Friday, July 18, 2008

#1. Free Prize Scam

Free prize scams are perhaps the most common and come in every shape and form: telephone calls, direct mailings, mass media advertisements, email, and so on.

John was just finishing dinner, when the phone rang. The voice on the other end announced that he had just won a “free prize.” The woman explained that his name had been drawn from thousands of entries across the country to receive an all expense paid vacation for two to Hawaii. John was stunned. “How could that be possible?” he asked himself as he continued to listen. The woman continued to explain that there were just a few formalities: they needed his credit card number for the “security deposit” and some information about where to send the tickets and the vacation value-pack. John fumbled in his wallet until he found his credit card, and then gave the woman the information. After he hung up, he was so excited, he had to call his daughter to report the good news. It wasn’t until almost a month later, when he received his credit card bill, that John realized he had been the victim of a scam.

Elements of the free prize scam:

- An unexpected notice that you have won a free prize or other premium.

- An explanation that you must pay some sort of fee, such as postage and handling or shipping fees, to obtain the prize or premium.

- The prize may be contingent on you signing up for some type of service or agreeing to purchase a product.

- To qualify for the free prize you may be asked if you have a checking account, if you do, later in the pitch you will be ask for the numbers on the bottom of your checks. Once the scam artist has the checking account information from one of the victim’s checks, the numbers can be put on a “demand draft” and sent to the bank for payment. As long as the draft contains the victim’s name, account number and amount, no signature is necessary. The money is then sent to the scam artist’s bank account.

- The person often requests a credit card number or payment in cash. The money must be paid quickly and sometimes the caller will offer to send a messenger or runner to pick up cash from the victim.

- The time for redeeming the prize is often very short‑24 to 48 hours.

- Either the prize or premium never arrives or its value is less than the fee paid.

- Sometimes the “free prize” scam is used by salespeople to generate contacts. The prize has little or no value but is delivered by the salesperson who then makes his sales pitch.

If you have to pay for a “free” prize, then the prize isn’t free. Anytime you are asked for personal information including credit card numbers or checking account numbers from an unsolicited telephone call you are in grave danger of being scammed.

The best response to the “free prize” scam is to hang up on all unsolicited telephone contacts. Under no circumstances should you ever give out personal or financial information to an unsolicited telephone caller. As with all scams, it is important to report the incident to your state’s consumer fraud office or Attorney General’s office. Even if you’re unable to get enough information to identify the caller, the report can be used to warn others in the same area.

One variation of the free prize scam is where the scam artist calls and identifies himself as a U.S. Customs Official located on the U.S. Canadian border. The victims are told that they have won thousands of dollars in a sweepstakes drawing. They are told that in order to receive their winnings, they must send the amount of the duty owed, which is often 7%. They are instructed to send cashiers checks via an overnight delivery service to various fictitious customs brokers in Montreal or other out-of-the-country locations. The scam artist then gets the parcel tracking number from the victim and redirects the money to a different mail drop. The money then disappears. It is very important to understand that the U.S. Customs Service does not to conduct business in this fashion.

Protect yourself by:

- Hanging up on unsolicited offers for “free prizes.”

- Never giving out personal or financial information to an unsolicited telephone caller.

- Reporting all incidents of “free prize” call to the appropriate consumer protection agency.

- Obtaining a telephone number and person’s name from anyone who says he or she is a government official. Find the number of the government agency from an official source, such as the telephone book, call the government agency back, and ask to speak to the caller.

10 types of common scams and frauds

The following posts of scams is by no means exhaustive. Hundreds or thousands of variations of these common types of scams exist and are used daily. Scam artists are extremely inventive in the stories they tell to take advantage of their victims. The names of these scams vary from place to place across the country, but they involve the same elements. Each type of scam contains at least one example, a list of common elements to that scam, and a list of what you can do to protect yourself in that situation. Not all elements would be present in every case of the scam.

Wednesday, July 16, 2008

What the scam artist looks for in a victim

This section describes a variety of characteristics that make an individual susceptible to scam artists. Seldom are all of these characteristics present in the same person, but if you find yourself identifying with two or more of them then you are more susceptible to being scammed.

Someone who is trusting

Many older people, especially those who grew up in small towns or close-knit communities, are more vulnerable to scam artists. It isn’t necessary to become suspicious and distrustful, but it is important to be aware of the obvious dangers when a person who contacts you has done nothing to deserve your trust. Be wary when approached by a stranger who asks questions about your personal life, especially when the questions are about your financial affairs.

Cultivate habits of security that will protect you when those around you may be less than trustworthy. For example, it is a poor idea to carry large amounts of cash, especially in public. Likewise, it is important not to reveal personal financial information such as bank account numbers, credit card numbers, and personal identification numbers. Just as you wouldn’t give someone you don’t know the key to your house, you shouldn’t share personal information with strangers.

