employees in its workforce
nationally. In 1992, a reorganization of the Postal Service eliminated tens of thousands of
additional positions.The money you spend to obtain information on how to get a postal
job may only get you generic information which is already available for free from the
Postal Service and from some public libraries.Save your money and instead contact your
nearest Postal Service employment office to see if postal jobs are available in your area
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and to obtain the necessary application forms.
You may also contact your local Better Business Bureau or other consumer protection
agency to check on a company you are considering paying money to for job training or
employment opportunities. You may find there have been complaints against the
company.
If you have been taken by a phony job opportunity scheme, and the U.S. Mail system was
used in any way, report your experience to your local postmaster or the nearest Postal
Inspector.
� Employment Opportunity Tips (from National Fraud Information Center)
_ Be suspicious of requests for upfront fees. Most employment agencies only charge
if they actually get you a job, and often the new employer pays, not the employee.
_ Don’t believe promises of access to a “hidden job market.” They’re usually just
excuses for refusing to provide information without advance payment.
_ Never give your credit card or bank account information over the phone. unless
you are familiar with the company and are agreeing to pay for a service at that time.
_ Be skeptical of any employment service firm that guarantees refunds to
dissatisfied customers if they meet specified criteria. You might find that it’s
impossible for you to qualify for a refund.
_ Get a copy of the firm’s contract and review it carefully before paying.
Understand all of the terms and conditions. If oral promises are made, insist that they
be included. If the company claims it’s not necessary to make the contract agree with
the oral promises, say goodbye. Whenever there is a dispute between oral promises
and a written contract, the written contract is the winner. The only reason to refuse to
include promises in a contract is to avoid fulfilling them.
_ Be aware that some listing services and “consultants” may place ads that seem to
offer jobs when in fact they are selling resume drafting services, “career direction
consultations” or simply employment advice.
� Multi-Level Marketing
Multi-level marketing is a system of selling in which you sign up other people to assist
you, and they, in turn, recruit others to help them. Some entrepreneurs have built
successful companies on this concept because the main focus of their activities is their
product and product sales.
However, there are many multi-level distributorship schemes that are nothing more than
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sophisticated chain letters. They operate as a “pyramid,” claiming participants can earn
lots of money by concentrating most, if not all, of their efforts on recruiting distributors
rather than selling a product.
The success of a pyramid distributorship for each and every distributor depends on
continuously getting additional people to join the pyramid. However, there is a practical
limit to how many distributors can be found and to how many product units they can sell
or use.
Furthermore, you cannot control the efforts of the individuals under you to any
significant degree. Many of them will have no real commitment to the program. They
may have been high-pressured, just like you, to become a distributor.
Fraudulent pyramid schemes typically violate the Postal Lottery Statute (Title 18, United
States Code, Section 1302). They contain all three elements of a lottery: prize
(expectation of monetary or other gain from participation in the pyramid); chance (the
monetary return you may receive from your participation is entirely up to chance, that is,
dependent on the efforts of those below you in the pyramid), and consideration (the fee
you pay to become a distributor). Frequently, the entrance fee into the pyramid is very
high. In many cases, the money spent for such an entrance fee can often be considered
lost the moment you pay.
To protect yourself against falling victim to a multi-level marketing scheme, note
whether the basis of the promotion is the sale of a product at the retail level, as opposed
to an emphasis on recruiting more and more distributors to help you increase your
income.
There is no easy way to wealth. A multi-level marketing scheme is no exception, other
than perhaps for the promoter who originates it and receives the large fees from
unsuspecting victims. If you do fall victim to a multi-level marketing scheme, please
contact your local postmaster or Postal Inspector.
� Pyramid & Multi-level Marketing Tips (from National Fraud Inforamtion Center)
_ Avoid any plan that pays commissions simply for recruiting additional
distributors. Your primary source of income should be your own product sales. If
the earnings are not made primarily by sales of goods or services to consumers or
sales by distributors under you, you may be dealing with an illegal pyramid. There
must be a way to purchase the goods or services without becoming a distributor.
_ Beware of plans that require you to purchase too much inventory upfront. These
plans can collapse quickly —— and also may be thinly-disguised pyramids.
