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Consumer Fraud
 Consumer Fraud Prevention Tips
Make sure the company has a phone number that you can call
back.
Check with information to see if that number belongs to
that company.
Contact the Better Business Bureau in the area of the
company you are about to deal with.
Check to see if the company / firm has a pattern of bad
complaints at the Attorney General Office.
If your sending in payment try to send it to a physical
address instead of a P.O. Box Number.
If you do find yourself in the middle of a scam and you
cannot resolve your problems by contacting the company,
contact the following sources:
Following are Facts for Consumers from the Federal Trade
Commission.
The Cooling-Off Rule
November 1992
When you buy something at a store and later change your
mind, you may not be able to return the merchandise. But
if you buy an item in your home or at a location that is not
the main or permanent place of business or local address of
the seller, the Federal Trade Commission's (FTC's) Cooling-Off
Rule gives you three days to cancel purchases of $25 or more.
With the Cooling-Off Rule, your opportunity to cancel for a
full refund extends until midnight of the third business day
following the sale.
Locations not considered the seller's place of business
include temporarily rented rooms, restaurants, and home
"parties." The Cooling-Off Rule applies even
if you invite the salesperson to make a presentation in your
home, unless the sale is covered under the exemptions noted
below.
Under the Cooling-Off Rule, the salesperson must orally
inform you of your cancellation rights at the time of sale.
The salesperson also must give you two copies of a
cancellation form (one to keep and one to send) and a copy of
your contract or receipt. The contract or receipt should
be dated, show the name and address of the seller, and explain
your right to cancel. The contract or receipt must be in
the same language as that used in the sales presentation.
Some Exceptions
Some types of sales cannot be cancelled even if they do occur
in your home. The Cooling-Off Rule does not cover sales that:
- are under $25;
- are not goods or services primarily intended for
personal, family or household purposes. (The Rule does
apply to courses of instruction or training regardless of
the purpose for which they are taken);
- are made entirely by mail or telephone;
- are the result of prior negotiations made by you at the
seller's permanent business location where the goods are
regularly sold;
- are needed to meet an emergency, such as the sudden
appearance of insects in your home, and you write and sign
an explanation waiving your right to cancel;
- are made as part of your request for the seller to
perform repairs or maintenance on your personal property
(although, any purchase made beyond the maintenance or
repair request is covered);
- involve real estate, insurance, or securities;
- are of automobiles sold at temporary locations, provided
the seller has at least one permanent place of business;
- involve arts and crafts sold at fairs or other
locations, such as shopping malls, civic centers, and
schools.
How to Cancel
To cancel a sale, sign and date one copy of the cancellation
form. Then mail it to the address given for cancellation
so that the envelope is post-marked before midnight of the
third business day after the contract date. (Saturday is
considered a business day but Sundays and most federal
holidays are not.) Because proof of the mailing date and
proof of receipt are important, consider sending the
cancellation form by certified mail so you can get a return
receipt. If you prefer, you may hand deliver the
cancellation notice before midnight. Keep the other copy
of the cancellation form for your records.
If you are not given cancellation forms, you can write your
own cancellation letter, but remember it also must be
post-marked within three business days of the sale.
Again, for proof of mailing, consider sending your letter by
certified mail. Further, let the FTC know that you were not
given the required cancellation forms.
You do not have to give a reason for canceling your
purchase. Under the law, you have a right to change your mind.
What the Seller Must Do If You Cancel
If you cancel your purchase, the seller must, within ten days:
- cancel and return any papers you signed;
- refund all your money and tell you whether any product
left with you will be picked up; and
- return any trade-in.
- within twenty days, the seller must either pick up the
items left with you, or, if you agree to send back the
items, reimburse you for mailing expenses. If you do
not make the items available to the seller or if you agree
to return the items but fail to do so, then you remain
obligated under the contract.
