Are You a Target of Telephone Scams?
If you're age 60 or older, you may be a special target for people who sell bogus products and services by phone.
It's easy enough to fall prey to their sales pitch. Telemarketing fraud is a multi-billion dollar business in the United States. Every year, thousands of consumers lose from a few dollars to their life savings to telephone con artists.
That's why the Federal Trade Commission (FTC) encourages you to be skeptical when you hear a phone solicitation and to be aware of the Telemarketing Sales Rule, a new law that can help you protect yourself from abusive and deceptive telemarketers.
How Older People Become Victims of Telemarketing Fraud
Fraudulent telemarketers try to take advantage of older people on the theory that they may be more trusting and polite toward strangers. Older women living alone are special targets of these scam artists.
Here are some reasons older people become victims of telemarketing fraud:
- Often it's hard to know whether a sales call is legitimate. Telephone con artists are skilled at sounding believable —even when they're really telling lies.
- Sometimes telephone con artists reach you when you're feeling lonely. They may call day after day--until you think a friend, not a stranger, is trying to sell you something.
- Some telephone salespeople have an answer for everything. You may find it hard to get them off the phone - even if they're selling something you're not interested in. You don't want to be rude.
- You may be promised free gifts, prizes, or vacations-or the "investment of a lifetime"- but only if you act "right away." It may sound like a really good deal. In fact, telephone con artists are only after your money. Don't give it to them.
Common Telephone Scams
Con artists never run out of scams. Have you heard any of these?
You usually have to do something to get your "free" prize-attend a sales presentation, buy something, or give out a credit card number. The prizes generally are worthless or overpriced.
"Free" or "low-cost" vacations can end up costing a bundle in hidden costs. Or, they may never happen. You may pay a high price for some part of the package - like hotel or airfare. The total cost may run two to three times more than what you'd expect to pay or what you were led to believe.
Electronic certificates congratulating you on "winning" a fabulous vacation for a very attractive price are among the scams arriving in your email. Some say you have been "specially selected" for this opportunity.
The Scam: Most unsolicited commercial email goes to thousands or millions of recipients at a time. Often, the cruise ship you're booked on may look more like a tug boat. The hotel accommodations likely are shabby, and you may be required to pay more for an upgrade. Scheduling the vacation at the time you want it also may require an additional fee.
Vitamins and Other Health Products
The sales pitch also may include a prize offer. This is to entice you to pay hundreds of dollars for products that are worth very little.
Pills that let you lose weight without exercising or changing your diet, herbal formulas that liquefy your fat cells so that they are absorbed by your body, and cures for impotence and hair loss are among the scams flooding email boxes.
The Scam: These gimmicks don't work. The fact is that successful weight loss requires a reduction in calories and an increase in physical activity. Beware of case histories from "cured" consumers claiming amazing results; testimonials from "famous" medical experts you've never heard of; claims that the product is available from only one source or for a limited time; and ads that use phrases like "scientific breakthrough," "miraculous cure," "exclusive product," "secret formula," and "ancient ingredient."
People lose millions of dollars to "get rich quick" schemes that promise high returns with little or no risk. These can include gemstones, rare coins, oil and gas leases, precious metals, art, and other "investment opportunities." As a rule, these are worthless.
Investment schemes promise outrageously high rates of return with no risk. One version seeks investors to help form an offshore bank. Others are vague about the nature of the investment, stressing the rates of return. Many are Ponzi schemes, in which early investors are paid off with money contributed by later investors. This makes the early investors believe that the system actually works, and encourages them to invest even more.
Promoters of fraudulent investments often operate a particular scam for a short time, quickly spend the money they take in, then close down before they can be detected. Often, they reopen under another name, selling another investment scam. In their sales pitch, they'll say that they have high-level financial connections; that they're privy to inside information; that they'll guarantee the investment; or that they'll buy back the investment after a certain time. To close the deal, they often serve up phony statistics, misrepresent the significance of a current event, or stress the unique quality of their offering-anything to deter you from verifying their story.
The Scam: Ponzi schemes eventually collapse because there isn't enough money coming in to continue simulating earnings. Other schemes are a good investment for the promoters, but no for participants.
Con artists often label phony charities with names that sound like better-known, reputable organizations. They won't send you written information or wait for you to check them out with watchdog groups.
If you buy into any of the above scams, you're likely to be called again by someone promising to get your money back. Be careful not to lose more money in this common practice. Even law enforcement officials can't guarantee they'll recover your money.