_ Be cautious of schemes that claim you do little or no work, your downline (those
people you’ve recruited into the plan) will do it for you. It takes a lot of work to
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make sales and supervise others.
_ Don’t take claims of miracle products at face value. Just because your sponsor
says it’s true, doesn’t mean that it is. Insist on proof that the product works. Check
with an independent source to make sure that you aren’t having the wool pulled over
your eyes.
_ Do your homework! Check with your state attorney general and the National Fraud
Information Center before getting involved —— especially when the claims about
the product or potential earnings are extravagant.
_ Beware of shills —— people paid by the company to lie about how much they’ve
earned and how easy the plan was to operate.
_ Don’t agree to anything in a high pressure meeting or seminar. Insist on having
time to think it over and to discuss things with a spouse, partner or even your lawyer.
If a company won’t give you the time you need to check it out and think things over,
you don’t want to do business with it. A good deal now will be a good deal
tomorrow; the only reason for rushing you is if the company has something to hide.
� Six-Cent and Other Short-Paid Postage
Since about 1988, unscrupulous people have promoted a fraudulent scheme to sell
“secret” information that claims it is legal to send a First-Class letter for only 2 cents, 3
cents, or 6 cents. For various prices, often ranging from $5 to $20, the promoter sends
you a copy of an out-of-date federal law that was eliminated by the Postal Reorganization
Act of 1970 (Title 39 of the United States Code).
Don’t be misled by a promoter’s claim that his letter, advertising the “secret,” reached
you with only a 2-cent, 3-cent, or 6-cent stamp. A few underpaid letters do get through
the Postal Service’s automated mail processing equipment, but most don’t. So, if you buy
the “secret,” not only will you be wasting your money, you will also have any short-paid
letters you send either returned to you or delivered to the addressees who will be charged
the additional postage due.
Also, don’t be misled if the promoter claims that the law that reflects the lower postage
rate has never been changed by the U.S. Congress. Prior to passage of the Postal
Reorganization Act, postage rates were set by the Congress, and the rate of postage for
First-Class Mail was 6-cent. However, when the Post Office Department became the U.S.
Postal Service in July 1971, the power to prescribe postal rates was delegated to the
Postal Service.
Under the new law, postal rates were no longer established by direct legislative
enactment, but through administrative action by the Postal Service Board of Governors
and the independent Postal Rate Commission. Also, Section 3 of the act provided that
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postage rates, as well as classes of mail and fees for postal services, prescribed before the
effective date of the new law, were to remain in effect until they were changed in
accordance with the new administrative rate-making procedures outlined by the Act.
If you begin selling obsolete postal rate material to others, you will be engaging in a
promotion which violates the False Representation Statute (Title 39, United States Code,
Section 3005) and may be in violation of the Mail Fraud Statute (Title 39, United States
Code, Section 1341), a federal felony law.
When you open your mail, if you receive an offer for an information package on how to
send First-Class Mail using only a 2-cent, 3-cent, or 6-cent stamp, give the envelope and
its contents back to your postal letter carrier, or forward it to your local postmaster or the
nearest Postal Inspector.
� Work-at-Home Schemes
“Assemble our products at home. Earn $200 per week.” How often have you seen such
an advertisement or ones like it? Advertised opportunities to earn money by doing work
in your home are frequently nothing more than fraudulent schemes and, at best, rarely
result in any meaningful earnings.
The targets of the work-at-home con artists are those who need extra money but who are
not able to work outside their homes. Victims typically include mothers at home caring
for young children, the unemployed, the elderly, handicapped persons and people with
low incomes.
These ads typically promise a “large income” for working on projects “in great demand.”
Some promotions stress that “no experience is necessary,” while others indicate that “no
investment is required.” The one characteristic common to all of these schemes is that
you are required to purchase something before you are able to start work.
Probably, the most common kind of work-at-home scheme is envelope stuffing.
Typically, all you receive for your money are instructions to place an ad like the one you
answered, which requires you to rip off your fellow citizens to make any money.
Remember: modern mailing techniques and equipment have virtually eliminated the need
for homeworkers to perform legitimate envelope stuffing, addressing, and mailing
services from their homes.
