UNP-0041 Rip-offs and Fraud Cost Money
Rip-offs and Fraud Cost Money
UNP-0041, November 2006,
Bernice B. Wilson, Extension
Urban Specialist, Resource Management, Alabama A&M University
Rip-offs and fraud are unscrupulous ways
to separate people from their hard-earned money. Many consumers
are unaware of deceptive tactics that exist in the marketplace.
Occasionally, greed causes people to seek offers that seem too
good to be true, and the result is being ripped-off or becoming
victims of fraudulent transactions. Some individuals may be too
trusting of others and, when faced with deceptive misrepresentation,
may be too embarrassed to seek help.
Use Caution in the Marketplace
Educated consumers compare products
when shopping and make smart buying decisions. Being a savvy consumer
means more than just knowing how to find a good bargain. It also
means consistently recognizing fraud and knowing how to
avoid a bad deal.
Financial expert E. T. Garman describes
rip-offs as exploiting consumers unfairly in marketplace transactions.
Fraud, although related, is a deliberate deceptive practice to
unfairly or unlawfully gain advantage over the consumer. To better
understand these concepts, Garman indicates that rip-offs and
fraud have one thing in common--false advertising designed to
lure consumers into fraudulent schemes. He offers the following
advice:
- Talk to friends and acquaintances to
learn more about their experiences with particular vendors, products,
and services.
- Buy products from reputable vendors
you know or from a vendor recommended by someone you trust.
- Avoid being too nice to every salesperson
and telephone caller. Don't be afraid to hang up the phone or
to walk away from unwanted offers.
- Do not trust every salesperson.
- Be cautious of "expert" testimonials
and endorsements of a product because people are often paid well
for their statements.
- Get the names, addresses, and telephone
numbers of salespeople and companies.
- Check out vendors' reputations by contacting
the Better Business Bureau, the state attorney general's office,
or an office of consumer affairs. Call the agencies in the state
of any out-of-town sellers.
- Research the company in library business
references such as Dun & Bradstreet.
- Try not to be overly sympathetic to
salespeople, especially those who pretend to be your friend.
- Be wary of purchasing items from door-to-door
salespeople. Ask for and carefully examine identification.
- Be cautious about buying anything over
the telephone. It is good advice never to buy over the telephone
unless you originated the call or you know the caller.
- Realize that a flashy, professional-looking
Web site does not guarantee that the sponsor is legitimate.
- Ask for and wait until you receive written
promises or information in writing about products or services.
- Read and understand sales agreements
and contracts before signing. Make sure the terms are the same
as those given in the sales presentation and get a copy of the
documents.
- Read advertisements and warranties thoroughly.
Look for limitations in the small print.
- Get an attorney or trusted friend to
look over documents and contracts when a substantial amount of
money is involved.
Fight Financial Fraud by Asking Questions
Financial fraud is a rapidly growing
crime and should be taken seriously. Hundreds of millions of dollars
are swindled from consumers every year. According to the Federal
Deposit Insurance Company, all consumers indirectly pay some of
the costs associated with financial fraud. This can be in the
form of higher prices for goods and services from businesses that
bear the primary responsibility for losses and higher taxes to
pay for additional law enforcement.
Garman recommends that consumers protect
themselves from financial fraud by asking the right questions.
For example, ask vendors to do the following:
- Explain advertisements, product operations,
and warranty terms.
- Supply a copy of written policies on
refunds and exchanges.
- Supply a copy of written warranties.
Read the warranty carefully and understand it before buying the
product or service. Learn what it covers, for how long, and who
will honor it.
- Provide a copy of your legal rights
in writing when cancelling a contract.
- Give you time to think about a purchase
overnight.
Avoid Common Pitfalls
The National Consumers League
also provides consumers with information on combating rip-offs
and fraud. The NCL reported in 2005 an alarming increase in fraud
and warned consumers to be cautious of easy money promises because
most are untrue. Garman offers this advice to consumers:
- Never put yourself in situations where
you may be set up to be deceived, such as listening to sales
pitches on the telephone or going to a motel or a model home
to hear a sales presentation.
- Never buy on impulse. Avoid pressure
to make quick decisions. Stop and think before buying. Ask yourself
the following questions, "Do I really need this?";
"Why am I buying this?"; "Does something sound
too good to be true?"; and "Would I be smarter to ask
a trusted friend before buying?"
- Never take a vehicle home for a one-
or two-day tryout because the dealer does not have to take it
back if you change your mind.
- Never reveal your social security number
or partial account numbers for credit cards or checking accounts
over the telephone for "identification" or "verification"
purposes unless you initiate the call, have been a satisfied
customer of the business in the past, and are certain of the
caller's identity.
- Do not send cash, money orders, or personal
checks to a post office box or another location without knowing
the company's reputation.
- Never permit a messenger service to
come to your home or job to pick up cash, money orders, or checks.
- Never pay money for a prize or in advance
to obtain a loan.
- Never pay with cash. Put transactions
on a credit card or write a personal check. If you pay with a
credit card, you have legal rights to avoid paying your credit
card company if you are unhappy with goods or services from a
vendor. You also have the option to call your bank to stop payment
on a check. This request is good for six months and renewable
if necessary.
Become an Informed Consumer
Deal only with legitimate, reputable
businesses to minimize your risk of encountering rip-offs and
frauds. If you plan to do business with an unfamiliar merchant,
do your research first. For example, contact your state's attorney
general's office or the Better Business Bureau to see if complaints
or lawsuits have been filed against the company.
