It's a sad fact that as the economy goes south, the number of scams and cons that are designed to separate you from your dwindling resources increase. Last year I covered some of the common scams I've seen recently, but since then I have heard of a whole slew of new ones, so it is time to put the word out again.
Before we get to the good stuff, I have an administrative note: I recently revamped the mailing list for announcing these diaries. If you want to get an email announcement each week when a new diary is posted, send me email: frugalfridays (at) gmail.com and I'll add you to the list. If you didn't get an email this week, you are not on the current list.
There are a few simple things you can do that will help you avoid many of these scams when making purchases:
- Use a credit card: Debit cards offer some fraud protection, but credit cards offer more. Paypal, as far as I can tell, offers you virtually no recourse in the event you are scammed.
- Use a one-time use credit card number: If your credit card issuer doesn't offer this service, maybe it's time to switch cards. You can set the transaction limit, and the expiration date so this number expires soon after your transaction and won't permit any extraneous charges.
- Check your receipts, statements and bills carefully: Many of these scams rely on the consumer unwittingly approving relatively minor charges. By the time you notice that you have been overpaying for months (or years) it may be too late to protest the charges.
- Always request a receipt: If you ever need to dispute a charge, you won't get very far without some proof of payment. This is particularly important if you are making cash transactions.
If you do find that you have been charged for something you didn't intend to authorize or that you failed to receive, you may still be able to reverse your losses. Firstly, try speaking with the merchant or vendor who took your money. You may be able to get them to correct the mistake immediately. If you can't get any satisfaction, speak with your credit card issuer. They can reverse charges in cases of outright fraud. However, if you did authorize the charge, even inadvertently, they may not be able to help. Be polite, but be persistent. Escalate your complaint up the chain of command and eventually you may reach someone with both the authority and the inclination to help you. If phoning the customer service hotline doesn't resolve your issue, try looking for alternative complaint channels. As a last resort, you can try hunting down the email addresses for all the top executives in the company and sending them each a polite letter than explains your dilemma. Many big companies have a special branch of customer service to deal directly with these sorts of complaints. These executive customer service officers often have a lot more ability to fix problems than the standard reps.
In the case of outright theft, you should file a police report. Although these sorts of cases are not generally a high priority for police departments, it is possible that the authorities will chase after someone who has defrauded multiple victims. In addition, you may want to make complaints to the Better Business Bureau and your state Attorney General's Office. Here are some more resources for finding who you can report fraud to in your state.
Now that you know how to avoid and how to resolve some of the general problems you might encounter, here are some specific scams I've recently heard of.
Web Marketing, aka Web Loyalty Programs
How it works: This is the biggest scam that I have heard of in ages. So big, both the federal government and the State of New York have started investigating how deceptive marketing practices have cost consumers over $1.4 billion (yes, with a "b"). Some very big name companies have been involved in perpetrating this scheme over the past few years. Here is a list of 88 companies that have been identified as being involved. The details of the entrapment vary, but in general, consumers were tricked into signing up with a marketing company that offered free coupons or other discounts, but in actuality, the marketer would initiate a recurring charge on the customer's credit card generally in the range of $20 a month. In return for this fee, customer got essentially nothing of value. Sometimes the enrollment offer was hidden in the checkout procedure from an online merchant. Most of the customers had no idea they were even enrolled.
How to avoid it: This is one of the big reasons I am such a fan of one-time use credit card numbers. While you should always be vigilant when shopping and never click a box that says "OK" without knowing what you are agreeing to, one-time use numbers add an extra layer of protection. Set the dollar limit to only cover the cost of your purchase and set the time limit to expire immediately.
How to reverse the charges: If you notice a recurring charge on your credit card that you haven't authorized, immediately protest it with your credit card company. Although credit card companies have soemtimes been somewhat reluctant in the past to interfere on behalf of the consumer in cases like this, the recent attention by both the Senate and the NY AG may help to change their minds.
Cell Phone Text Scam
How it works: This one is often marketed to teens. The ideas is to get you to submit a request for some free service. This service could be a ring tone download, or a request for your IQ score or anything innocuous. What you don't know is that by requesting the free text you are also agreeing to receive many more texts from this company and each text comes with a charge. Sometimes as much as $10. Before you realize it, you could have hundreds or even thousands of dollars of charges accrued.
