From The Urbach Letter –
Scams, Cons, and Rip-offs – How to Protect Yourself
Have you ever been "conned?" Most of us have at least once in our lives; somebody took unfair advantage and swindled us out of our hard-earned money. Con artists come in all shapes and sizes: from the easily identifiable "three card monte" dealer to the super-sophisticated businessperson you'd never suspect. Despite the somewhat romantic treatment given the "confidence man" character by Hollywood (my favorite is George C. Scott in The Flim-Flam Man), in reality, they're nothing but cold-hearted predators. Fortunately, there's a lot you can do to protect yourself. Especially in this case, information is power. Knowing about possible scams and raising your awareness level will make it much harder for someone to take advantage of you. But first a word of warning: greed is the engine that drives many scams and cons. It's the possibility of getting something for nothing that drives people to do stupid things. As W.C. Fields once said, "You Can't Cheat an Honest Man." Integrity, prudence, and common sense go a long way here…
Nigerian Advance Fee Scam. This is a classic mail fraud scam that's taken root on the Internet. Is there a person alive who hasn't yet received an urgent message from somebody in the Nigerian government who needs help "relocating" sixty million dollars to the United States? Talk about easy money. In exchange for a 30% cut of the money, all you need to do is supply some identification (like a scan of your passport), banking information (so that the money can be transferred "into" your account), and perhaps payment of various fees to facilitate the transfer (there are government officials and bank officers who must be paid bribes and Nigerian taxes due – and this money must be advanced by you). Of course, what happens is: (A) your passport scans are sold to counterfeiters, (B) your bank account is cleaned out, and (C) the fees you paid are gone forever. Stay far away. Forward these emails to email@example.com
Free Goods. You may have received spam emails offering to send you valuable items like computers, electronic appliances, and long-distance phone cards – for free. But first you have to pay a fee to join a "buyer's club" or some such, and then told that you need to "earn" the free goods by recruiting others to join the club. You can already smell the pyramid scheme at work here. These kinds of operations inevitably collapse… with few people other than the promoters receiving any real benefit.
Free Prize. This one usually arrives via a phone call. (By the way, over $40 billion was taken in by telemarketing fraud last year.) You get a call with great news: you've won a free prize. It's a big-screen TV, a car, a boat, or some other big-dollar item. However, before you can claim your prize, you must pay a "handling fee" or "the taxes" due on the item, etc. Know this: if you're asked to do something or pay something or give a credit card number in order to claim a prize, you're being scammed. A legitimate company would not ask for a fee, and taxes (if any) are due directly to Uncle Sam.
Three Card Monte. A New York City classic. Here's how it works: on a busy city sidewalk, the dealer will set up on a cardboard box and rapidly shuffle three cards. If you come up to watch, you'll notice that someone seems to be winning consistently, always choosing the correct card out of three. This person (often a woman or a man in a business suit) is usually in cahoots with the dealer. If you give it a try, the dealer may let you win a few rounds at first and then up the bet. After that, you're going down. Guaranteed. If you don't lose outright, you have a good chance of another accomplice picking your pocket or grabbing your wallet the next time you take it out. If, by some fluke of luck, you win, you may be followed and mugged.
Cable Descrambler Kits. Tired of paying Cablevision big bucks every month? All you need to do is send in $14.99 for plans that'll show you how to easily build your own cable TV descrambler from twelve dollars worth of parts from Radio Shack. Once built, you'll (supposedly) be able to receive all premium channels without paying any subscription fee. Only two problems: (1) Stealing service from the cable company is illegal – and these guys don't have any sense of humor about it. If they catch you, they'll fry you. (2) The box you build won't work. Cable systems use very sophisticated scrambling methods these days. Most stopped using the old technology this type of box could unscramble about a decade ago. But "entrepreneurs" are still happy to sell you a ten-cent photocopied sheet of plans for fifteen to thirty bucks. Save your money.
Bank Guard Scam. It's after regular banking hours and you go to use the ATM in the branch's outer lobby, but find there's an out-of-order sign on the machine. A uniformed "bank guard" holding a clipboard and a cash box says he can handle your transaction. Think you're too smart to fall for this? Chuck Whitlock, an investigative reporter and consumer advocate, simulated this scam for a television program and took in $118,000 in one night. It works because busy, successful people are used to the convenience of 24/7 banking and are ready to trust people in uniform. The con is set up in the evening, when people are tired and just want to get home. Please realize that even if you only make a cash withdrawal instead of a deposit, you're still going to get ripped off. In order to make the withdrawal, you'll have to give the "guard" your account number, PIN, Social Security number, address, and your mother's maiden name. That's all he needs to completely clean out your account (and possibly steal your identity too).
"Business Opportunities." A staple of spam email and low-end direct mail, "biz-op's" are almost always sure-fire money losers. Here's the typical pitch: start your own business with no experience and make lots of money without much work or capital outlay. These solicitations make incredible earnings claims, like a thousand dollars a day or more. Oh, and the business doesn't involve selling or any personal contact with other people. Often, these biz-op's involve an Internet-related business, with the whole operation supposedly running on auto-pilot – again, with enormous potential income claims. You can be sure the only person making any real money is the guy selling you the "insider information" on how to make money.