What To Do About Problems
One of the best safeguards against problems in this area is to
take your time when you buy and to make sure you really want
what you purchase. However, if you have a complaint about
sales practices that involve the Cooling-Off Rule, write:
Correspondence Branch, Federal Trade Commission, Washington,
D.C. 20580.
You also may wish to contact a consumer protection office
in your city, county, or state. Some state laws give you even
more rights than the FTC's Cooling-Off Rule, and some local
consumer offices can help you with your complaint.
In addition, if you paid for your purchase with a credit
card and a billing dispute arises about the purchase (for
example, if the merchandise shipped was not what you ordered,
or if you cancelled the purchase within three days under the
FTC's Cooling-Off Rule), you can notify the credit card
company that you have a dispute over the purchase. Under the
Fair Credit Billing Act, the credit card company must
acknowledge your dispute in writing and conduct a reasonable
investigation of your problem. You may withhold payment of the
amount in dispute, until the dispute is resolved. (You are
still required to pay any part of your bill that is not in
dispute.) To protect your rights under the Fair Credit Billing
Act, you must send a written notice about the problem to the
credit card company at the address for billing disputes
specified on your billing statement within 60 days after the
first bill containing the disputed amount is mailed to you.
If the 60-day period has expired or if your dispute
concerns the quality of the merchandise purchased, you may
have other rights under the Act. If you have questions about
the Fair Credit Billing Act, write for the free brochure Fair
Credit Billing. Write: Public Reference, Federal Trade
Commission, Washington, D.C. 20580.
Automatic Debit Scams
October 1993
Fraudulent telemarketers have found yet another way to steal
your money, this time from your checking account.
Consumers across the country are complaining about
unauthorized debits (withdrawals) from their checking
accounts.
While automatic debiting of your checking account can be a
legitimate payment method (many people pay mortgages or make
car payments this way), the system is being abused by some
telemarketers. Therefore, if a caller asks for your
checking account number or other information printed on your
check, you should follow the same warning that applies to your
credit card number do not give out checking account
information over the phone unless you initiate the call or are
familiar with the company. Remember, if you give your
checking account number over the phone to an unknown person
for "verification" or "computer purposes,"
that person may use it to improperly take money from your
checking account.
How the Scam Works
The new telemarketing scam usually works like this. You
either get a postcard or a telephone call saying you have won
a free prize or can qualify for a major credit card,
regardless of past credit problems. If you respond to
the offer, the telemarketer often asks you right away,
"Do you have a checking account?" If you say
"yes," the telemarketer then goes on to explain the
offer, making it sound too good to pass up.
Near the end of the sales pitch, the telemarketer may ask
you to get one of your checks and to read off all of the
numbers at the bottom. Sometimes you may not be told why
this information is needed. Other times you may be told
the account information will help ensure that you qualify for
the offer. And, in some cases, the telemarketer may
explain that this information will allow them to debit your
checking account and ship the prize or process the fee for the
credit card.
Once the telemarketer has your checking account
information, it is put on a "demand draft," which is
processed much like a check. The draft has your name,
account number, and states an amount. Unlike a check,
however, the draft does not require your signature. When
your bank receives the draft, it takes the amount on the draft
from your checking account and pays the telemarketer's bank.
You may not know that your bank has paid the draft until you
receive your bank statement.
What You Can Do to Protect Yourself
Automatic debit scams involve a fraud that is hard to detect
and could expose you to large financial losses. However,
the following suggestions may help you avoid becoming a
victim.
- Do not give your checking account number over the phone
in response to solicitations from people you do not know.
- If anyone asks for your checking account number, ask
them why they need this information.
- Beware of offers that sound too good to be true,
especially any offers that require your checking account
number. Ask to review the company's offer in writing
before you agree to a purchase.
What to Do if You are a Victim
If a telemarketer has issued a draft against your checking
account without your knowledge or permission, or the amount is
more than you authorized, contact your bank immediately.