Someone who fears admitting lack of knowledge

A person who will agree to something without fully understanding the terms and conditions can fall easy prey to a scam. A major tactic of the scam artist is to make the assumption that the victim will automatically agree with anything suggested. This assumption is particularly useful to the scam artist in situations where people are unsure of themselves. Scam artists also use a person’s fear of appearing uneducated or unsophisticated to get her to agree to their plot. Requiring those who deal with us to explain things to our level is one of the first steps to protection from the scam artist. A wise man said, “Awareness of our ignorance is the beginning of wisdom.”

Someone who may not use common sense

Everyone has a measure of common sense and experience. Unfortunately, when presented with the prospect of a free prize or get-rich-quick scheme, some people lose their common sense entirely. When faced with such schemes, it is important to get another opinion or two and take some time to consider all the ramifications.

Someone who is suffering from a serious or chronic illness

People with chronic or serious diseases are faced with the medical system that may seem unsympathetic to their plight and leaves them without much hope. Under such conditions, it is possible to be taken in by accounts of new “miracle” cures or treatments. Some scam artists may even use the idea that the “government” is preventing many new medicines from entering the United States in order to protect the medical establishment. Scam artists also take advantage of the difficulty in distinguishing between mainstream health products and those that have no real effect or are actually harmful.

Someone who trusts advertisements

Some people have a belief that if it is printed, broadcast, or on the Internet, it is “true.” However, most media have no way of screening or checking the veracity of the advertising. False ads are generally only challenged after someone complains about them. The claims and representations made in print or on the television should be subject to the same challenge as oral representations. A scam in writing is no more valid than the scam made orally.

Someone who falls for appeals of promised beauty or youth

Advertising and popular culture have created an almost universal “need” for youth and beauty. Scam artists use the advertising methods of legitimate industry to sell overpriced, marginal, or even detrimental products to the unwary consumer.

Someone who is easily intimidated

Scam artists use intimidation as a tool. Lack of self-confidence or knowledge, infirmities, and the difficulties of old age can all make us timid to some degree. Others can take advantage of those who are easily intimidated. Good communication skills are helpful in overcoming timidity, but the main key is preparation. If you are prepared, you will not be afraid. If necessary, you may need to think through intimidating situations in advance and decide on your course of action. If you feel yourself being intimidated you should be aware that you are in danger.

Tuesday, July 15, 2008

Privacy issues and your identity

Even though “privacy” is not mentioned in the U.S. Constitution, the concept has developed through laws, court decisions, and popular use. The concept of privacy is often poorly defined and generally has been limited by the courts to those areas were there is a reasonable “expectation of privacy,” such as in a home. Related to this question is the issue of what information about you is “private.” Are your medical records confidential? Can businesses keep detailed records on all your purchases and then share that information with others? Can anyone look up your credit history and bank account information? These issues and others are part of a debate on personal privacy and how much control you can have over information about yourself.

Many Americans would be shocked to learn the sheer volume of information available about them. For example, every time you use a credit card, debit card or payment card of any kind, information concerning when and what you purchased is collected and stored. Every time you order anything by telephone, join a club, register for a prize, enter contest, subscribe to a magazine, open a checking account or participate in any one of thousands of other activities, your name ends up in some kind of mailing or telephone list. All organizations maintain lists of their customers or members and many of these groups will sell the lists to other businesses. Depending on the compiler, the list may be as simple as the white pages of the telephone directory or the list may contain detailed social and economic information, including buying habits, income, personal possessions, and interests. For example, if a surfboard manufacturing company wanted to mail advertisements, the company could purchase a list of surfboard owners in a certain area.

Unfortunately, scam artists do not respect privacy anymore that they respect any other laws. Certain personal records are much more useful to scam artists and others. Social Security numbers, credit card numbers, bank account numbers, and other similar records are frequently used by scam artists to take advantage of their victims. Simply refusing to give this type of personal information to unauthorized sources will go a long way towards limiting the risk of being scammed. At the same time, it is important to understand that it can be a relatively simple process to obtain personal information about you. Do not be put off guard if someone approaches you and tries to gain your confidence by telling you certain information about yourself, such as part of your credit card number, your Social Security number, or what you recently purchased.

Here are some guidelines for protecting personal information:

1. Never give anyone you do not know personal information unless you initiated the contact. If you initiate the contact then you can control who receives personal information. For example, if you call a mail-order catalog and order merchandise, you can properly give them information concerning your credit card in order to complete purchase. If someone contacts you, unsolicited, then under no circumstances should you give out personal information.

2. Avoid using your Social Security number as a form of identification, unless required by law, such as on a tax form or pay check. Businesses generally cannot require you to use your Social Security number for identification purposes.

3. Don’t write account numbers on the outside of envelopes used for paying bills.

4. If possible, shred any personal records you throw away, including deposit slips, receipts, canceled checks and other personal financial information. If you don’t own a shredder, tear the documents into small pieces and throw them away in separate garbage cans.

5. Avoid reporting personal income or other such information in surveys.

6. Pay with cash whenever possible. The computers used as cash registers gather information about your purchases that can later be used to send you targeted advertising.

