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The Basics

Recession brings out the scammers

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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:

A false-check red alert: Let's say you're interested in buying supplies for a job or becoming a mystery shopper, or even in helping a Nigerian prince claim his inheritance. To convince you of their legitimacy, scammers will send you a check, often for thousands of dollars. They instruct you to deposit the check into your bank account and then ask you to wire a portion of it back. Their reasoning can sound downright reasonable: It's an administrative step, a part of how their company simply does business.

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Beware of tax scams
A spokesman for the Internal Revenue Service explains the 'dirty dozen' tax scams and how to watch out for them. (March 10)
By the time most banks can determine the check is worthless, victims have likely already spent part of it and wired part back to the scammers. The false-check scam is so effective it was the top scam perpetrated by phone and on the Internet in 2008, according to the National Consumers League.

"People have been falling for the false-check scam left and right over the past six months," says Keith Durkin, an associate professor of sociology at Ohio Northern University and an expert in scams. "These are college-educated people, but they're out of work and out of desperation want to believe that they can make money."

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

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