Depending on the timing and the circumstances, you may be able
to get your money back. You also may want to contact
your local consumer protection agency, state Attorney General
and the Better Business Bureau to report the telemarketer.
Prize Offers: You Don’t Have to Pay to Play
May 1996
Congratulations! It's your lucky day! You
have won one of the following fabulous prizes: a diamond
pendant; a deluxe vacation for two; a food processor; a stereo
system; or a six-foot grandfather clock.
If you receive a letter or phone call with a message like
this, be skeptical about the value of these
"fabulous" prizes. They may not be worth
collecting.
What could be wrong with these prizes? You need to
see them to understand. The diamond is probably the size
of a pin-head. The vacation for two might be a
certificate for inexpensive lodging. But chances are it
includes so many restrictions or hidden charges that it's
worthless. The food processor might be described more
accurately as a hand-operated food chopper. The stereo
system might be a plastic toy that fits in your hand. And the
clock? It's probably made of cardboard or plastic.
Scam artists often use the promise of a valuable
"prize" or "award" to entice consumers to
buy vitamins, cosmetics, or other merchandise or services, or
to contribute to bogus charities. Typically, they
falsely describe the "prize" as being worth more
than the price of the merchandise they're asking you to buy.
In addition, they describe prizes deceptively to attract
customers to sales meetings for land or vacation timeshares.
As a rule, if you have to pay to receive your
"prize," it's not a prize. You haven't won
anything.
Too Good to Be True?
How can you tell if a prize promotion is on the level?
The Federal Trade Commission (FTC) suggests that you listen to
the pitch carefully: Under the FTC's Telemarketing Sales
Rule, telemarketers who use prize promotions must tell you
important information before you pay for any goods or
services.
In the case of a "cold" call from a telemarketer
- when a telemarketer calls you - the telemarketer must state
promptly when you answer the phone that no purchase or payment
is required to win a prize or participate in a prize
promotion. If you ask, the telemarketer must tell you
how to participate without buying something or paying
anything. In every telemarketing call involving a prize
promotion - whether it is a cold call made by the telemarketer
or a call you make to respond to a written solicitation - the
telemarketer must let you know:
- the odds of winning a prize. If the odds cannot be
determined in advance, you must be told the factors used
to calculate the odds;
- that no purchase or payment is required to win a prize
or participate in a prize promotion;
- how to participate without buying or paying anything;
- what you'll have to pay or the conditions you'll have to
meet to receive or redeem a prize.
A telemarketer who offers to sell goods or services in
connection with a prize promotion must give the sales pitch
before the prize description. If it's the other way
around, hang up! The telemarketer is breaking the law.
The Telemarketing Sales Rule also bans misrepresenting any
material aspect of a prize promotion, including the odds, the
nature or value of a prize, or the fact that a purchase or
payment is required to win. Prizes are free. If
any payment or purchase is required, it's a sales transaction,
not a prize.
How to Protect Yourself
The next time you get a "personal" letter telling
you it's "your lucky day," keep these points in
mind:
Some contest promoters use names that resemble official
organizations, such as the lottery or a parcel delivery
service. Others use an envelope that looks like it contains a
telegram or government check. Don't be deceived by letters
that look official or urgent. It's illegal for a telemarketer
to misrepresent an affiliation with or an endorsement by a
government agency or other third party.
Read the letter carefully, including the fine print. In
some cases, the letter may tell you the cash value of each
prize or that you must attend a sales seminar as part of the
contest.
Think carefully before you attend a sales meeting just to
win an "expensive" prize. Your chances of winning a
truly valuable prize are likely to be very slim. You also may
be required to pay a handling charge that is equivalent to the
value of your prize. Remember, free is free. If you have to
pay, it's not a prize.
Be cautious of contest promoters who use a toll-free
"800" number that directs you to dial a pay-per-call
"900" number. Charges for calls to "900"
numbers may be high.
Before you send a check to a contest promotion company,
think twice. If a company urges you to use an overnight
delivery or courier service, beware! Fraudulent telemarketers
sometimes use these services to take consumers' money fast -
before an unwary consumer realizes he or she has been cheated.