Some work-at-home schemes don’t really offer work in the home, but sell ideas for
setting up home businesses. Other schemes require you to raise animals. Many schemes
require you to produce items, such as sewing baby booties or aprons, making Christmas
wreaths or toys, or fabricating other specialty products. You are not told that you will
have to sell these items yourself and that there is generally little or no market for them.
The promoters of such schemes are only interested in selling you something--that is, the
ideas, animals, or materials you need to start your business.
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Sometimes the promoters indicate that “no selling is required.” They promise to buy back
any items you make, as long as your workmanship is “acceptable” or up to their “high
standards.” Of course, these promoters will reject everything you send them by telling
you that your finished products do not meet their standards. Once again, you are left to
sell the items on your own, if you can.
If you fall victim to a work-at-home scheme, immediately notify your local postmaster or
the nearest Postal Inspector. The sooner postal inspectors become aware of such a
scheme, the sooner they can prevent other people from being defrauded.
� Work-At-Home Tips (from National Fraud Information Center)
_ Consider whether the pay offered is too high for the simple work promised.
Legitimate companies pay wages based on the skills and training needed. Also, ask
yourself, “Can a machine do this job?” If a task can be done faster and cheaper by
another method, why are you being offered the job?
_ Get a complete description of the work involved before you send any money.
You may find that what you are asked to do after you pay is far different from what
was stated in the ad. You should never have to pay for a job description or for
needed materials.
_ Beware of companies that claim they can set you up in profitable home-based
businesses, but you must first pay upfront to attend a seminar and buy expensive
materials. Frequently, seminars are high pressure sales pitches and the material is so
general it is worth little. And the material, especially software, may not even be
usable or adaptable to your needs.
_ Get in writing the refund, buy-back and cancellation policies of any company
you deal with. Do not depend on oral promises. They have no legal validity.
_ Know that it is illegal to do certain types of work at home. To find out which
types, check out the regulations enforced by the Department of Labor.
� Rules For Telephone Solicitations
Mail fraud promoters use the postal system to try to get money from you by offering
something they don’t intend to deliver. But a mail fraud scheme doesn’t always start
through the mail. It can sometimes begin with an unsolicited telephone call.
While there are many legitimate individuals and companies that use the telephone to
solicit business, some con artists use a scripted sales pitch and an array of high-pressure
sales tactics to obtain purchase commitments from victims.
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However, both con artists and legitimate telemarketers sometimes use abusive techniques
such as calling people’s homes late at night. To protect consumers, the Telephone
Consumer Protection Act of 1991 was passed and became effective December 20, 1992.
That act and regulations of the Federal Communications Commission (FCC) help
consumers avoid unwanted telephone solicitations and regulate certain abusive
techniques. Under the new rules, telemarketers:
_ Are required to maintain company-specific do-not-call lists for consumers who have
requested that they not receive unwanted telephone solicitations.
_ Are barred from calling homes before 8 a.m. and after 9 p.m.
_ Are prohibited from using automatic dialing systems and pre-recorded messages
where they may pose a threat to health and safety, such as using these techniques to
call emergency lines and health care facilities.
_ Must, when making calls with an automatic dialing system, identify the caller, give
caller’s telephone number or address, and release the called party’s line within five
seconds of notice the called party has hung up.
_ May not send unsolicited or “junk fax” ads to telephone fax machines.
The Telephone Consumer Protection Act of 1991 also allows consumers and businesses
to sue telemarketers who violate provisions of the act or the FCC’s regulations.
Consumers may sue in state court to stop violations or to recover any actual monetary
damages suffered.
The U.S. Postal Inspection Service has no authority to investigate or punish telemarketers
who use the abusive practices outlined in this tip sheet. The Postal Inspection Service’s
responsibility is to investigate telemarketers who solicit funds through the U.S. Mail in
fraudulent schemes. Therefore, if you have been victimized in a fraudulent promotion in
which the U.S. Mail was used, even if you became interested in the promotion by first
receiving a telephone call, report your experience to your local postmaster or the nearest
Postal Inspector.
