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The scammer hall of fame, recession style!

No group of entrepreneurs are more creative, adaptable, or faster out of the blocks than the scammers, cheaters, hucksters, and frauds. That good old entrepreneurial energy married to a walloping dose of anti-social personality disorder has given us five big scams for 2009 meant to hoover up dwindling resources from the unwary and the unprepared: stimulus grant scams, mortgage foreclosure consultants, auto repair fraud, property tax reassessment fraud, and retail closeout scams.

This list, in my opinion, is too short. Other popular “recession” scams include foreclosed home scams, identity theft protection scams, and debt reduction scams.

Now auto repair fraud and retail closeout scams have been with us since time immemorial. Way back in the 80’s, I spent 7 years on an English doctorate at Stanford and, during that entire time, and I mean every single day for seven years, a furniture store on El Camino Real had a “going out of business sale.” But auto repair fraud and retail scams are on the rise because, well, auto dealers and retailers are desperate. Besides which, “going out of business” has a much more credible ring today than it did two years ago.

But the other three are sheer entrepreneurial creativity. I myself have received more than my share of “property tax reassessment” direct mailers. These letters come in very official looking envelopes and declare that your property taxes are too high and will be reassessed at a lower rate. Everything on the envelope and the letter implies that your county tax assessor has sent you this letter, but for some reason, the county wants a few hundred bucks to reassess your house. Turns out, when you read the very fine print in Tagalog at the bottom of the second page, that the county assessor has nothing to do with this letter. It’s simply a private firm that is offering to prepare the paperwork to send to the county to reassess your home. Even my wife fell for it when I accidentally left one of these lying around.

Keep in mind that requesting a property tax reassessment is free. And, yes, you have to fill out some form or other, but it takes no more specialized knowledge or esoteric skills than filling out a driver’s license application. That, of course, is the scam. You think the county is offering to lower your property taxes (get real) by reassessing your house. You fill out the form, the company you send it to transfers what you fill out to the official county form, they then send it to the tax reassessor (for free), and charge you three hundred bucks for five minutes of clerical work and a thirty cent stamp.

Stimulus bill scams target both individuals and small businesses. These scams work by offering free or low cost information on how to get stimulus bill money (yeah, right), but they then lock you into a subscription program which you only know about if you actually read all the terms and conditions (which you don’t). You only discover your “subscription” when you notice that your bank account is being drained of a fifty, sixty, or seventy bucks each month — and, if you’re like most people, you only notice this after a few months have passed. Don’t worry, the “terms and conditions” that you agreed to include a clause that says that you are entitled to no refund whatsoever, so all those bucks they charged to your card have gone bye-bye for eternity. And, just in case you thought they were playing fair, when you call to cancel your “subscription,” they neglect to follow through.

Home foreclosure scams work in much the same way. They “sell” you a “list” of home foreclosures and auctions (getting such a list on your own is extremely easy) with the promise that you can purchase a house for literally dimes on the dollar (“you can purchase a home for as low as $10,000 — that’s only $75 a month, much less than rent!”) Again, what you “buy” is a subscription to their Web site, which you would only know if you read the fine print in the terms and conditions (which you don’t). Again, you only notice the subscription when you find some unknown company is billing your card twenty, thirty, or a forty dollars each month. And again, you’ve agreed in the “terms and conditions” that there are no refunds.

Identity theft protection scams have been around for a few years, but the urgency of the recession has created a bumper crop of scammers. The most famous of the identity theft scams is, which is run by a reputable credit reporting agency, Experian. The scam works exactly like the home foreclosure and stimulus grant scams — the site wheedles you into a subscription. Now, at least and the identity theft protection people are open about this aspect. What they don’t tell you is that they actually don’t do anything to protect your identity (none of them do). And with, which lassoes you into a 15-buck-a-month subscription, the scam is that all they do is deliver a credit report to you each month (and not for free). Experian, which runs the scam, however is required to give you your credit report anytime you ask for it. They have, in essence, tricked you into paying for what they are supposed to give you for free. That’s the scam. A, it’s not free and B, you’re paying for something you don’t have to pay for normally.

And the scam doesn’t end there. No “identity theft protection” system actually works at preventing identity theft. Don’t be fooled when the CEO on the radio ad gives out “his” social security number — the only thing any identity theft protection system is good at is taking your money.

In fact, the scam is particularly galling (but it’s the cheapest scam, I’ll give it that). Why? It is Experian’s job to prevent anyone who is not you from obtaining credit in your name. They’re supposed to protect your credit as part of their daily duties. So when you get your free credit report (if “free” means 15 bucks a month) and you find someone has taken out a Discover card in your name, well, that’s good to know, but it also means that Experian has dropped the ball.

Finally, while debt reduction scams have been with us as long as debt has been with us, American consumers are paying down debt at historical highs (how do you like that for mixing metaphors — how low can I go in mixing metaphors? The sky’s the limit!). Debt reduction scams promise one of two things: that you can easily pay down your debt in weeks and months (including your mortgage!) or that you can renegotiate your debt to dimes on the dollar.

There is no magic debt reduction plan out there other than declaring bankruptcy, and that wave of the wand is not quite so magic as you might imagine. You are not going to pay off 20 grand in credit cards and two hundred grand on your mortgage in “just a few months to a couple years without having to earn any more income than you’re earning now” in this world or this dimension. These debt reduction programs are only bank account reduction programs, hoovering up hundreds of dollars, that you could otherwise have used to actually pay down debt, for books and videos that teach you “how to be debt free in months!” (Actually, the scams initially lure you into a debt reduction “seminar,” where they promise to teach you how to reduce your debt, but they don’t actually teach you anything. They just tell you that the books and videos which cost hundreds of bucks will do the teaching part. Every time you get lured into a “free seminar,” there’s a money-sucking machine lurking at the end.)

If you’re serious about paying down debt, you have to do it the hard way, which includes cutting back on your spending, budgeting, planning, and, well, actually paying down your debt (imagine that!). And unless you’ve got a magic cash-making hat, your ability to pay off your debt is limited by your wealth and income. There are financial counselors that can help you, but once the phrase “be debt-free in a year” breathes past someone’s lips, then that person has greedy little eyes trained on your wealth and income . . . the very same wealth and income that you should be using to pay down your debt.

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One Response to “The scammer hall of fame, recession style!”

  1. James says:

    I guess one has to seek more knowledge on cutting back on one’s spending, budgeting, planning etc. But Richard I think there is desperation in the land and this lead people to take silly step if not why will I pay up to a $1000 to cut back my debt.

    As for Identity theft there are sites you dare not use your credit card on otherwise they enroll you for a weekly billing for no services rendered.



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