Cons/Scams

Business Opportunity & Franchise Tips

Magazine Solicitation Tips

Sweepstakes & Prize Offer Tips

Tips on Telephone Service Scams

Telemarketing Travel Fraud Tips

Advance Fee Loans

Work-At-Home Tips

Business Opportunity & Franchise Tips

	Study the disclosure document and proposed contract carefully. Under the FTC Franchise Rule a franchise or business opportunity seller must provide you with a detailed disclosure document at least 10 days before you pay any money or legally commit yourself to the purchase. This document must give 20 important items of information including: the names, addresses, and telephone numbers of other purchasers; a fully-audited financial statement of the seller; the background and experience of the business' key executives; and, the responsibilities you and seller will have to each other once you buy. If a seller claims to be exempt from the FTC Rule, check with the FTC first to make sure. Don't sign up through a website until after you've had a chance to look over all documentation.

	Talk to current owners. Use the list or other purchasers in the disclosure document to contact and find out about their experiences. Make sure to check whether the information in the disclosure document and promotional materials matches their experiences. You should be especially interested in the amount of work claimed vs. actually required and the promised profits vs. actual profits. Remember, a list of company-selected references cannot be substituted for the required list of franchisees or business opportunity owners.

	Investigate earnings claims. Promised earnings are only estimates. If companies make earnings claims, they are required to have in writing the facts upon which those estimates are based. A seller must tell you the number and percentage of owners that have actually met the claimed profit margins. Beware of broad and unsubstantiated claims.

	Shop around: compare franchises with other available business opportunities. Use the Franchise Opportunity Handbook, published by the Department of Commerce, to check out other sellers and compare their offerings. If your seller is making claims that are way out of line for the industry, beware. And if you shop around, you may find a better deal somewhere else.

	Listen carefully to the sales presentation. If you notice high pressure being used during a sales presentation, especially attempts to get you to sign up now, beware. The FTC rule requires at least 10 business days between getting the disclosure documents and paying or signing any agreements. If the salesperson tries to go faster than that, don't do it.

	Get the seller's promises in writing. If the salesperson makes statements that are different from the contract, disclosure documentation or promotional materials, make sure you get them in writing. If there is a dispute later, the written contract is what counts. If a seller refuses to put the promises in writing, for whatever reason, take your business elsewhere.

	Consider getting professional advice. Before you make any decisions, you should always get professional advice. Check with a lawyer for the legality of the business and to make sure you fully understand the contract. Have an accountant look over the finances and promised income. Remember, the initial money and time you spend getting professional advice could save you from big losses on a bad investment.

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Credit Cards

	Read the fine print. If you receive an offer for a pre-approved credit card or if someone says they'll help you get a credit card, find out the details first. You need to know what interest rate you will be paying and for how long. Some credit cards offer low rates as "teasers" that are raised after a certain period of time or only apply to balances transferred from other cards. You also need to know about any annual fees, late charges or other fees, and whether there are grace periods for payment before interest is applied. If the terms of the offer aren't provided or aren't clear, look for a credit card from someone else.

	Shop around. Interest rates and other terms vary widely. There are also different types of cards, such as secured cards that require a deposit to cover any charges that are made, cards that can also be used as telephone calling cards, cards that allow you to either charge something and pay later or deduct the charge from your bank account immediately, and cards that can only be used to charge merchandise from a catalog. Make sure you know what kind of card you're being offered and what type of card meets your needs best.

	Don't pay fees up front to get a credit card. Legitimate credit card issuers don't ask for money up front, unless you're applying for a secured card. If you are applying for a secured card, make sure you understand how your deposit will be used. Don't pay someone to help you get a credit card; if you have good enough credit, you can get one yourself, and if you have bad credit, no legitimate lender is likely to give you one.

	Use your credit wisely. Many Americans are in debt because they have taken on more credit than they can handle or have not used credit responsibly. Don't apply for more cards than you absolutely need, and don't charge more than you can afford. To maintain a good credit rating, pay bills promptly. Avoid interest charges by choosing a card that offers a grace period and paying the entire balance due each monthly. If you can't pay the full balance, choose a card with the lowest interest rate.

	Get help if you feel you're in over your head. Consumer Credit Counseling Service, a nonprofit organization, provides low or no cost services to consumers who need a plan to repay debts and improve their credit. To find the nearest C.C.C.S. office, call toll-free, 1-800-388-2227.

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Magazine Solicitation Tips

	Listen carefully to sales pitches for magazine subscription deals. They could be from unscrupulous con artists who want to trick you into paying hundreds of dollars for multi-year subscriptions.

	Ask questions to make sure you understand the deal.

	If you're not interested, tell the caller to put you down on a "do not call" list. If the company continues to call, hang up. Report the company for breaking the law.

	Ask for - and read - a written copy of the contract before you agree to buy.

	Do the math. You could end up paying hundreds of dollars for subscriptions that sell elsewhere for less.

	Keep information about your bank accounts and credit cards to yourself unless you have agreed to purchase something from them. If you give an account number to a stranger over the phone, it could be used to debit or charge your account without your permission.