� Characteristics of Telemarketing Fraud Schemes
A telemarketing fraud scheme often begins when you receive a postcard or letter in the
mail describing an appealing offer. To take advantage of the offer, you’re told to call a
900 number or a toll-free 800 number. When you call, the telemarketer has a convincing
sales pitch.
Protect yourself from becoming the victim of such fraud by remembering the following
tip-offs, which will help you decide whether to deal with the promoter.
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_ The offer sounds too good to be true. An unbelievable-sounding deal probably is not
true.
_ High-pressure sales tactics. A swindler often refuses to take no for an answer; he has
a sensible-sounding answer for your every hesitation, inquiry, or objection.
_ Insistence on an immediate decision. Swindlers often say you must make a decision
“right now,” and they usually give a reason, like, “The offer will expire soon.”
_ You are one of just a few people eligible for the offer. Don’t believe it. Swindlers
often send out hundreds of thousands--and sometimes millions--of solicitations to
consumers across the nation.
_ Your credit card number is requested for verification. Do not provide your credit card
number (or even just its expiration date) if you are not making a purchase, even if you
are asked for it for “identification” or “verification” purposes, or to prove “eligibility”
for the offer. If you give your card number, the swindler may make unauthorized
charges to your account, even if you decide not to buy anything. Once that is done, it
may be very hard to get your money back.
_ You are urged to provide money quickly. A crook may try to impress upon you the
urgency of making an immediate decision by offering to send a delivery service to
your home or office to pick up your check. This may be to get your money before you
have a chance to think carefully about the offer and change your mind, or to avoid the
possibility of mail fraud charges in the future.
_ There is no risk. All investments have some risk, except for U.S. Government
obligations. And if you are dealing with a swindler, any “money-back guarantee” he
makes will simply not be honored.
_ You are given no detailed written information. If you must send money or provide a
credit card number before the telemarketer gives you the details in writing, be
skeptical. Do not accept excuses such as, “It’s such a new offer we don’t have any
written materials yet,” or “You’ll get written information after you pay.”
_ You are asked to trust the telemarketer. A swindler, unable to get you to take the bait
with all of his other gimmicks, may ask you to “trust” him. Be careful about trusting
a stranger you talk to on the phone.
_ You are told you have won a prize, but you must pay for something before you can
receive it. This payment can either be a requirement to purchase a minimum order of
cleaning supplies or vitamins, or it can be a shipping/handling charge or a processing
fee. Do not deal with a promoter who uses this tactic.
If you have been bilked in a telemarketing scheme in which the U.S. Mail was used, or if
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you know about a scheme that should be investigated, inform your local postmaster or
nearest Postal Inspector.
� General Telemarketing Tips (from National Fraud Information Center)
_ Do business with those you know and trust. If you aren’t familiar with the
company, ask for information to be sent to you about the products or services it’s
offering. A legitimate company will be glad to provide that information, a fraudulent
marketer won’t.
_ Understand the offer. Be sure you know who and where the company is and how to
reach it, what is being sold, the total price, the delivery date, the return and
cancellation policy, and the terms of any guarantee. If that information isn’t in a
catalogue or other materials that you have, get it in writing from the company.
_ Check out the company’s track record. Ask your state or local consumer protection
agency if the company has to be licensed or registered, and with whom, and check to
see if it is. You can also ask consumer agencies and the Better Business Bureau in
your area about the company’s complaint record. But keep in mind that some
companies open and shut quickly, so lack of a complaint record is no guarantee that
a telemarketer is legitimate.
_ Be careful to whom you give your financial or other personal information. Don’t
provide your bank account numbers, credit card numbers, social security number or
other personal information unless you know the company is legitimate and the
information is necessary for the transaction. Even with partial information, con
artists can make unauthorized charges, deduct money from your account, and
impersonate you to get credit in your name.
_ You may be better of paying by credit card than with a check, cash or money
order, as long as you know with whom you’re doing business. When you use your
credit card for a purchase and there is a problem, you have the right to notify your
card issuer that you are disputing the charge, and you don’t have to pay it while your
dispute is being investigated. It’s easier to resolve a problem if you haven’t already
paid.
_ Take your time to decide. While there may be time limits for special offers,
high-pressure sales tactics are often danger signs of fraud.
_ Resist pressure to send your payment by private courier, wire transmission or
overnight delivery. These tactics are sometimes used to prevent you from changing
your mind and to avoid law enforcement authorities such as the U.S. Postal
Inspection Service.
_ Don’t enter contests or other games of chance unless you know the company or
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organization sponsoring them. Fraudulent telemarketers often get lists of potential
victims from entry forms for free trips or other prizes that consumers drop in boxes at
fairgrounds or shopping centers, and from responses to mailings for sweepstakes,
contests and puzzles.
_ If you’ve lost money to a fraudulent telemarketer, beware of bogus “recovery
services” that offer to get it back for you---for an up-front fee. People who are
victimized once are often targeted again by the same crooks or others. Legitimate law
enforcement agencies don’t charge for attempting to help telemarketing scam victims.
_ You do have some control over who calls you. Under federal law, you can tell a
telemarketer not to call again. If you want to exercise that right, be specific----don’t
just say that you’re interested. Keep a list next to the phone with the company names
and dates. If you are called again on behalf of those companies, report it to your state
attorney general and the Federal Trade Commission.
_ You can reduce unwanted calls Sign up for the Direct Marketing Association’s
Telephone Preference Service. DMA member companies that participate in this
industry-sponsored program will put you on their “do not call” lists. If you are
repeatedly called by fraudulent telemarketers, you may want to consider changing
your phone number.
Telephone Preference Service
PO Box 9014
Farmingdale NY 11735-9014
_ Don’t be shy about hanging up. Your phone is just like the door to your home or
apartment. You don’t have to open it or invite people in, and you can ask guests to
leave at any time. Fraudulent telemarketers are very good at lying to, bullying or
sweet talking their intended victims. The longer you stay on theline, the deeper they
sink their hooks. Don’t let a criminal in your home through your telephone line!
� Home Improvement and Home Repair Frauds
Because home repairs and improvements are expensive undertakings, con men and
vagabond thieves have entered the industry to rip you off. Be careful if somebody mails
you a brochure offering to do an expensive job for an unusually low price. This is a
favorite trick of dishonest home repair firms. Once you sign the contract, you learn why
the price is so low--the firm never delivers the service you paid for in advance.
Free inspections by con men turn up plenty of expensive repairs you don’t need. Some
vagabond thieves may not even mail you an offer to do a free inspection. They just show
up at your home and try to gain access by posing as utility repairmen or home insulation
inspectors offering a free inspection. They may quickly flash something that looks like an
identification card to convince you to let them enter. Some shady operators offer to do
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the work on the spot. However, when they leave, you may be left with a large bill and a
faulty repair job.
Precautions you can take to make an informed decision include:
_ Always get several estimates for every repair job and compare prices and terms. Ask
if there is a charge for an estimate before agreeing to let the repair person or company
inspect your home.
_ Make sure you know your salesperson’s name and the name and address of the
company he or she represents.
_ Ask the firm for references, and check them out. Inspect the finished product. Contact
your local Better Business Bureau to check out the company’s reputation before you
authorize any work or pay any money.
_ If you decide to sign a contract, make sure a completion date is specified and that you
know what the job will cost, if work will be subcontracted, if a bond will be posted to
protect you against liens on your home, if the contract includes all oral promises
made, and if materials to be used are described in detail.
Always pay for home improvement work with a check or money order, never with cash.
You may wish to make installment payments at the beginning of a job, when the work is
almost complete, and after the job is finished. Many reputable companies do not require
payment until work is completed.
If you have been taken in a home improvement fraud scheme, and the U.S. Mail system
was used in any way, report your experience to your local postmaster or the nearest
Postal Inspector.
� The Phony Inheritance Scam
Wouldn’t it be nice if you came into an inheritance from a long-lost relative or friend? It
does happen, but not very often. So if you receive a notification in the mail from an
“estate locator” saying that there is an unclaimed inheritance waiting for you, beware.
You could be the target of a slick con artist.