7. Find out from your telephone service provider how to block caller ID. Usually, there are a combination of numbers you can dial that will prevent your number from being viewed by others. However, some of the people you call may refuse to answer the telephone. This is one of those precautions that have a price.

8. Make sure you know the privacy policies of the various businesses you work with. Reputable companies are eager to provide you with such information. Many Web pages, for example, will have a statement about the privacy of your email address, credit card number, and other personal information.

Monday, July 14, 2008

How to Protect Yourself From 10 Common Frauds and Scams Part Two

Defining a few terms

The word “scam” is usually defined as “a swindle or fraud.” “Scamming” is “a cheat or swindle; as in a confidence game.” In other words, a “scam” is an act of misrepresentation with the intent to take a person’s money or goods. The best term for the perpetrator of a scam is “scam artist,” even though there is nothing “artistic” about stealing other people’s money. Another term frequently used is “con artist.”

The word “fraud” is commonly used to mean the same thing as a scam. However, in legal terminology as used by federal and state courts, “fraud” has a precise definition that requires proving between nine and 12 separate elements. “Misrepresentation” is another legal term also defined by the courts and laws. The legal definition of “stealing” or “theft” refers to the intent to permanently deprive a person of their property. It is a crime in most states to engage in “theft by false pretenses.” Very often, scams fall within the definition of “theft by false pretenses” since a person is deprived of his or her property without force or threat. A scam victim usually is not aware he is being scammed. Misplaced trust and confidence combined with a lack of knowledge or awareness lead the victim to voluntarily part with his or her property.

All of the scams outlined in this Blog series are illegal. The scam artists who take the money or valuable property of others without their informed permission or knowledge are criminals. The losses are real and often tragic especially when the victims are the old or helpless. If caught, scam artists may face criminal charges and civil lawsuits. The U.S. system of laws is complex and is divided into two main categories: criminal and civil. Criminal laws are passed by state and federal legislatures and enforced by local, state, and federal law enforcement agencies. If you violate a criminal law you can be sent to jail or pay a fine or other penalty. Civil laws are those that govern transactions between individuals or between individual and the state. A law may prohibit certain fraudulent activities and provide for both criminal and civil remedies. For example, if a state law required telemarketing companies to be registered before conducting business and a company violated that law, then the state could bring criminal charges against the owners of the business. The law could also allow anyone injured by such a company to sue for damages in the courts (a civil case).

Every state and the federal government consider some sort of fraud to be a crime. Moreover, many states have laws making scams and frauds against incapacitated people or vulnerable people a more serious offense. An incapacitated person is one who, either through physical or mental disability, is unable to provide adequately for himself or herself. Although there are levels of incapacity, generally an incapacitated person needs a conservator or guardian. Conservators or guardians are appointed by the court to administer an incapacitated person’s financial affairs (a conservator) or physically take care of person (a guardian).

If you feel that you have been scammed or defrauded is important for you to discuss your rights and possible course of action with a competent legal adviser, such as a law enforcement officer or an attorney.

If It’s Too Good to Be True...

How to Protect Yourself From 10 Common Frauds and Scams

Part One...


Cheryl had worked hard to support her two children after her husband was killed in an automobile accident. Even though she had very little formal education, she did quite well as a real estate agent and managed to save enough for a modest retirement after her children married and moved out of state. Lately, her health had been poor and working full time was impossible. She enjoyed the few small luxuries she could afford, such as going to the mall to buy presents for her three grandchildren. She could hardly believe her luck when a friend she met at the senior center told her about a fabulous new business opportunity to work out of her home. With only a few hours of work a week she could afford to travel to see her family. It sounded almost too good to be true, but he assured her there were hundreds of women just like her making lots of money. Her friend was such a nice man and almost before she knew what was happening, she invested $5,000 in the “franchise.” However, the materials she received seemed very difficult to understand and when she called her friend for help, he didn’t return her phone calls. The next week his phone number was disconnected.

Cheryl had just become a victim of a scam artist.

No one has an accurate estimate of the tremendous amount of money lost each year in fraudulent schemes and scams. What is known is that the senior population, particularly those over 70 years of age, is the most targeted and the most vulnerable.

This blog is written to help anyone identify and protect themselves from scams and frauds. The examples are based upon actual experiences as reported personally to the author or in the media. However, the names and situations have been changed and do not represent actual people or events. They are given as illustrations of the many methods used to steal money from people.

If you become a victim, it is very important to report the fraudulent activity to the proper government agency. Depending on the state, enforcement may be handled by an independent agency, such as adult protective services, or the state attorney general. Usually a call to the local sheriff’s office or police station will give you the information you need to report the scam. If you suspect that a friend or relative has been scammed, do not hesitate to report the incident to the police. Some states have laws requiring such information to be reported immediately to the responsible government agency.

The Blog is one of a series and is divided into a number of sections. The first three parts will define common terms and review issues associated with your privacy and identity. The next section, which constitutes the bulk of this Blog series, identifies 10 types of common scams and frauds. The concluding sections of this series list ways to protect yourself and how to find additional information or help.

Saturday, July 12, 2008