How to avoid it: Stay away from free ringtone sites, and online quizes that want to text the result to your phone. Check your phone bill regularly and immediately dispute any extraneous charges. I would be very careful handing any device to a child or a teen that can rack of thousands of dollars of debt. If you want to give your child a cell phone, select a pre-paid phone. Alternatively, many carriers have special plans where they can limit exactly how a phone can be used. Perhaps you want to limit the phone to only call certain numbers and to not send or receive texts. Ask your carrier about special plans like these. They don't advertise them widely, but sometimes they do offer them.
How to reverse the charges: Complain to your cell phone provider. They are the one billing you for the fraudulent services, so don't let them hide behind the excuse that they are just a third party. Make them prove that you authorized the charges and if they can't, then inform them that you will be making a fraud report to the Federal Communications Commission, the Attorney General and any other regulatory body you can think of.
Fraudulent Cashiers Checks
How it works: This is a scam that attacks the seller, rather than the buyer of an item. Unfortunately a lot of people are reaching out to the internet to raise some extra cash by selling unwanted items and the scammers are out there waiting. The thing to keep in mind is that it is evidently not that difficult to generate fraudulent cashiers checks that can fool even bank officers. It can take several days, or even weeks, for the fraud to be detected and by that time the buyer has your stuff and you are left with nothing but the bank fees for depositing a bad check into your account. To add insult to injury, sometimes the check is written for much more than the purchase price with the instruction for you to return the change by check. Now they have taken your stuff and your cash.
How to avoid it: If you are selling stuff online, only deal with local buyers who pay in cash. If you must sell to a remote buyer, use a service like Paypal or Google Checkout. They may cost you in fees, but it is worth it to avoid this scam.
How to reverse the charges: Unfortunately there is no good way to catch the perpetrators of these scams. File a police report if you have been a victim. It probably won't do any good, but it is possible that it will.
Free Trial Offers Lead to Repeated Charges
How it works: I have seen this scam from lots of products including makeup, teeth whiteners, acai berry supplements or other diet aids. You will see an offer for a free trial of a product with some minimal charge for shipping an handling. Unbeknown to you, buried in the fine print on your free trial request, there is an authorization to start charging you immediately a monthly or bimonthly fee for an outrageous sum. Before you know it, the company has sucked hundreds of dollars out of your account.
How to avoid it: Be highly skeptical of anything you are offered for free. No company ever made a profit giving away their products (excepting Google, of course). If you just can't resist a trial offer, I'll repeat that this is the exact situation that one-time use credit card numbers are perfect to use. Set the dollar limit to only cover the initial shipping and handling fees and the time limit to expire immediately and you are protected from this sort of sneaky practice.
How to reverse the charges: If this company makes a practice of luring their customers in by deceit, it is unlikely that they are going to refund your money just because you asked. You should go straight to your credit card provider and initiate a fraud claim. However, this approach will not always be successful. You may have to escalate your complaint.
Radio Shack: Livestrong donations
How it works: When checking out at Radio Shack, customers are offered the opportunity to donate $1 to the Livestrong Foundation. While this may be a worthy cause, some customers have reported than even when they explicitly refused to donate, the $1 was still added to their bill.
How to avoid it: Take care when using the pin pad to complete your transaction at Radio Shack. Evidently, the donation prompt is often confused with the standard "check OK to continue" prompt the consumer expects to see. Also, make sure to check you receipt before you leave the store.
How to reverse the charges: If you do notice a spurious charge, immediately insist on having it reversed. Speak with the manager if you must, but explain calmly that you did not authorize this charge, so it is fraudulent for them to add it in.
Best Buy: computer optimization
How it works: Many consumers have recently found when they try to buy a compuer at Best Buy for the advertised price, they are informed that the only computers in stock have already been "optimized" and so they must pay an additional fee for this service. The worst part about this scam is that evidently the optimization process they are charging you for is nothing more than loading a bunch of software onto your machine that you could easily do yourself, if you want to, which you may not want in any case because some of it will actually degrade your performance.
How to avoid it: Best Buy has been getting a bunch of bad publicity about this lately, so if a salesman tries to push this service for you, push back. Request that they sell you an un-optimized computer. If they are out of stock, then they should sell you an optimized one at the un-optimized price. Insist on speaking to the manager. Use terms like "bait and switch" if you were enticed into the store by an advertised price. Whatever you do, don't agree to pay the extra fee under the assumption you can later get it reversed.
How to reverse the charges: If you already bought a computer from Best Buy recently, and paid this fee, it is unlikely that you can get it reversed, but I would try calling Best Buy's consumer hotline at 1-888-237-828 just to try.
Unfortunately, this list doesn't even begin to cover all of the many scams and fraudulent activity I've heard of recently. If you want to see more, try these links: