Don't Pay for a Promise!: A Survivor's Guide to Swindles and Deceptive Practices

By John McHardy

Growing out of a project to help the author deal with his own credulity, "Dont Pay for a Promise" is a treasure house of information distilled from hundreds of Government publications. These publications are constantly being revised and updated and the reader should consult them regularly for the latest facts. However, because each publication must stand on its own, there is a "patchwork" character to the material and finding answers for a particular situation can take time. By capturing the essence of these publications, John McHardy has created a powerful resource for anyone who has ever agonized over an offer that seems too good to be true. In 14 compact chapters, the book deals systematically with the diverse types and guises of consumer fraud, offering concrete advice on how to recognize and respond to each of them. The first chapter provides information common to all types of fraud and serves as a foundation for the rest of the book. The next eleven chapters then cover individual aspects of the subject. For example, Chapter 2 "Identity Theft" examines topics that range from simple theft to the less obvious hazards of automatic debit and electronic banking. A typical chapter begins with an outline of pertinent laws and regulations and continues with one or more sections on particular issues. For example, Chapter 3, arranges the broad subject of "Contests" into three separate sections. Within each section, the material is organized under a consistent set of paragraph headings. These include the "promise" (the scam or deceptive practice), warning signs that may distinguish it from a legitimate offer, and ways that consumers can protect themselves or at least minimize their losses. The book concludes with two chapters of reference material, Chapter 13 detailing the many organizations that can offer help in the fight against fraud and Chapter 14 containing the full text of FTC Telemarketing Sales Rule.

• Language: English
• Publisher: Xlibris US
• Release date: Nov 1, 2000
• ISBN: 9781462818006

John McHardy

Raised in the congenial conformity of post war England, John McHardy came to the US confident that integrity and a Cambridge degree were all he needed to succeed. The path to enlightenment was long and arduous but it made him realize that lofty ideals and higher education are just no match for low cunning.

Book preview

DON’T PAY

OR A PROMISE!

A SURVIVOR’S GUIDE

TO SWINDLES AND

DECEPTIVE PRACTICES

John McHardy

Copyright © 2000 by John McHardy.

DISCLAIMER:

While great care has been taken to ensure that the information in this book comes from reliable sources, it is provided as is, with no guarantee of completeness, accuracy, or timeliness. The author is not engaged in rendering legal or other professional advice and the book should not be used as a substitute for consultation with professional advisers.

Cover photograph by Digital Imagery®

Copyright © 1999 PhotoDisc, Inc.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

This book was printed in the United States of America.

To order additional copies of this book, contact:

Xlibris Corporation

1-888-7-XLIBRIS

www. Xlibris. com

Orders@Xlibris. com

Contents

CHAPTER 1:

THE FRAUD EPIDEMIC

THE SWINDLER

THE VICTIM

THE CONTACT

TELEPHONE

COMPUTER NETWORKS

MAIL

ADVERTISEMENTS

TV INFOMERCIALS

REFERRALS

THE RESPECTABLE BUSINESS

THE PITCH

Large Profits

Low Risk

Urgency

Confidence

ABOUT THIS BOOK

Purpose

Organization

CHAPTER 2:

IDENTITY THEFT

THE LAW

The Fair Credit Billing Act (FCBA) and the

Electronic Fund Transfer Act (EFTA)

FTC Telemarketing Sales Rules

CARD THEFT

Limiting Your Financial Loss

Protecting Yourself

MAIL THEFT

Protecting Yourself

AUTOMATIC DEBIT

ELECTRONIC BANKING

Electronic Fund Transfers

Your Rights and Responsibilities

Errors

Lost or Stolen EFT Cards

Limited Stop-Payment Privileges

Other Rights

Protecting Yourself

CHAPTER 3:

CONTESTS

THE LAW

PRIZE OFFERS

The Promise

Protecting Yourself

The Promise

Warning Signs

Protecting Yourself

GREEN CARD OFFERS

The Promise

Protecting Yourself

CHAPTER 4:

EMPLOYMENT

FEDERAL JOBS

The Promise

Warning Signs

JOB ASSISTANCE

The Promise

Types of Employment Service Firms

Protecting Yourself

MODELING OFFERS

The Promise

Warning Signs

Protecting Yourself

WORK AT HOME

The Promise

Protecting Yourself

COUPONS

The Promise

Warning Signs

Protecting Yourself

CHAPTER 5:

BUSINESS

OPPORTUNITIES

THE LAW

FTC Franchise Rule

INTERNET-BASED BUSINESS OPPORTUNITIES

The Promise

Protecting Yourself

DISPLAY RACKS AND VENDING MACHINES

The Promise

The Reality

Protecting Yourself

PYRAMID SCHEMES

Pyramids vs. Multi-Level Marketing Plans

Protecting Yourself

INVENTIONS

Warning Signs

Recognizing Legitimate Firms

Protecting Yourself

Further information

CHAPTER 6:

CREDIT

THE LAW

The Fair Credit Reporting Act

The Fair Credit Billing Act (FCBA)

The Credit Repair Organizations Act

CREDIT CARDS

Protecting Yourself

Protecting Your Cards

Buying a Registration Service

SECURED CREDIT CARDS

Secured vs. Unsecured Cards

The Promise

Warning Signs

Protecting Yourself

ADVANCE-FEE LOANS

The Promise

Protecting Yourself

Low-Cost Help for Credit Problems

CREDIT REPAIR

The Promise

Warning Signs

File Segregation

Protecting Yourself

DEBT RELIEF

Warning Signs

Protecting Yourself

Personal Bankruptcy

LOAN TRANSFERS

CHAPTER 7:

MERCHANDISE

THE LAW

The FTC Credit Practices Rule

The FTC Cooling-Off Rule

UNORDERED MERCHANDISE

Frequently Asked Questions

Protecting Yourself

WARRANTIES AND SERVICE CONTRACTS

Written Warranties

Spoken Warranties

Implied Warranties

Service Contracts

Protecting Yourself

Resolving Warranty Disputes

HOME WATER TREATMENT UNITS

How do I know if I need a unit?

What kind of units are available?

What else should I consider?

Warning Signs

Protecting Yourself

KITCHEN GADGETS

The Promise

The Risk

NATIVE AMERICAN JEWELRY

Authentication

Terminology

How to Buy

Further Information

MAGAZINES

Warning Signs

Protecting Yourself

How To Cancel

OFFICE SUPPLIES

The Credible-Invoice Scam

The Order-by-Trick Scam

The Wedge Scam

After the Merchandise and the Invoice Arrive

Protecting Your Organization

Yellow Pages Invoices

Warning Signs

Protecting Yourself

CHAPTER 8:

AUTOMOBILE REPAIRS

BE PREPARED

How to Choose a Repair Shop

Recognizing Symptoms

Trouble Shooting

AUTOMATIC TRANSMISSION REPAIR

Recognizing Symptoms

Choosing a Repair Facility

Protecting Yourself

GAS-SAVING PRODUCTS

The Promise

The Reality

Protecting Yourself

CHAPTER 9:

HEALTH AND RECREATION

FRAUDULENT HEALTH CLAIMS

The Promise

Warning Signs

Protecting Yourself

DIETARY SUPPLEMENTS

WEIGHT LOSS PROGRAMS

The Promise

Protecting Yourself

HEALTH SPAS

Protecting Yourself

TRAVEL OFFERS

The Promise

Warning Signs

VACATION TIME SHARING

TIMESHARE RESALE PROGRAMS

The Promise

Protecting Yourself

DANCE LESSONS

Sales Techniques

Protecting Yourself

CHAPTER 10:

TELEMARKETING

THE LAW

The FTC Telemarketing Sales Rule

Exceptions to the Rule

TYPICAL SCAMS

The Promise

Warning Signs

Protecting Yourself

RELOADING

The Promise

Sucker Lists

The Double Scam

RECOVERY

The Promise

Protecting Yourself

CHAPTER 11:

COMMUNICATIONS

THE LAW

The FTC 900 Number Rule

Mail or Telephone Order Rule

900 NUMBERS

Protecting Yourself

CROSS BORDER SCAMS

The Promise

Protecting Yourself

MAIL FRAUD

The Promise

Protecting Yourself

ONLINE FRAUD

The Promise

Warning Signs

Protecting Yourself

CHAPTER 12:

INVESTMENT AND CHARITY

FEATURES OF INVESTMENT FRAUD

The Promise

Warning signs

Protecting Yourself

ONLINE INVESTMENTS

The Promise

Warning Signs

RARE COINS

The Promise

Protecting Yourself

ART FRAUD

The Promise

Protecting Yourself

PRECIOUS METALS

The Promise

Protecting Yourself

TELECOMMUNICATIONS

FCC License Auctions

License Application Services

Partnerships

Warning Signs

Protecting Yourself

CHARITY

Public Safety Fund-Raising Appeals

Protecting Yourself

CHAPTER 13:

RESOURCES

THE FTC BUREAU OF CONSUMER PROTECTION

Division of Advertising Practices

Division of Credit Practices

Division of Marketing Practices

Division of Service Industry Practices

Contacting the FTC

THE NATIONAL FRAUD INFORMATION CENTER (NFIC)

Charter

Contacting the NFIC

Privacy

THE AMERICAN ASSOCIATION OF RETIRED PERSONS (AARP)

Charter

Contacting AARP

CALL FOR ACTION, INC. (CFA)

CHARTER

Contacting CFA

YOUR STATE ATTORNEY GENERAL

OTHER AGENCIES AND ORGANIZATIONS

Credit and ATM Card Problems

National Credit Bureaus

Employment and Investment Problems

Business Organizations

CHAPTER 14:

THE TELEMARKETING SALES RULE

PART 310: TELEMARKETING SALES RULE

§ 310.1 Scope of regulations in this part.

§ 310.2 Definitions.

§ 310.3 Deceptive telemarketing acts or practices.

§ 310.4 Abusive telemarketing acts or practices.

§ 310.6 Exemptions.

§ 310.7 Actions by States and private persons.

§ 310.8 Severability.

FOOTNOTES

The book is dedicated to the threadbare stranger

who once persuaded a vain college student

to pay for the promise of a German camera.

Had I learned my lesson then,

the five pounds I gave him would have been a bargain!

CHAPTER 1:

THE FRAUD EPIDEMIC

Fraud and deception are rampant afflictions of modern society and none of us is immune. Many thousands of people each year fall prey to swindlers and almost everyone has experienced some form of deceptive business practice. Even those people who have (so far) escaped the direct impact of fraud still pay indirectly through surcharges or taxes that are levied to cover its costs.

Wherever money changes hands, the potential exists for fraud. No matter whether we are enjoying good fortune or facing ruin, the swindler will find a way to deplete our resources. We can be cheated when we enter a lottery, look for a job, apply for a loan, make a purchase, pay for a service, or seek restitution for prior fraud. our money is a target whether we are trying to accumulate it, enjoy it, invest it, donate it, or even bequeath it.

Dealing primarily with practices that cheat individuals and small businesses, the information contained in this book can help minimize your chances of becoming a victim. The operative word is minimize because no amount of information can completely shield us from fraud. Indeed, the swindler’s greatest asset is the victim’s belief that it could never happen to me.

THE SWINDLER

The agent of fraud may be a man or a woman but in the interest of brevity I will use the masculine pronoun to represent both. He may be a stranger on the telephone, a friend of a friend, or a

distant relative. He may operate from a dingy back office or from an opulent suite in the new bank building. He may wear a hard hat. He may have no apparent credentials or he may have impressive letters following his name. He may be glib and fast-talking or shy and soft-spoken. In short, swindlers are people from every walk of life who just happen to have a talent for deceit. Not all of them start out as swindlers. There have been cases where individuals who held positions of trust and esteem—accountants, attorneys, brokers and doctors—abandoned their professional ethics in pursuit of easy money. In other cases, legitimate programs went sour through happenstance or poor management—leading the promoter to take the money and run. Whether a deal is planned as a swindle or simply becomes one, the result is the same: money changes hands and innocent people suffer.

THE VICTIM

Just as there is no typical profile for a swindler, neither is there one for a victim. While some swindlers prefer to target the wealthy, most of them take the view that everyone’s money spends the same. Some swindlers deliberately seek out people in financial difficulty, cynically exploiting their plight. If you are a newly downsized worker, suddenly in possession of a large severance package, you are also a prime target.

Movie actors and athletes, professionals and successful business executives, political leaders and internationally famous economists have all fallen victim to fraud. So have hundreds of thousands of others, including widows, retirees and working people who have struggled for every penny. The one thing all victims have in common is a need or desire for money that overrides their instinct for caution. By believing what they want to believe, the victims actually participate in their own undoing.

THE CONTACT

In seeking to catch a victim, the swindler will attempt to mimic the offerings of reputable firms, contacting their victims through trade shows; telephone solicitations; television, radio, print advertisements, and now the Internet. The differences between the legitimate and the shady can be subtle and the con artist will strive to blur the distinctions even further. When we are contacted by a stranger, skepticism should be the watchword, no matter which of the following methods is used.

TELEPHONE

So-called telephone boiler-rooms remain a favorite way for swindlers and their sales squads to quickly contact large numbers of potential investors. Even if a swindler has to make 100 or 200 phone calls to find a mooch (one of the terms swindlers use for a victim), he figures that the opportunity to pocket thousands of dollars of someone’s savings is still good pay for the time and effort involved.

COMPUTER NETWORKS

By November 1999, there were over 80 million Internet users in the United States (220 million worldwide) and every one of them is a potential target for the scam artist. These road hazards on the information highway may lurk within colorful home pages on the World Wide Web or on electronic bulletin boards. The scams aren’t new, just the medium. Some con artists who once used telemarketing, infomercials, newspapers, magazines, and the mail to attract consumers are turning to the Internet and the online services of cyberspace to promote their scams.

The Internet and the commercial online services provide a valuable new information source for consumers. However, cyberspace has another side: fraudulent sellers use these computer services to promote bogus stock offerings, credit repair services, and exotic or high-tech investment opportunities. Promotions for ineffective weight-loss and health-related products and programs also appear online. The bottom line is: treat all ads with skepticism. Never make an investment or major purchase decision based on information from one source—whether it’s print, broadcast, or online.

MAIL

The U. S. Postal Service will deliver more than 180 billion pieces of mail this year, including many interesting, appealing, and attractive solicitations. Unfortunately, some of these solicitations come from scam artists and many are using approaches that tug at your heart strings, take advantage of your trusting nature, or appeal to the entrepreneur in you.

Some sellers of fraudulent deals buy bonafide mailing lists—names and addresses of people who, for example, subscribe to particular publications, who have responded to previous direct mail offers, or who have other characteristics that swindlers look for. In the hope of avoiding notice by postal authorities mail order swindlers may not make a direct or immediate pitch for your money. Rather, they often seek to entice you to write or phone for more information. Then comes a call from the salesperson or the person who closes the deal. Some may phone even if you didn’t respond to the mailing.

ADVERTISEMENTS

A newspaper or magazine ad may offer (or at least hint at) profit opportunities far more attractive than available through conventional means. Even though crooks know that regulatory agencies regularly monitor ads in major publications, some, nevertheless use such publications in the hope of being able to hit-and-run before an investigator shows up. Others advertise in narrowly circulated publications that regulators are less likely to see.

TV INFOMERCIALS

Companies often use program-length commercials or infomercials to promote their wealth-building methods and merchandise. These infomercials have the look, feel, and length of real TV programs. They often imitate the format of genuine talk shows or investigative consumer news programs. The products being sold are often discussed as part of the program and touted by paid experts, moderators, or reporters. The programs may last for 30 minutes, interrupted by advertisements for the show’s products with ordering information. Promoters of wealth-building schemes may claim that if you follow their methods, you can make substantial sums of money through real estate, investments and business opportunities, or get low-interest government loans or grants. These claims may be false, misleading, or unsubstantiated.

Some infomercials invite you to attend seminars where you can learn more about how to start a home-based business. More than likely, the seminar is a sales pitch. The smooth-talking salespersons may endorse the programs, materials, or services or use testimonials to illustrate what easy money you can make by using the promoters’ products. Lured by the promises of easy success, you may invest in programs, materials, or services without much thought. Later, like many others, you may find that the program or business opportunity was essentially worthless and that all you have are empty promises.

REFERRALS

One of the oldest schemes involves paying large profits to initial investors (from their own or other peoples’ investments) so that they will recommend the opportunity to their friends. These friends will tell their friends and soon, the swindler no longer needs to find new victims; they will find him.

