Make sure you and your family never fall prey to the schemes and cons that pervade all aspects of American life. Learn to recognize con artists and send them on their way before parting with any of your hard-earned money.
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The successful con artist approaches victims with a nice guy approach. Behind this friendly exterior is a shrewd psychologist who can break down his victims' resistance to his proposals. The typical con artist has a good sense of timing and sincerely believes his victims deserve to be taken advantage of.
Being well-informed and skeptical are your best means of protection. This Financial Guide tells you how to spot a scam. It provides lists of "buzzwords" used by con artists, strategies for knowing which sales pitches are legitimate, and ways to fight back.
Anyone can fall victim to a con game, even someone who thinks they are too intelligent or sophisticated to be conned.
Many victims share certain characteristics. Often, but certainly not always, they are older, female, and live alone. They trust others and either need or want more income. Loneliness, willingness to help and a sense of charity are characteristics a con artist will exploit to gain a victim's cooperation.
The con artist exploits his victim's life insurance benefits, pensions or annuities, retirement nest eggs, home equity, or other assets. And he will usually have the willing cooperation of his victim.
It is difficult to spot a con artist by his looks alone. But his words or expressions often give him away. These buzzwords include the following. A red flag should go up immediately when you hear these:
It's free! Few things are really free. If you are told it's a free vacation, free cellular phone, free gift, investigate it. What else do you have to do to get the "freebie?" Pay shipping and handling charges? A gift tax or redemption fee? Get yourself to some distant destination? Sign up for a month or two of service? Buy three and get the fourth free?
It's 50 percent off. Off of exactly what? The regular retail price? The manufacturer's suggested price? The bulk price? The sticker price? Ask for written verification of the original price.
It's a going-out-of-business sale. Stores along parts of Fifth Avenue in Manhattan have been going out of business for years...and are still in business. Be particularly cautious in the crowded tourist and shopping sections of any major city or resort. Even when a company is honorably closing its doors, they could be posting artificially high prices and then marking them down. Their incentive to unload merchandise is strong. If you find what you believe is a good deal, read the warranty carefully -- if something goes wrong with your CD player or refrigerator, you cannot take it back if the store is closed. But can you take the item to a service center or other designated repair place?
It's factory to you. We match lower prices. It's the lowest price in town. You have been specially chosen. These are more often than not just come-ons to get you into the store. Will you really shop around to make certain it is the lowest price in town? Will you really ask management to lower the price because another store has a better deal? You need time and assertiveness to make these deals really work.
You've just won! Sweepstakes and vacation prizes cram everyone's mailbox. Some are real, but many are not. If you are asked to pay a fee in advance in order to be a possible winner, don't grab the bait. This practice is known as an illegal lottery. And those low-cost vacation trips generally come with extra charges or difficult-to-meet conditions; the Federal Trade Commission is constantly issuing warnings about them. You may be asked to join a travel club, be charged extra for in-season rates, or get airfare only one way. Be sure to inquire.
Work at home and make a fortune. Some of these offers are legitimate, but there are also hundreds that are pyramid schemes requiring you to make a high initial investment that you are unlikely to ever get back or requiring you to bring a number of other people into the business. A recent deal that swept the country involved sending $5 for information about stuffing envelopes at home. Once you did that, you were asked for $200 to $500 for supplies, and then another $25 or $50 for something else. . .the pyramid, made up of your money, simply grew higher and higher.
We'll get you money for your down payment. New home buyers are ripe for this one. The caller promises you money for a pre-paid fee, which is often an outrageous amount -- $1,000 or more. Later on, he gets back to you with the surprising news that he just couldn't get you credit. Now you're out the $1,000 and no closer to buying the house.
These coins will put your child through college. One year the Pennsylvania Attorney General's office received over 300 complaints from people who had lost money on phony coin deals; the average loss per person was $10,000. The coins were never delivered. We do not wish to discourage you from buying legitimate coins; just make sure to use a reputable dealer.
We have an IRS-endorsed retirement plan. Phony telemarketers have promised people a retirement with an IRS-approved, IRS-endorsed plan. To set the record straight, the IRS does not endorse anything. Don't put your money anywhere but the bank, mutual fund or brokerage firm where you have an established IRA.
Cash only. Why is cash necessary for a proposed transaction? Why not a check?
Secret plans. Why are you being asked not to tell anyone?
Get rich quick. Any scheme should be carefully investigated.
Something for nothing. A "retired" swindler once said that any time you are promised something for nothing, you usually get nothing.
Contests. Make sure they are not "come-ons" to draw you into a money-losing scheme.
Haste. Be wary of any pressure that you must act immediately or lose out.
Today only. If something is worthwhile today, it is likely to be available tomorrow.
Too good to be true. Such a scheme is probably neither good nor true.
Last chance. If it is a chance worth taking, why is it offered on such short notice?