These unscrupulous white collar criminals also call themselves “research
specialists”--but they didn’t find you by doing research. You are one of thousands across
the nation who are targeted in mass mailings. Thousands of individuals with the same last
name receive notification that inheritance funds have been located in their names. Many
of these recipients are lured into mailing in a fee--sometimes $30 or more--for an estate
report, which will supposedly explain where the inheritance is located and how it can be
claimed. The promoter may also offer to process your claim for a fee.
All the individuals on the mailing list receive the same estate information, so chances are
almost zero that you are the actual heir. In the rare instance when someone on the mailing
list has the right to claim the funds, the amount is negligible because many accounts are
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so small. They may actually be worth less than the fee you must pay to the promoter.
You can protect yourself by checking other sources before sending funds in response to
an “estate locator” solicitation. Checking with relatives about recent deaths in the family
is one approach. In addition, you can check with the local Better Business Bureau, the
U.S. Postal Inspection Service, or State Attorney General’s office to see if there have
been any investigations into the activities of the person or firm making the solicitation.
Remember, legitimate law firms, executors of wills, and others who have been named to
distribute estate funds to rightful heirs normally do not request you to pay a fee to find
out about your share of the estate. If you have been the victim of a phony estate locator
scheme, or if you have received a suspicious solicitation in the mail stating an unclaimed
inheritance awaits you, report your experience to your local postmaster or nearest Postal
Inspector.
� Receipt of unsolicited merchandise
A company sends you a gift in the mail--a ball point pen, a key chain, a tie. But you
didn’t order it. What do you do? If you are the type of person this company is looking
for, you may feel guilty about accepting the item without paying for it. Don’t feel guilty!
It’s yours, and you are under no obligation to pay anything.
You, the consumer, may only legally be sent two types of merchandise through the mail
without your consent or agreement:
_ Free samples which are clearly and conspicuously marked as such.
_ Merchandise mailed by a charitable organization that is soliciting contributions.
And in these two cases, you can consider the merchandise a gift if you wish. In all other
situations, it is illegal to send merchandise to someone, unless that person has previously
ordered or requested it.
These rules are codified in Title 39, United States Code, Section 3009. That section of the
Postal Reorganization Act of 1970 incorporates these protections for American
consumers and makes the mailing of unordered merchandise unfair methods of
competition and unfair trade practices under the law.
If you do not wish to pay for unsolicited merchandise or make a donation to a charity
sending such an item, you may do one of three things (in each case, by law, you have no
obligation to the sender):
_ If you have not opened the package, you may mark it “Return to Sender,” and the
Postal Service will return it with no additional postage charged to you.
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_ If you open the package and don’t like what you find, you may throw it away.
_ If you open the package and like what you find, you may keep it for free. In this
instance, “finders-keepers” applies unconditionally.
Furthermore, it is illegal for a company that sends you unordered merchandise to follow
the mailing with a bill or dunning communication.
If you are aware of violations of the federal law prohibiting the mailing of unordered
merchandise, or if you have personally had difficulty with such items--especially if you
are sent statements demanding payment for the merchandise--you should contact you
local postmaster or the nearest Postal Inspector.
� Missing Persons Fraud Scheme
The missing persons scam is one of the more unusual types of fraud schemes. It preys on
those people whose loved ones have disappeared. For example, Postal Inspectors once
investigated a promoter who was running a “recovery bureau.” The bureau attempted to
collect $20,000 on the basis of fraudulent claims that it knew the whereabouts of a
California man’s missing former wife and children.
The Californian traveled to Michigan based on the promoter’s promises that he could
find and reclaim his family in that state. The man became suspicious when the contact he
was sent to see in Michigan demanded a $20,000 payment before he would provide any
information about the missing former wife and children.
Subsequent investigation by Postal Inspectors revealed that the ex-wife and children had
never been in Michigan. The promoter had no information about the missing family
members. In reality, he had only received a routine notice from a private investigator who
was seeking assistance in finding the ex-wife and children.
The Postal Inspection Service warns families with missing children, spouses or other
relatives, or friends, to be cautious about persons who demand money for information
leading to the whereabouts of those missing persons. When such information is made
available for sale, law enforcement authorities should be contacted to assure the validity
of the claims being made about the whereabouts of missing persons.
You should also consider contacting your local Better Business Bureau, the District
Attorney’s Office Consumer Protection Unit, or the Postal Inspection Service to
determine if they are investigating any missing persons “recovery bureau” for possible
fraudulent activity.
If you have been victimized in a fraudulent missing persons scheme in which the U.S.
Mail was used, or if you have received a suspicious solicitation in the mail which offers
to provide information about missing family members or friends for a fee, report your
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experience to your local postmaster or nearest Postal Inspector.
� Prison Pen Pal Money Order Scam
Singles in search of romance are increasingly turning to personal ads. But so are
criminals looking for an easy mark. Prisoners’ personal ads have proliferated in recent
years, and some prisoners may be looking for genuine contact with life outside their
prison walls. However, many ads placed by prisoners are part of a sophisticated mail
fraud scheme that misuses postal money orders to bilk consumers of their hard earned
savings.
Be aware of the telltale signs of this unusual scheme. If you begin to write letters to a
prisoner who is attempting to cultivate you for his mail fraud scheme, he will slowly
attempt to gain your trust and confidence. If you are a single woman, he may even send
you love letters and handsome photos, and promise to marry you upon his release. Male
prisoners posing as women try to lure men into the scheme as well.
While confessing their love for you, he will also admit that he is serving a prison term for
a tax violation or other non-violent offense. But he will say his prison term is almost up,
and he’s looking forward to starting a new life together with you when he is freed.
Eventually, he will ask you to cash one or more postal or other money orders for him,
claiming that he needs the money to pay attorney fees or court fines. Where does he get
each high-value money order (often as much as $700)? He will obtain them from an
accomplice outside the prison who buys them in small denominations (often only $1) and
then smuggles them inside the prison, where inmates alter them to reflect higher values.
When you assist your pen pal by cashing any such money order--and sometimes there are
many of them totaling thousands of dollars--you are told to send the money to a “friend”
of the prisoner, whom you’re told is helping with his legal defense. Of course, this friend
is the outside accomplice. You will be told first to deposit the money orders in your
personal bank account for temporary “safe-keeping” and then to pay out the funds to the
outside accomplice.
Shortly after sending the money, you will receive a cruel “Dear Jane or John” letter
asking you to understand that your penpal only did what he or she “had to do” to survive,
and now that he’s out, the relationship is over. But he’s not out. He’s still in prison. And
what’s even worse, he now has your money, because the bank will charge your account
for the phony money orders you deposited. Since the U.S. Postal Service routinely
compares all of its cashed postal money orders with the original money order receipts, all
altered postal money orders will ultimately be discovered.
Under current law, the person who cashes, or deposits and then withdraws, an altered
money order is responsible for its total value--in this case, the altered value. Therefore,
shortly after you pay out the temporarily held funds from your bank account, your bank
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will notify you that you must pay the difference between the issued amount and the
raised amount. For example, if you cash a $1 money order that has been altered to $700,
you will end up being charged $699 of your own money.
If you have received a money order from a prisoner, you should immediately contact a
Postal Inspector through your local post office. And if you a bank teller and are
suspicious about the authenticity of a money order you’re about to accept, you should
refer the customer to the nearest post office.
� Fraudulent Health and Medical Products
Senior citizens are special targets of the quacks and con men who are out to sell
worthless medical products. Their claims are highly deceptive and usually promise
miracles. Watch out for such exaggerated claims as “instant cures for arthritis,” “lose
weight without effort,” “grow hair overnight,” or “look years younger.”
The pills, lotions and creams sold by these con artists will supposedly cures arthritis,
rheumatism, heart disease, multiple sclerosis, Parkinson’s disease, cancer, obesity,
impotency, and a host of other ailments. Hardly any of these products have been properly
tested or proven medically effective, and some are even dangerous to your health.
These medically ineffective or dangerous products are sold by professional con men who
have no medical training, and will use every trick to get you to buy their products. Sales
gimmicks include bogus testimonials from “satisfied customers,” emotional sales pitches
to play on your problems, and outright lies regarding a product’s effectiveness.