THE RESPECTABLE BUSINESS

Some swindlers go first class. Using profits from previous swindles, they rent plush offices, hire an interior decorator and professional sounding receptionist and open what has the appearance—but not the reality—of a reputable firm. You may even have to phone for an appointment, and once there don’t be surprised to be kept waiting (that’s intended to make you all the more eager). This kind of swindler’s success depends on how long he can keep his victims from knowing they are being cheated. Investors are assured that their large profits are being reinvested to earn even larger profits. Such a swindler may join local civic groups, contribute to charities, and generally play the role of a solid citizen.

THE PITCH

The approaches employed by swindlers to catch their victim are as varied as their methods of establishing contact. If there is a common denominator, however, it is their ability to be convincing.

The skills that make them successful are essentially the same skills that enable any salesperson to be successful but swindlers have a decided advantage: Unlike salesmen, they don’t have to make good on their promises. In the absence of this responsibility, they have no reluctance to promise whatever it takes to persuade you to part with your money. Features of these promises may include:

Large Profits

The profits a swindler talks about are generally large enough to make you interested and eager to invest—but not so large as to make you overly skeptical. Or he may mention a profit figure he thinks you will consider believable and then, as a further enticement, suggest that the potential profit is actually far greater than that. The latter figure, of course, is the one he hopes you will focus on. Generally speaking, if a proposal sounds too good to be true, it probably is. \

Low Risk

Some are so blatant as to suggest there’s no risk—that the deal is a sure money maker. Obviously, the last thing a swindler wants you to think about is the possibility of losing your money. (If you ask how you can be certain your money is safe, you can count on a plausible-sounding answer. To make his pitch more credible, a swindler may acknowledge that there is some risk—then quickly assure you it’s minimal in relation to the profit you will almost certainly make. A con man may become impatient or even aggressive if the question of risk is raised—perhaps suggesting that he has better things to do than waste time with people who lack the courage and foresight needed to make money! With this kind of put down, he hopes you won’t bring up the subject again.

Urgency

There’s usually some compelling reason why it’s essential for you to act right now. Perhaps because the deal can be offered to only a limited number of people. Or because delaying the deal could mean missing out on a larger profit (after all, once the information he has confided to you becomes generally known, the price is sure to go up, right?).

urgency is important to a swindler. For one thing, he wants your money as quickly as possible with a minimum of effort on his part. And he doesn’t want you to have time to think it over, discuss it with someone who might cause you to become suspicious, or check him or his proposal out with a regulatory agency. Besides, he may not plan on staying in town very long.

Confidence

They don’t call them con artists for nothing! If you are absolutely certain it could never happen to you, the swindler starts with a big advantage. Fraud generally seeks out the people who think it

couldn’t happen to them. So protecting your savings against fraud involves at least three steps: carefully check out the person and firm you would be dealing with; take a close and cautious look at the offer itself; and continue to monitor any deal that you decide to make. No one of these precautions alone may be sufficient.

ABOUT THIS BOOK

Although my primary source of information has been the publications of the FTC and other offices of the US Government, this book is neither sponsored nor endorsed by any government agency.

Purpose

The publications of the FTC Bureau of Consumer Protection contain a wealth of information about fraud and other topics of vital interest to consumers. These publications are constantly being revised and updated and the reader is strongly encouraged to consult them for the latest facts. At the same time, because each publication stands on its own, there is a patchwork character to the information and finding answers for a specific situation can take some time. It was for this reason that I decided to write the book. By distilling and unifying the material, I have sought to provide a compass that will guide consumers through the ever changing landscape of fraud.

Organization

Chapters 2-12 cover the many types of fraud and sections within each chapter deal with a series of separate but related topics. A typical section begins with an outline of pertinent consumer protection laws and regulations. The section continues with an overview of a particular promise (a scam or deceptive practice) and a list of the warning signs that can distinguish it from a legitimate offer. The section then itemizes ways that consumers can protect themselves—or at least minimize their losses.

The last two chapters contain reference information. Chapter 13, Resources provides information about the FTC, the National Fraud Information Center (NFIC), Call For Action, Inc. (CFA), the American Association of Retired Persons (AARP), and other organizations that offer help in the fight against fraud. Chapter 14 contains the full text of FTC Telemarketing Sales Rule.

CHAPTER 2:

IDENTITY THEFT

We all understand the need to guard against the loss of a checkbook or wallet. However, few of us exercise the same caution when filling out forms or responding to questions. The fact is that whenever we give out credit card,