Work-At-Home Schemes. As a kid I remember seeing the classified ads in the back of Popular Mechanics magazine offering to pay a steady income for folding letters and stuffing envelopes. Thirty-five years later, those ads are still running (and have also found a new home on the Internet). Nowadays, the going rate is two dollars an envelope. The pitch is the same: easy work, do it while watching TV, etc. Here's how this little scam works: you'll pay a fee to get started in the "envelope-stuffing business." However, nobody's going to hire you at two bucks an envelope when a legitimate lettershop charges only pennies apiece. All you'll get is a sheet of instructions on how to send out the same pitch to other suckers. If you make any money at this, it'll be ill-gotten gains from others who've fallen for the scheme you're perpetuating. No wonder this thing won't die. A related scam is the "work at home assembling crafts" deal, which requires an investment of several hundred dollars for equipment and supplies, and many tedious hours producing goods for a company which promises to buy them. Invariably, they refuse to pay you, claiming that your work falls below their "quality standards."
Bulk Email. Ever get a pitch for those "million email addresses on a CD-ROM?" It's always accompanied by hyperbolic sales copy claiming how easy it is to send out the million email messages at next to no cost. "If only one tenth of one percent respond, that's a thousand sales!" Please don't fall for this. The math is totally specious, but if you decide to do it anyway (i.e. become a spammer), I will disown you.
Guaranteed Loans. Many scams target people with bad credit or low income. They'll offer home-equity loans that don't require any equity in your home and other "impossible" propositions, like guaranteeing an unsecured Visa or MasterCard regardless of your credit history (all for a hefty one-time fee, of course). Sometimes, these credit/loan scams are combined with a pyramid scheme, where you can supposedly earn cash by recruiting new participants. However, the "home equity loans" turn out to be just a worthless list of lenders who'll turn you down if you don't meet their standard qualifications. The promised credit cards never come through. But the fees you paid are long gone.
Credit Repair. People with bad credit histories are easy marks for the credit repair scammers. They're desperate to qualify for a credit card, auto loan, or mortgage, and are very responsive to an offer to "erase negative information" from their credit files. Here's the problem: if the negative information is accurate – and it usually is – it's impossible to legally "erase" it. Nonetheless, scammers promise the world (for an up-front fee, of course), but can't deliver. Usually, you'll get instruction to lie on a loan or credit application, misrepresent your Social Security number or obtain a new one under false pretenses, or commit some other act of fraud. You can go to jail for doing these things. There are better alternatives. Not-for-profit agencies will assist you with a personal debt repayment plan and provide other services that will actually improve your credit profile over time.
Lost Pet Scam. This one is really low. People who've lost a pet and placed an ad in the newspaper are contacted by a "good Samaritan" claiming to have found the animal in another city or state. This finder claims the dog or cat has been injured and in need of veterinary care. The scammer offers to ship the pet home after receiving payment for vet bills and transportation costs. In my opinion, this crime should qualify for the death penalty.
Health & Diet Scams. Chances are, your email inbox is filled with solicitations for weight loss pills ("lose weight without dieting or exercising!"), hair growth potions ("miracle extract 10X more powerful than Rogaine!"), and impotence cures ("herbal Viagra!"). None work. Losing weight requires a simultaneous reduction of calories and increase in activity. No legitimate hair growth method is easy, cheap, or painless. And if you need/want Viagra, get the real thing. Everything else will be a waste of money. Beware these phrases: "secret formula," "ancient ingredient," scientific breakthrough," or "miraculous cure." And remember, anybody can get a white coat and pose for a photograph. There are also plenty of "doctors" who'll sell their name and shill a dubious product if paid enough money.
Bogus Charities. While many cons thrive on greed, this one works on kindness. Scammers often set up bogus charities with clever names that make them sound legitimate. If you've never heard of a charity before, don't donate on the phone. If you're still interested in helping, ask for a package of information to be mailed to you. Or check them out online at IRS Approved Charities.
Metal Detector Rip-off. You probably know about this one last one, but it's important to be extra-vigilant at metal detector checkpoints. Here's what happens. You put your stuff down on the x-ray conveyer belt, but the guy in front of you has metal in his pockets or somewhere… which keeps setting off the alarm as he goes back and forth through the detector. As you're waiting, another person comes up in a big rush, saying he's about to miss a flight or something. So you let him go ahead of you. He throws his coat on the conveyer and breezes through the detector. On the other size he scoops up your stuff under his coat and is long gone by the time you realize your laptop and other valuables are missing. Lesson: never put your things on the conveyer unless you see the coast is clear through the metal detector.
So there you have it. A "rogue's gallery" of the more common scams, cons, and rip-offs currently in play. In a future issue, I'll cover two related topics: investment cons and tax scams.