	Be skeptical if someone tries to sell you a "bargain," offers you something for "free" or pressures you into a decision because the offer is good for a "limited time" only.

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Sweepstakes & Prize Offer Tips

	Don't pay to win. Buying goods or services won't increase your chances of winning. Prizes are supposed to be free. You cannot be required to purchase goods or services or to pay fees to win or collect a prize.

	Keep your credit card and bank information to yourself. Never give your credit card number, bank information, or social security number to someone who claims it's needed to verify your eligibility or to "deposit winnings" in your account. No legitimate prize company asks for this information to declare you a winner. Ever.

	Don't send a company money for taxes. Only the government collects taxes on prize winnings. If you win a prize you have to send a check directly to the federal, state and local tax authorities. If a company tells you they need money to cover taxes before they will release your prize, say "goodbye." You haven't won anything.

	Check it out. Don't just assume that the company is who you think it is. To confuse consumers, fraudulent companies often will use names that sound similar to legitimate sweepstakes offers.

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Tips on Telephone Service Scams

There are many different kinds of scams that involve telephone services.
Here are some to watch out for:

	"Slamming" is when your long-distance telephone service is switched to another company without your permission. It can happen in many ways. You may receive a check in the mail, or enter a contest, not realizing that the fine print says that by signing the check or the entry form you have agreed to change your phone service. Or you may get a call offering you lower rates and, even if you haven't agreed, find out later that you've been switched. Look at your phone bill carefully. If a different long-distance company is listed, call your local phone company to find out how to get switched back with no fee and how to be re-billed at your original long-distance company's rates.

	Don't Be "Crammed." When monthly charges pop up on your telephone bill for optional services that you never authorized such as voice mail, paging, a personal 800 numbers or club membership, it's called "cramming." Like slamming, it can happen by filling out a contest entry form, failing to respond to a negative option sales pitch, or calling a 900 number. Or the crammer may simply pick your phone number out of the blue and place charges on your bill through your local telephone company, claiming that you agreed to purchase the services. Look at your bill closely every month. Charges for optional services should be itemized and show the name of the company providing them and its toll-free number. If you did not authorize the services, call that number and insist that they be canceled and the charges removed from your bill. If the "crammer" agrees, let your local telephone company know. If it refuses or you can't get through, notify your local carrier that you're disputing the charges. Be sure to pay your bill on time, subtracting the disputed amount and any taxes or fees associated with it. Your phone service should not be disconnected, but be aware that the "crammer" can refer the matter to a collection agency.

	Toll fraud occurs when someone charges their long-distance calls to your number. If your calling card is stolen, or your account number is obtained by someone looking over your shoulder at a pay phone, calls to places all over the world can be charged to your calling card. Don't let people see you dialing your calling card number carefully and report a stolen card right away. In another type of toll fraud scam, you may receive a call from someone pretending to be from a phone company or a government agency claiming to be investigating a phone problem and asking you to accept charges for a call. No legitimate company or agency would ask you to do this. Hang up immediately.

	Prepaid phone cards are sometimes worthless or more expensive to use than coins or collect calls. Beware of cards that do not come with clear information about the rates for the calls. Comparison shop for the best rates and find out if there are fees or surcharges that might apply. Choose companies that provide toll-free numbers for 24-hour customer service. If your card doesn't work, or the value of the card turns out to be less than what it said, or you have other problems, report them to your state or local consumer agency.

	Claims of savings by using "dial-around" access numbers may be phony. Those five-digit numbers that you can dial to get around your regular long-distance phone company to save money could result in higher charges, not lower, if there are added fees or calling minimums. Get all of the details and compare both the rates and the terms before you use an access code to place your long-distance calls through another company.

	Not all pay phones charge the same rates. Pay phones on streets, or in hotels, airports, restaurants, stores and other public places may provide long-distance service through different companies than your own long-distance carrier. There should be information on or near the phone that explains how to get the service provider's rate for the call and that you have the right to be connected to the long distance company of your choice. If rate information is not provided or you are blocked from accessing another company, report it to your state public utility department.

	Not all 800 numbers are toll-free. You can be charged for calling an 800 number if you have agreed in advance. But some consumers are tricked into being charged for 800 numbers by following instructions to dial "personal activation codes" that are really access codes linking them to "pay-per-call" numbers, or by other means. You can dispute improper 800 number charges by contacting the billing company.

	Some 900 number and other "pay-per-call" services are not worth the price of the call. Advertisements should say how much the call will cost, what information or services will be provided, and if there is a contest involved, how you can enter for free. When you dial a pay-per-call number that will cost more than $2, you must be told the company's name, the cost of the call, what will be provided, that kids under the age of 18 need their parents' permission to stay on the line, and that you can hang up when you hear a signal without being charged. Your phone service can't be shut off if you refuse to pay disputed charges, though bill collectors may hound you. You can put a block on your phone to prevent people from making 900 number calls from your home.

