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.

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