Do not disclose your checking account or credit card
account number on the phone unless you have a relationship
with the company or know its reputation.
Call the Better Business Bureau and your state or local
consumer protection office to check out the seller's
reputation. Be wary of offers that claim to be "limited
time" only and efforts to urge you "buy on the
spot." Although some state laws provide cancellation
periods under certain circumstances, don't count on being able
to cancel and get your money back unless your right to do so
is spelled out clearly in your contract.
Read all contracts carefully before you sign. Generally,
once you sign, you are obligated. If the salesperson makes
claims orally that are not in the contract, the written
document counts.
Credit and Charge Card Fraud
February 1993
The cost of credit and charge card fraud to card
holders and to card companies alike was $864 million in 1992.
Everyone pays for credit and charge card fraud in higher
prices, whether or not they are personally defrauded.
While theft is the most obvious form of credit and charge
card fraud, fraud occurs in other ways, as well. For
example, someone may use your card number (not the card
itself) without your permission. This may occur in a
variety of ways:
A thief rifles through trash to find discarded receipts or
carbons to use the card numbers illegally.
A dishonest clerk makes an extra imprint from your credit
card or charge card for his or her personal use.
You receive a postcard or a letter asking you to call an
out-of-state number to take advantage of a free trip or a
bargain-priced travel package. When you call, you are told you
must join the travel club first. You are asked for your credit
card number so you can be billed for the membership fee. The
catch? New charges continue to be added at every step and you
never get your free or bargain-priced vacation.
How to Guard Against Credit and Charge Card Fraud
Here are some suggested precautions you can take to help
protect yourself against credit and charge card fraud. You
also may want to instruct any other person who is authorized
to use your account to take the same precautions.
- Sign your new cards as soon as they arrive.
- Carry your cards separately from your wallet. Keep a
record of your card numbers, their expiration dates, and
the phone number and address of each company in a secure
place.
- Keep your card in view, whenever you can, after you give
it to a clerk. Retrieve your card promptly after using it.
- Avoid signing a blank receipt, whenever possible. Draw a
line through blank spaces above the total when you sign
card receipts.
- Void or destroy all carbons and incorrect receipts.
- Save your card receipts to compare with your billing
statements.
- Open billing statements promptly and reconcile your card
accounts each month, just as you would your checking
account.
- Report promptly and in writing any questionable charges
to the card issuer.
- Notify card companies in advance of a change in address.
In addition, here are some things you should not do:
- Never lend your card(s) to anyone.
- Never leave your cards or receipts lying around.
- Never put your card number on a postcard or on the
outside of an envelope.
- Never give your number over the phone unless you are
initiating a transaction with a company you know is
reputable. If you have questions about a company,
check with your local consumer protection office or Better
Business Bureau before ordering.
What To Do If Your Cards Are Lost or Stolen
If your credit or charge cards are lost or stolen, call the
issuer(s) immediately. Most card companies have a
toll-free number for reporting missing cards. Some
companies provide 24-hour service. By law, once you
report the loss or theft, you have no further liability for
unauthorized charges. In any event, your maximum
liability under federal law is $50 per card.
What To Do About Suspected Fraud
If you suspect that someone has illegally used your credit
card, call the card issuer immediately. Use the special
telephone number that many card issuers list on their billing
statements. You also may want to follow up your phone call
with a letter. You may be asked to sign a statement under oath
that you did not make the purchase(s) in question, but you
cannot be required to do so.
For more information about your credit rights, write to:
Public Reference, Federal Trade Commission, Washington, D.C.
20580 for these free publications: Credit Billing Errors; Fair
Credit Billing; Lost or Stolen: Credit and ATM Cards; and
Telemarketing Travel Fraud. You also can write to this address
for a free copy of Best Sellers, which lists all the FTC's
consumer and business publications.
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