	You may be lured into making an international call without realizing it. Some international phone numbers look very similar to U.S. numbers, but the charges can be far more. An advertisement may not make clear that the phone number listed is international. Or you might receive a message on your pager, your computer or your telephone answering machine that there is a family emergency or that legal action on a debt is about to be taken, with an unfamiliar phone number to call. If you are unsure where a number is, ask your operator before you dial.

	Beware of fraudulent computer-generated phone charges. In the latest twist to phone frauds reported to the National Fraud Information Center, consumers who downloaded a program from a web site on the Internet to view pictures later received huge phone bills for international calls they never made. They did not know that the viewer program was designed to disconnect their computers from their regular Internet service providers and reconnect them to the Internet through a phone number in Moldova, formerly part of the Soviet Union! Don't download programs from web sites unless you know and trust them.

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Telemarketing Travel Fraud Tips

	Be skeptical if you receive a call or postcard offering you a free or bargain travel package, especially if the price seems completely unreasonable. Do not give out your credit card number, checking account number or agree to send money up front until you get the full offer in writing with all costs and conditions and have time to check it out.

	Do not be pressured into buying "NOW!" This should be your first warning sign. A good offer today will remain a good offer tomorrow.

	Refuse the offer if you're told that you have 18 months or more to take the trip. By the time you try to make reservations, the company could be out of business. Many illegitimate firms will use stall tactics so your offer will expire before you can take a trip. Besides, promising that bargain prices to a desirable location are available at any time are usually false. Prices and availability vary wildly between peak and off-season. No company can guarantee below normal off-season rates at the peak of the tourist season.

	Get everything in writing. Make sure the written information includes the price of the package plus any additional charges. Find out exactly what is included in the package price and what isn't. Get the names of specific hotels, airports, airlines and restaurants that are a part of the package. Contact these establishments to double check the arrangements (Find the phone numbers yourself. Do not use a number provided by the company). If they've never heard of the firm offering you the trip, don't sign up.

	If the package doesn't include certain parts of your trip, such as air travel to and from the port of embarkation for a cruise, find out if you have to purchase that through the company or if you can arrange your own travel. Some companies offer you the cruise and hotel accommodations at cost, but then make a profit by selling air travel at a ridiculous mark-up.

	Check prices with local travel agencies. Unscrupulous companies often have hidden charges that can end up making a trip cost more than if you'd bought it through a reputable agent. You may not even find out about these charges until you are already in the middle of the trip and are unable to refuse payment. After you get all the information in writing, shop around to see who has the best deal. You may find out that the travel agent down the street can get you a cheaper trip with less hassle.

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Advance Fee Loans

	Don't pay money up front. It's against the law for a telemarketer that is offering to help you obtain a loan to ask for any fees in advance. You must have the loan in your hands for at least 7 days before the company may ask for payment. This applies to telemarketers that offer loans directly and companies that offer to help you obtain a loan through a third party.

	Apply for loans through local banks and credit unions. Dealing with someone locally makes it easier to resolve problems if they arise. Ask if the financial institution is licensed by a state or federal agency and then check to make sure that it is.

	Don't fall for promises of a loan regardless of past credit problems. If you have poor credit, it is unlikely that any legitimate bank or other financial institution will give you a loan. Your credit history is one of the main criteria used determine whether you will be able to repay a loan.

	If you can't get a loan yourself, get a co-signer. A friend, relative or employer may be willing to apply with you for a loan. But bear in mind that your co-signer is equally responsible for the debt; if you don't make your payments on time, that person can be held liable for the loan, and his or her credit record will also be affected.

	Get it in writing. If a company offers you a loan, get all of the terms of repayment, including interest rates, in writing. Shop around for the lowest interest rate. Make sure that any promises that are made are included in your written agreement.

	You can get free or low-cost help with credit problems. If you've got bad credit or no credit, you can get advice on how to build a good credit record from your local Consumer Credit Counseling Service. This nonprofit organization may also be able to negotiate payment plans with your creditors if you have fallen behind. To find the nearest C.C.C.S. office, call toll-free, 1-800-388-2227.

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Work-At-Home Tips

	Consider whether the pay offered is too high for the simple work promised. Legitimate companies pay wages based on the skills and training needed. Also, ask yourself, "Can a machine do this job?" If a task can be done faster and cheaper by another method, why are you being offered the job?

	Get a complete description of the work involved before you send any money. You may find that what you are asked to do after you pay is far different from what was stated in the ad. You should never have to pay for a job description or for needed materials.

	Beware of companies that claim they can set you up in profitable home-based businesses, but you must first pay upfront to attend a seminar and buy expensive materials. Frequently, seminars are high pressure sales pitches and the material is so general it is worth little. And the material, especially software, may not even be usable or adaptable to your needs.

	Get in writing the refund, buy-back and cancellation policies of any company you deal with. Do not depend on oral promises. They have no legal validity.

	Know that it is illegal to do certain types of work at home. To find out which types, check out the regulations enforced by the Department of Labor.

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Information gathered from
The National Fraud Information Center
www.fraud.org