Recession brings out the scammers
People in dire financial straits are being targeted by swindlers offering loans, mortgage assistance and extra income. Here's how to tell real rescues from rip-offs.
By
Dalia FahmyMSN Money
Marilyn B. had already lost half of her retirement savings in the stock market crash, so when she received a letter inviting her to become a mystery shopper at Wal-Mart, she was delighted.
Unfortunately, after wiring $2,983 of her savings to her prospective employers (they had asked for the money as a "security precaution"), she found out she had been scammed. The people who had contacted her don't run a mystery shopping program, and the first paycheck they sent her turned out to be a forgery.
Americans like Marilyn, reeling from 401(k) losses, layoffs and/or foreclosures, are under attack from scammers aiming precisely at their desperation.
"Con artists follow the news closely and adapt their schemes to whatever is the crisis of the day," says Susan Grant, the director of consumer protection for the
Consumer Federation of America. "In times of economic disaster, they offer to help people get jobs or loans or to help them keep their homes."
Lawyers and consumer advocates around the country say they have noticed a sharp increase in complaints about scams. Not only are there more potential victims, experts say, there are more scammers -- desperate people who have resorted to running fraudulent schemes.
You'll see new depths of trickery behind these scams:
- Offers of money out of the government's economic stimulus plan.
- Work-at-home jobs or other lucrative deals that involve easy paychecks.
- Offers to help homeowners avoid foreclosure or settle debt.
- Guaranteed loans to borrowers with bad credit.
If you think you're not vulnerable, think again. Americans from all walks of life have fallen prey.
"We've seen people across all income levels victimized," says John Breyault, who heads the fraud division of the
National Consumers League. "We've even seen law firms victimized."
The government is giving away millions!
Most vulnerable are people who are facing foreclosure or have recently lost their savings, jobs or access to credit. They are being aggressively targeted by a variety of scams. For example: the economic stimulus scam. Virtually anytime you surf the Web, you are bombarded with ads that promise large grants or checks out of the government's stimulus plan. "In 30 days I was able to get a $12,000 check from the US Govt which I never have to pay back," reads one such banner ad, which pops up when you search the Web for "economic stimulus."When you click on such ads, you are redirected to blogs purportedly written by average Americans who succeeded in getting checks from the government and now want to show you how to do the same. They might ask you to buy a software program that "helps" you apply for a grant, sign you up for a monthly subscription without your consent or even ask for sensitive personal identity details.
The reality is that the economic stimulus bill recently passed by Congress -- known as the
American Recovery and Reinvestment Act of 2009 -- doesn't include provisions for grants or payments directly to consumers. Rather, consumers should expect a reduction in the amount of taxes withheld from their paychecks every month. Anyway, when the U.S. government wants to give money back to taxpayers, it does so through the Internal Revenue Service, and the IRS never contacts people through banner ads.
"We don't contact people by e-mail or phone with some offer of a refund," IRS spokesman Anthony Burke says. "To get a refund, taxpayers need to file a tax return."
For an idea of what you can truly expect to see, read "
How the stimulus bill affects you."
Work from your own basement for $5,000 a week!
Another scam taking hold as the unemployment rate soars is one in which victims are offered lucrative pay in exchange for little work. But there's always a snag.Some scammers get victims to pay exorbitant upfront fees or to disclose valuable identity information -- such as Social Security numbers -- before agreeing to "sign them up" for a job. The job, of course, never materializes. Others force victims to buy outrageously overpriced supplies or merchandise that are supposedly required for the job -- such as envelopes to be stuffed or cosmetics to be sold. In those cases, victims spend hundreds of dollars on supplies that normally cost much less, and the scammers disappear with the profit.
Breyault, of the National Consumers League, warns against falling for work-at-home scams that seem too good to be true."Be cautious if you have to buy supplies, especially if the company doesn't offer to buy them back or if they only offer to buy them back at 50%," he says. "If it sounds like it's too good to be true, it probably is."
Another scam targeted at those who have recently lost jobs or savings is the mystery shopper scam. That's the one Marilyn B. fell for. In the legitimate world, mystery shoppers are employed by market research firms gathering data on the level of cleanliness or service at certain stores or restaurants. These companies usually pay less than $20 per assignment and reimburse only the expense of buying an item or eating a meal after the mystery shopper has completed the assignment.
In the world of scams, however, mystery shoppers are offered hundreds of dollars in return for their services. After they spend large amounts at the stores they were supposed to research and wire money from their accounts to the scammers, they find out they are not getting paid at all.
Here are three ways to check out a deal that might be too good to be true:
Bad credit? No credit? Loans guaranteed!
One common scam has gained popularity as banks tighten their lending standards. Luckily, the advance-fee loan scam is easy to detect: If anybody guarantees you a loan in exchange for a fee paid in advance -- especially if you have a spotty credit history -- run the other way. Legitimate lenders never guarantee a loan to anyone before researching the borrower's credit history. Plus, aside from application fees that usually total less than $100, fees tend to come out of the borrowed amount after a loan has been made. Even mortgage brokers, who might request a few hundred dollars for property appraisals, normally ask you to pay the fees directly to the lender.
James Christy, an Arizona contractor, says he paid $6,000 in fees to a financing company before he realized its employees were stealing the money without any intention of offering him a loan. Christy says he was fooled because his "loan officers" were in fact working for what seems to be a legitimate company and because he had been asked to pay for the fees in small increments over several months, which made it seem to him as if the officers were in fact processing his application.
"If someone is promising to get you a loan or a credit card, they shouldn't need to collect money in advance for it," says Stephen Cohen, a senior staff attorney for the Federal Trade Commission.
Here are five telltale signs of a loan scam, according to the commission:
- A lender who isn't interested in your credit history.
- Fees that are not clearly disclosed.
- A loan that is offered by phone.
- A lender who uses a name that sounds similar to that of a well-known organization.
- A lender who is not registered in your state.
Published March 14, 2009