Ask the merchant to give you details in
writing and then check them thoroughly before doing business with
them. Do not totally rely on a salesperson's oral statements about
a product or service.
Garman offers the following tips to consider
before shopping:
- Educate yourself about the product or
service you want to buy.
- Read helpful consumer magazines, such
as Consumer Reports, Kiplinger's Personal Finance Magazine,
Money, Smart Money, and Worth.
- Decide on the product you want to buy
before you go shopping.
- Compare products at two or more stores
before buying.
Know Your Rights
The FDIC offers this warning:
"Get as much written information as possible, including a
contract, specifying cost information and your consumer rights.
If a marketer refuses to supply written information or employs
high-pressure sales tactics to get you to act fast, take that
as your cue to say goodbye."
Garman adds the following hints:
- Know your consumer rights in dealing
with implied warranties, door-to-door cancellations, cooling-off
periods, charge-back credit regulations, stopping payments on
checks, and other remedies to correct wrongdoings.
- Let parties know if you do not agree
with a clause in a contract. You have the right to cross out
a portion of a contract. Have all parties initial next to the
crossed-out portion as evidence of agreement that the clause
is void.
Watch the Warning Signs
In its annual report, the Federal
Trade Commission further supports the findings of the FDIC, Garman,
and NCL that consumers are experiencing an increase in fraud.
Identity theft accounted for 255,000 of more than 686,000 complaints
filed with the FTC in 2005. Garman offers guidance on how consumers
should protect themselves from rip-offs and fraud:
- Be alert to commonly used deceptive
practices, such as bait-and-switch advertising.
- Remember that legitimate businesses
will never force you to make a quick decision and will not send
a messenger to your home to pick up money.
- Don't send money or buy a product assuming
that you have won something.
- Watch for high-pressure sales tactics
that are a strong tip-off that you are the target of a scam.
When it Pays to be Distrustful
The FTC and NCL suggest that consumers
know who they are dealing with by conducting an inquiry and confirming
a seller's name, street address, and telephone number. Should
a consumer purchase a product or service via the Internet, the
FTC advises the consumer to say no to a check for more than the
selling price no matter how tempting the plea or how convincing
the story. Garman suggests the following practices when in doubt:
- Nothing is free. Check out deals that
sound too good to be true.
- Ask for advice from a third party if
you believe you might be the target of a scam. Contact consumer
authorities, such as the Better Business Bureau, the state attorney
general's office, the district attorney's office, the consumer
fraud section of local police department, or an office of consumer
affairs.
- Check the validity of a telemarketing
call by asking the caller to mail you printed information. Once
received, you can verify it.
- Stick to your decision and leave the
premises once you say no to a merchant.
- Consult a trusted friend or impartial
advisor on important decisions.
- Get a second estimate for expensive
repairs, such as those on your vehicle or your home.
- Avoid doing business with a vendor if
you are advised to act "right now" to take advantage
of a deal.
- Don't do business with a vendor if you
doubt the honesty of their marketing techniques.
As consumer fraud rises, it's important
to learn the warning signs and to take the proper precautions
to protect yourself, your family, and your community from the
high costs of fraud.
To Report Rip-Offs & Fraud
The National Fraud Information
Center specializes in helping victims of telemarketing and Internet
fraud. You can reach them by calling (800) 876-7060.
The Alabama Attorney General's Consumer
Affairs office is available at (800) 392-5658.
For unwanted mail, contact:
The Direct Marketing Association
1120 Avenue of the Americas
New York, NY 10036-6700
Phone: (212) 768-7277
Fax: (212) 302-6714
http://www.the-dma.org
References
Federal Deposit Insurance Corporation
(FDIC). (Spring 2003). Fighting financial fraud: How to shield
yourself from swindles. Special Report on Fraud. FDIC Consumer
News. Retrieved August 29, 2006, from
http://www.fdic.gov/consumers/consumer/news/cnspr03/cvrstry.html.
FDIC. (Spring 2003). Ten simple things
you can do to fight fraud. Special Report on Fraud. FDIC Consumer
News. Retrieved August 29, 2006, from http://www.fdic.gov/consumers/consumer/news/cnspr03/ten.html.
Garman, E.T. (2004). Consumer economic
issues in America. (8th ed.). Cincinnati, OH: Dame, Thomson
Learning.
National Consumers League. (January 19,
2006). 2005 fraud trends: Consumer being hounded by Internet
and telemarketing scams. Retrieved August 29, 2006, from
http://www.nclnet.org/news/2006/2005_fraud_trends_01192006.htm.
Federal Trade Commission (FTC). (March
23, 2006). Be suspicious about wiring money back after cashing
a check. Retrieved August 29, 2006, from http://www.ftc.gov/opa/2006/03/overpayment.htm.
FTC. (January 25, 2006). FTC releases
top 10 consumer fraud complaint categories. Retrieved August 29,
2006, from http://www.ftc.gov/opa/2006/01/topten.htm.
For more information, contact your county Extension office. Visit http://www.aces.edu/counties or look in your telephone directory under your county's name to find contact information.
Issued in furtherance of Cooperative Extension work in agriculture and
home economics, Acts of May 8 and June 30, 1914, and other related
acts, in cooperation with the U.S. Department of Agriculture. The Alabama
Cooperative Extension System (Alabama A&M University and Auburn
University) offers educational programs, materials, and equal
opportunity employment to all people without regard to race, color,
national origin, religion, sex, age, veteran status, or disability.
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