Cable Descrambler Kits
For a small sum of money, you can buy a kit to assemble a cable descrambler that supposedly allows you to receive cable television transmissions without paying any subscription fee.
The Scam: The device that you build probably won't work. Most of the cable TV systems in the U.S. use technology that these devices can't crack. What's more, even if it worked, stealing service from a cable television company is illegal.
Some email messages offer valuable goods-for example, computers, other electronic items, and long-distance phone cards-for free. You're asked to pay a fee to join a club, then told that to earn the offered goods, you have to bring in a certain number of participants. You're paying for the right to earn income by recruiting other participants, but your payoff is in goods, not money.
The Scam: Most of these messages are covering up pyramid schemes, operations that inevitably collapse. Almost all of the payoff goes to the promoters and little or none to consumers who pay to participate.
The trendiest get-rich-quick schemes offer unlimited profits exchanging money on world currency markets; newsletters describing a variety of easy-money opportunities; the perfect sales letter; and the secret to making $4,000 in one day.
The Scam: If these systems worked, wouldn't everyone be using them? The thought of easy money may be appealing, but success generally requires hard work.
Envelope-stuffing solicitations promise steady income for minimal labor-for example, you'll earn $2 each time you fold a brochure and seal it in an envelope. Craft assembly work schemes often require an investment of hundreds of dollars in equipment or supplies, and many hours of your time producing goods for a company that has promised to buy them.
The Scam: You'll pay a small fee to get started in the envelope-stuffing business. Then, you'll learn that the email sender never had real employment to offer. Instead, you'll get instructions on how to send the same envelope-stuffing ad in your own bulk e-mailings. If you earn any money, it will be from others who fall for the scheme you're perpetuating. And after spending the money and putting in the time on the craft assembly work, you are likely to find promoters who refuse to pay you, claiming that your work isn't up to their "quality standards."
Guaranteed Loans or Credit, on Easy Terms
Some email messages offer home-equity loans that don't require equity in your home, as well as solicitations for guaranteed, unsecured credit cards, regardless of your credit history. Usually, these are said to be offered by offshore banks. Sometimes they are combined with pyramid schemes, which offer you an opportunity to make money by attracting new participants to the scheme.
The Scams: The home equity loans turn out to be useless lists of lenders who will turn you down if you don't meet their qualifications. The promised credit cards never come through, and the pyramid money-making schemes always collapse.
Credit repair scams offer to erase accurate negative information from your credit file so you can qualify for a credit card, auto loan, home mortgage, or a job.
The Scam: The scam artists who promote these services can't deliver. Only time, a deliberate effort, and a personal debt repayment plan will improve your credit. The companies that advertise credit repair services appeal to consumers with poor credit histories. Not only can't they provide you with a clean credit record, but they also may be encouraging you to violate federal law. If you follow their advice by lying on a loan or credit application, misrepresenting your Social Security number, or getting an Employer Identification Number from the Internal Revenue Service under false pretenses, you will be committing fraud.
Tip-Offs to Phone Fraud
Telephone con artists spend a lot of time polishing their "lines" to get you to buy. You may hear this:
- You must act "now"-or the offer won't be good.
- You've won a "free" gift, vacation, or prize-but you pay for "postage and handling" or other charges.
- You must send money, give a credit card or bank account number, or have a check picked up by courier-before you've had a chance to consider the offer carefully.
- You don't need to check out the company with anyone-including your family, lawyer, accountant, local Better Business Bureau, or consumer protection agency.
- You don't need any written information about their company or their references.
- You can't afford to miss this "high-profit, no-risk" offer.
If you hear these-or similar-"lines" from a telephone salesperson, just say "no thank you," and hang up the phone.
The Telemarketing Sales Rule
The FTC's Telemarketing Sales Rule requires telemarketers to make certain disclosures and prohibits certain misrepresentations. It gives you the power to stop unwanted telemarketing calls and gives state law enforcement officers the authority to prosecute fraudulent telemarketers who operate across state lines.
The Rule covers most types of telemarketing calls to consumers, including calls to pitch goods, services, "sweepstakes," and prize promotion and investment opportunities. It also applies to calls consumers make in response to postcards or other materials received in the mail.
Keep this information near your telephone. It can help you determine if you're talking with a scam artist or a legitimate telemarketer.
- It's illegal for a telemarketer to call you if you've asked not to be called. If they call back, hang up and report them to your state Attorney General.