To avoid being taken by a worthless or quack cure, remember that you should not trust
your health to a salesman. Also, remember:
_ Don’t believe claims that a product available only by mail or from an “exclusive”
supplier contains a “special,” “secret,” “foreign,” or “ancient” formula that will
provide the cure or relief you seek.
_ Don’t believe claims that a “miracle” drug or product will effectively treat a wide
variety of illnesses or ailments.
_ Don’t accept “testimonials” or case histories from “satisfied customers” as the only
evidence that the product actually works.
_ Don’t believe claims the medical establishment overlooked or suppressed a
“scientific breakthrough” the promoter is trying to sell you.
If you have any doubts about a product someone is trying to sell you that promise the
relief you have been looking for, discuss it first with your family doctor or other
informed health professional. And remember, money-back guarantees are usually
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worthless, and a product that sounds too good to be true probably won’t do what it claims
to do. If you’ve been victimized by a health product fraud scheme, report your experience
to your local postmaster or nearest Postal Inspector.
� Identity Theft (from Crime Prevention Association of Michigan)
Identity theft is one of the fastest growing crimes in the United States. Credit card
numbers, driver’s license numbers, social security numbers, and other personal
identification can net criminals thousands of dollars in a very short period of time.
While the financial loss incurred by this type of crime is not always incurred by the
consumer, it can significantly traumatize them, and take them months if not years to
restore their credit and good name, and may keep them from being able to cash checks,
obtain loans, or even rent an apartment.
_ Ten Ways To Protect Yourself
You can minimize the risk of being victimized by taking the following steps:
1. Never leave your purse or wallet unattended, at work, at restaurants, at health
fitness clubs, in your shopping cart, at church, at parties. Never leave your
purse or wallet in open view in you car, even when locked.
2. Destroy all checks immediately when you close a checking account. Destroy
or keep in a secure place, any courtesy checks that your bank or credit card
company may mail you.
3. Reconcile your check and credit card statements in a timely fashion and
challenge any purchases you did not make.
4. Limit the number of credit cards you have, and cancel any inactive accounts.
5. Never give any credit card, bank, or social security information to anyone
over the telephone.
6. Minimize exposure of your social security and credit card numbers. If the
numbers are requested for check cashing purposes, ask if the business has
alternative options such as a check cashing card.
7. Safeguard your credit and debit and ATM card receipts and shred them before
disposing of them.
8. Scrutinize your utility and subscription bills to make sure the charges are
yours.
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9. Memorize your passwords and personal identification (PIN) numbers. Keep
your PIN numbers somewhere that only you know about, anywhere but with
your credit cards. Don’t give out your PIN. Keeping your numbers to yourself
is the best way to keep your credit cards secure.
10. Keep a list of, or photocopy all credit and identification cards you carry with
you, including front and back, so that you can quickly call the issuers to
inform them about missing or stolen cards.
_ If You Are the Victim of Identity Theft
1. Report the incident to the police immediately. If you know where your
identification was stone, that would be the jurisdiction you would have to
report it to. Insist you be given a complaint number.
2 .Report all stolen cards to the issuers immediately and request new cards be
issued. Follow up with written notification.
3. Notify your bank in the event your checks were stolen and request that your
account be closed.
4. In order to prove your innocence, be prepared to fill out affidavits of forgeries
for banks, credit grantors and recipients of stolen checks. They are joint
victims with you and may suffer a financial loss.
5 Contact the social security office if someone is using your social security
number to establish credit or new accounts.
6. All three major credit reporting agencies in the United States have Fraud
Assistance programs, with toll free telephone numbers. Report the theft of
your credit cards and request that your account be flagged to all three of the
following companies:
Equifax Credit Information Services,
Consumer Fraud Division,
P.O. Box 740256, Atlanta, GA 30374.
Tel: (800) 525-6285 Fax: (770) 612-2518
TransUnion Fraud Victim Assistance,
P.O. Box 6790 Fullerton, CA. 92634
Tel: (800) 680-7289 Fax: (714) 447-6034
TRW Information (Esperian) Consumer Fraud Assistance,
P.O. Box 1017, Allen, TX 75013
Tel: (800) 301-7195, Fax: (214) 390-3527