When I was a kid, two of my favorite movies were Paper Moon and The Sting. Both movies featured conmen as the heroes who deserved all of their ill-gotten gains. The methods they employed (the short con, the long con, the pigeon drop, the short change, the bait and switch, etc.) these all seemed part of an exciting and romantic lifestyle. In reality conmen are pretty despicable characters who prey on the ignorance and good will (and often greed) of their marks. One thing of interest about both of those movies, however. They were both set during the Great Depression for a reason. As the economy dives, con artists thrive. As people search for new ways to make money, some of them turn to crime and some of them turn into marks.
Follow me below the fold for a list of scams and frauds I've recently heard of.
Work From Home
As unemployment numbers go up, more people are looking for ways to make money in alternate ways. There are lots of legitimate businesses you can run out of your own home, but there are lots illegitimate ones out there as well. Before you sign up with any organization that asks you for money up front, check out this list from Consumer Reports: Beware of work-at-home stings.
Help me, Grandpa! Help, help me Grandpa!
Say you are a senior citizen living somewhere like Arizona and you suddenly get a desperate phone call from your grandson or nephew who has been in an accident in Canada and needs money wired immediately. Before you hang up the phone and rush off to your local Western Union site, make sure that the person on the other end of the phone really is your relative by asking him questions he should know. Identity thieves have evidently started contacting friends and relatives of their victims trying to use the personal touch to get money.
There is a new version of this scam that I've seen just this week where someone's FaceBook or Gmail account is hacked and the hacker then starts chatting with all of the victim's friends asking them to immediately wire money overseas. So it pays to be suspicious when your FaceBook friends start suddenly asking for money.
Property Tax Reassessment
I don't know if this one is peculiar to California (we have a sort of strange property tax structure here) or if it can be found in other states as well, but here's how it goes. Recently, many properties have dropped in value below their assessed level. So you may be paying more tax on your house than you really should. Lucky for you, you just got a letter in the mail (or a phone call) from a service offering to get your home reassessed. For just a low fee, they can guarantee to lower your property tax bill significantly. The truth of the matter is that in California at least, these companies aren't going to do anything for you that the county assessor's office won't do automatically. The county assessors are applying automatic adjustments to properties already. If you feel your assessment is too high, you can always call the assessors office yourself and see if you can get a further reduction. Just don't pay somebody else to make that call for you.
More Housing Fraud
Other than property tax reassesments, there are lots of fraudulent businesses out there preying on homeowners and renters both. For homeowners, there are the home repair (or roofing or driveway refinishing or ...) "contractors" who show up at your door to offer you a special rate since they are already working in the neighborhood. These folks will take your money, and often damage your home in the bargain.
There are so many different mortgage and refinancing frauds out there that I couldn't begin to cover them all. If you have been contacted by someone offering to help you refinance, or avoid foreclosure, be suspicious and check them out thoroughly before signing anything. One place to look is Mortgage Fraud Blog. Renters can also be prey for con artists. Here's an press release from the Illinois Attorney General detailing a scam in Chicago where prospective renters are tricked into paying for access to a database filled with out-of-date and fraudulent rental listings.
Money Order Refund
This fraud has been around for a while, but small business owners and individuals are still falling for it everyday. The way it works is that you get an order for goods or services from somebody and they pay you using a money order. You deposit it into your bank, wait a few days for it to clear, and then the order is canceled or you are somehow requested to provide a partial or full refund. So you send off a wire transfer or a check which is immediately cashed. A few weeks later, your bank informs you that the money order was actually fraudulent. How can you protect yourself? Well, I won't say you should never accept money orders, but if you do, be sure to check that all the security features are intact. Alternatively, you could require payment in a more secure form, such as credit card or wire transfer.
Swoopo.com
I don't know if you can exactly call this a scam, since it's all legal, but since most people who pay this company get nothing for their money, I figure it was worth a warning. It is an online auction site that sells new merchandise drastically below retail prices. You could, for example, buy a MacBook for $80. What's the catch? Everytime you bid, you get charged 75 cents and each bid can only raise the previous price by $0.15. So Swoopo collects bidding fees from all the participants and one lucky winner gets a cheap laptop while the rest get nothing. It's basically a legal way of running a raffle. If you enjoy gambling, go ahead, but you would have better odds in a casino.
Avoiding Scams
So, how do you avoid falling victim to these and other scams? Here are a few tips that may help:
- There ain't no such thing as a free lunch: One of the most famous con artists of the last century, Yellow Kid Weil, once said, "When people learn -- as I doubt they will -- that they can't get something for nothing, crime will diminish and we shall live in greater harmony." If you are presented with a scheme that seems too good to be true, it probably is.
- (don't) Act NOW! Many schemes and scams rely on a high pressure sales technique to get the victim to hand over the money before he has time to realize it is a scam. Whenever a salesperson tells you, "this price is only good NOW!" you should hear giant alarm bells going off. A legitimate business is usually going to offer you the same deal tomorrow that they did yesterday. It is also highly unlikely that they are going to run out of whatever it is you are trying to buy. Take the time to think about your purchase, talk it over with friends or family or just sleep on it before you jump in with both feet.
- Don't give cash to a stranger. This may seem like an obvious piece of advice, but you would be amazed how many times people will just hand over large quantities of cash to someone they recently met. The pigeon drop is a classic con because people can be so easily convinced that they are going to greatly benefit if they just hand over a "small" amount of money up front.
- Use a credit card whenever possible for purchases. If you find out later you have been scammed, you may be able to recover your losses by filing a fraud report with your bank. If you are buying things on-line, check if your credit card company offers extra fraud protection like one-time-use numbers.
- Read before you sign. If you are signing a document, you should always read it in full first. If it is a long and complicated contract, and the salesman is hovering over you trying to hurry you along, ask to go sit down and read it in private. They can wait fifteen minutes, it's not going to kill them.