- Calling times are restricted to the hours between 8 a.m. and 9 p.m.
- Telemarketers must tell you its a sales call and who's doing the selling before they make their pitch. If it's a prize promotion, they must tell you that no purchase or payment is necessary to enter or win. If you're asked to pay for a prize, hang up. Free is free.
- It's illegal for telemarketers to misrepresent any information, including facts about their goods or services, earnings potential, profitability, risk or liquidity of an investment, or the nature of a prize in a prize-promotion scheme.
- Telemarketers must tell you the total cost of the products or services they're offering and any restrictions on getting or using them, or that a sale is final or non-refundable, before you pay. In a prize promotion, they must tell you the odds of winning, that no purchase or payment is necessary to win, and any restrictions or conditions of receiving the prize.
- It's illegal for a telemarketer to withdraw money from your checking account without your expressed, verifiable authorization.
- Telemarketers cannot lie to get you to pay, no matter what method of payment you use.
- You do not have to pay for credit repair, recovery room, or advance-fee loan/credit services until these services have been delivered. (Credit repair companies claim that, for a fee, they can change or erase accurate negative information from your credit report. Only time can erase such information. Recovery room operators contact people who have lost money to a previous telemarketing scam and promise that, for a fee or donation to a specified charity, they will recover your lost money, or the product or prize never received from a telemarketer. Advance-fee loans are offered by companies who claim they can guarantee you a loan for a fee, paid in advance. The fee may range from $100 to several hundred dollars.)
Exceptions to the Rule
While most types of telemarketing calls are covered by the Rule, there are exceptions. The Rule does not cover:
- Calls placed by consumers in response to general media advertising, except calls responding to ads for investment opportunities, credit repair services, recovery room services, or advance-fee loans.
- Calls placed by consumers in response to direct mail advertising that discloses all the material information required by the Rule, except calls responding to ads for investment opportunities, prize promotions, credit repair services, recovery room services, or advance-fee loans.
- Catalog sales.
- Calls initiated by the consumer that are not made in response to any solicitation.
- Sales that are not completed, and payment or authorization for payment is not required, until there is a face-to-face sales presentation.
- Calls from one business to another unless nondurable office or cleaning supplies are being offered.
- Sales of pay-per-call services and sales of franchises. These are covered by other FTC rules.
What You Can Do To Protect Yourself
It's very difficult to get your money back if you've been cheated over the phone. Before you buy anything by telephone, remember:
- Don't buy from an unfamiliar company. Legitimate businesses understand that you want more information about their company and are happy to comply.
- Always ask for and wait until you receive written material about any offer or charity. If you get brochures about costly investments, ask someone whose financial advice you trust to review them.
- Always check out unfamiliar companies with your local consumer protection agency, Better Business Bureau, state Attorney General, the National Fraud Information Center, or other watchdog groups. Unfortunately, not all bad businesses can be identified through these organizations.
- Always take your time making a decision.
- Legitimate companies won't pressure you to make a snap decision.
- It's never rude to wait and think about an offer. Be sure to talk over big investments offered by telephone salespeople with a trusted friend, family member, or financial advisor.
- Never respond to an offer you don't understand thoroughly.
- Never send money or give out your credit card or bank account number to unfamiliar companies.
- Be aware that any personal or financial information you provide may be sold to other companies.
For More Help
Before you buy from an unfamiliar organization, check it out with some of these groups. Your local phone directory has phone numbers and addresses.
Call for Action
5272 River Road, Suite 300
Local consumer protection organization
National Charities Information Bureau
19 Union Square West
New York, NY 10003-3395
To stop unwanted telephone sales calls from many national marketers, send your name, address, and telephone number to:
Direct Marketing Association
Telephone Preference Service
P.O. Box 9014
Farmingdale, NY 11735-9014
Under the Telephone Consumer Protection Act of 1991, you can ask that companies put you on their "do not call" lists. If the company calls you again, you can bring action in Small Claims Court.
For More Information
You can file a complaint with the FTC by contacting the Consumer Response Center by phone: toll-free 1-877-FTC-HELP (382-4357); TDD: 202-326-2502; by mail: Consumer Response Center, Federal Trade Commission, 600 Pennsylvania Ave, NW, Washington, DC 20580; or through the Internet, using the online complaint form. Although the Commission cannot resolve individual problems for consumers, it can act against a company if it sees a pattern of possible law violations.