Left-over material. Left-over materials might also be stolen or defective.
In fact, any cold call trying to sell you a half-acre ranch in some faraway state, aluminum siding, a new chimney flue, or even tax shelters, cattle, or anything else you know nothing about, should set off alarms.
We can clean up your credit card debt. The latest version of this scam claims to give you a new credit report within 30 days for a flat fee. However, after paying for the service, the scam artists call back, informing you that they couldn't get the job done. Only you can repair your credit report. Also, watch out for those who tell you that by obtaining a new Taxpayer Identification Number or TIN, you get a new credit report. The TIN is your Social Security number.
The possibilities are infinite, but some of the more common con games you should be aware of involve the following (some of which are described in more detail below):
Most successful cons are modern versions of old schemes. For example, the old "salting the gold mine" scheme is still being practiced, but today's salting occurs in living rooms rather than abandoned mines.
In the old ruse, mine owners would place a few gold nuggets in used-up mines so they could sell them for inflated profits. In one recent scheme a con artist bought six color television sets at the regular price from a retail store, and then sold them, still in their cartons, to six prominent local persons for one-fifth of their original price. Later, he hired several high school students as telephone solicitors to sell carloads of TV sets purchased new from a bankrupt retail chain. When potential customers balked, the con artist used as references the original six customers who had been salted. Before the police were alerted, he collected almost $60,000.
The old "bank examiner" scheme still exists, and it is working well, particularly among older widows. In this scheme, the con artist, posing as a bank examiner, asks the victim to help him test the honesty of bank employees by withdrawing substantial funds. When the funds are handed over to the con artist for "examination," he issues the victim a worthless receipt and disappears.
Postal authorities warn against mail-order swindles, such as phony work-at-home schemes requiring cash deposits or payments. Among all con-game activity, these are probably the most active and productive for the con artist
The most insidious scam involves the perpetrator offering you false legal assistance after he has already swindled you. For instance, you have already lost money in an illegitimate deal and you get a call from someone posing as a federal official or lawyer who claims he can get your money back, for a fee or a percentage of the total amount.
Here are five simple questions that will expose even the most clever of con artists.
Here are 10 steps you can take to avoid becoming the victim of a con artist:
The FTC (Federal Trade Commission) offers these tips to avoid fraudulent vacation offers:
The FTC has published a free brochure, Telemarketing Travel Fraud, to help you avoid these scams. For a copy, contact the agency at 1-877-FTC-HELP, or see its Website at http://www.ftc.gov, and click on "Consumer Protection."
Most telephone sales calls are from legitimate businesses. But wherever honest firms search for new customers, so do swindlers. Phone fraud is a multi-billion dollar business that involves selling everything from bad or non-existent investments to the peddling of misrepresented products and services. Everyone who has a phone is a prospect; whether you become a victim is largely up to you.
There is no way to determine whether a sales call is on the up and up simply by talking on the phone. No matter what questions you ask or how many you ask, skilled swindlers have ready answers. For this reason, sales calls from persons or organizations that are unknown to you should always be checked out before you actually buy or invest. Legitimate callers have nothing to hide.
Phone swindlers are likely to know more about you than you know about them. Depending on where they got your name in the first place, they may know your age and income, health and hobbies, occupation and marital status, education, the home you live in, what magazines you read, and whether you've bought by phone in the past.
Even if your name came from the phone book, telephone con men and women assume that you would be interested in having more income, that you are receptive to a bargain, that you are basically sympathetic to people in need, and that you are reluctant to be rude. As admirable as such characteristics may be, they help make the swindler's job easier. Swindlers also exploit less admirable characteristics, such as greed.
Fraudulent sales callers have one thing in common: They are skilled liars and experts at verbal camouflage, and their success depends on it. Many are coached to say whatever it takes by operators of the boiler rooms where they work at rows of phone desks, making hundreds of calls. Indeed, most victims of phone fraud think the caller sounded so believable.
Perpetrators of phone fraud are good at sounding as though they represent legitimate businesses. They offer investments, sell subscriptions, provide products for homes and offices, promote travel and vacation plans, describe employment opportunities, solicit donations, and the list goes on. Never assume you will know a phone scam when you hear one. Even if you have read lists of the kinds of schemes most commonly practiced, innovative swindlers constantly devise new ones.
Sadly, some families part with savings they worked years to accumulate on the basis of little more than a 15-minute phone conversation, less time than they would spend considering the purchase of a household appliance.
Be aware that the initiator of the phone call may be you. It is not uncommon for phone crooks to use mailings and advertise in reputable publications to encourage prospects to make the initial contact. So just because you may have written or phoned for additional information about an investment, product, or service does not mean you should be any less cautious about buying by phone from someone you do know.
Victims of phone fraud seldom get their money back or, at best, no more than a few cents on the dollar. Swindlers generally do the same thing other people do when they get money; they spend it.
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