5 Scams To Watch Out For During A Recession

The LA Times says that recessions are boom times for scammers looking to take advantage of desperate people. They’ve listed 5 common scams that do well in a poor economy. They include bankrupcy scams, foreclosure scams, and fake home-based businesses.

  • Credit Repair The Times says that the FTC has taken action on 70% (!) of companies that promise to repair your credit and have not yet found one that can actually “fix” truthful information on your credit report.

  • Foreclosure Rescue This is a nasty scam. The scammers advertise with messages like “We can save your home. Guaranteed.” Then the scammer either tries to swindle you out of your mortgage payments in exchange for “negotiating with your lender” or they trick you into signing over the title to your home. Here’s some more information about this scam and how to avoid it.
  • Hidden Bankruptcy Bankruptcy is one option that is open to you, but it has serious consequences to your credit that you should consider before going ahead with it. Watch out for ads that claim to “Consolidate your bills into one monthly payment without borrowing.” This is can be a secret code for bankruptcy.
  • Free Lunch Anyone offering you a free lunch for attending an “information” session is probably full of crap. If their investments are so good… why are they selling them to you!? The Times says that an SEC report said that “about half the seminars it attended featured misleading claims, and 13% appeared to be engaging in outright fraud.”
  • Home-based Businesses Run. Away. Never pay a fee to start a home-based business, however wonderful it may sound. Scammers will tell you that doctors need sub-contractors to stuff envelopes or help process their accounts. They might try to tell you that you can make money starting a website, or assembling crafts. They’ll charge a fee to set you up, and it’s usually pretty hefty. After you’ve paid your money, you’re on your own.

    “Few consumers,” the FTC said in a warning statement, “are able to find clients, start a business and generate revenues.”

    If you’re interested in starting your own business, go to your local library and ask what educational resources they have for people like you. Brooklyn, for example, has an entire library dedicated to the needs of small businesses and entrepreneurs.

Money scams don’t slow down in hard economic times [LA Times] (Thanks, Robert !)
(Photo: blue_j )

Comments

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  1. Suttin says:

    Any commercial that says I can work from home and make $60,000 a month is a little fishy when they never tell you what you would be doing.

    • graceless says:

      @Suttin: Seriously, a mother/daughter “messuage” team was recently busted by using craigslist…

    • agnamus says:

      @Suttin: But the lifestyle is great!

      PUPPIES!!!!!!!!!!!!

    • Outrun1986 says:

      @Suttin: I agree, and most of the job listings you see on job hunting websites are just scams. If I was seriously looking to apply for a job first of all I am not going to put my resume out in the public for the world to view. This opens me up to identity theft and all kinds of other problems. If I want to apply for a job at your company I will send my resume to your company. Second I would never apply for a job that doesn’t have adequate information in the ad, these ads with just phone numbers to call are meant to reel in the desperate job seeker. Some ads are like 2 lines with a small description and then a phone number! It is fine if they direct me to a website with more information because then I can check it out before taking action.

    • racermd says:

      @Suttin: Anything that advertises a ‘success kit’ – red flags should be waving and sirens should be blaring. Here’s looking at you, ‘crazy fox’…

      • kc2idf says:

        @racermd: Also, watch out for the word “report”. If someone wants to sell/give you a “report” on how to do x, then it’s probably BS.

    • Raiders757 says:

      @Suttin:

      Without a doubt.

      If the add deosn’t say exactly what the job or business involves on your end, stay away.

      If they want money or credit info up front. Stay away.

      If people want to work at home, they should check out the ‘Work At Home Mothers’ board, or WHAM for short. There is a lot of great advice over there.

    • dweebster says:

      @Suttin: TSA apparently has one opening that paid pretty well: [consumerist.com]

  2. a_pink_poodle says:

    I’ve heard the “set up a website and watch the money roll in” ad’s on the radio before and knew they were scams from the start if it weren’t for the logical fallacy that a website doesn’t make money on its own.

    • Moosehawk says:

      @a_pink_poodle: Every time I hear one of these, I think of those computer illiterate people (like from the Mojave commercial, as an example), and just imagine them thinking “I’ve heard things about them there websites. All I have to do is make one and I get money? Sounds easy!”

    • quail says:

      @a_pink_poodle: My sister’s neighbor was setting up a jewelry website. Some distributor convinced her that she could set up a website, using their program tools, and sell their jewelry without ever touching the merchandise.

      My sister kept asking her why she had to set up a site when the distributor could easily set one up and sell directly, keeping the profit. The neighbor could only respond that my sister didn’t know the ins and outs of business.

  3. ShortBus says:

    “…and have not yet found one that can actually “fix” truthful information on your credit report.”

    That’s not entirely accurate. There are several companies out there that can (and do), in fact, get legitimate, derogatory info removed from your credit report. I’ve personally known people who’s FICO has jumped more than 200 points in six months.

    The problem is that these companies are a) way more expensive and b) not nearly as effective as doing it yourself. Additionally they take a passive approach with their clients when an active approach produces better results more quickly. As an example: depending on what your credit report looks like, about 30-60% of the credit rebuilding process is establishing new, positive accounts. Obviously a third-party company can’t be opening new accounts in your name. And you have to know which accounts to open where and when, since the shotgun approach will result in excessive inquires, which drops your FICO further.

    The process is intimidating and complex, but *very* worth doing yourself. Two great places to start learning are: [www.debt-consolidation-credit-repair-service.com] and [www.creditboards.com]

    • Haltingpoint says:

      @ShortBus: Why do I have a hunch that the first URL is your own website? That has to be the spammiest URL i’ve seen in a long time. Fail.

      Just a note for others is to watch out for the affiliate marketers out there. They are SWARMING over all the products and services that people use in times of economic downturn and are just waiting to prey on you. Now, not all affiliate marketers are bad, but there is a ridiculously high signal to noise ratio out there. Its easy enough to spot though…just look for a URL with an affiliate ID number in it.

      The best way to protect yourself when someone has an offer you are considering is to ask yourself AND THEM these two questions:

      1. What’s in it for you? Ie. do they have a vested interested in you purchasing whatever it is they are reviewing or recommending? If so, they are biased and cannot be fully trusted. Good luck finding honest reviews these days…affiliates are all over creating fake “review” sites and cloaking their affiliate links.

      2. If it is that easy to make money doing/using this, why are you trying to sell it to me and not using it yourself? Don’t accept an answer like “I want to pass on this gift to others to help them succeed” bullshit. If that was the case they’d give it to you for free.

  4. dmuth says:

    A good rule of thumb for “home based businesses” (and MLMs) is that the business model relies more around signing up new clients than actually providing a useful product or service, changes are that it is a pyramid scheme.

    • dweebster says:

      @dmuth: Biggest red flag to me is that “they” have an exclusive monopoly over the product I would be paying to represent. If it’s actually something good – they control pricing, distribution, how many competitors I’d have (endless), etc. MLM is a thinly veiled ponzi scheme using overpriced goods as the come-on.

  5. So what exactly is wrong with the free lunch. Is it poisoned? Not seasoned right? I mean, as long as you don’t want to sign up for whatever they’re selling, why not take their food. Strangers have the best candy.

  6. "I Like Potatoes" says:

    Parents, you MUST teach your children….”There’s no such thing as a ‘free’ lunch”!!!

  7. cashmerewhore says:

    I’ll gladly suffer through an Ameriprise informational session for my favorite chinese food free.

    I already have a retirement fund, tyvm. Can’t switch it, not starting another one, but thanks for the grub!

  8. BrianDaBrain says:

    I have a general rule that I follow. If they don’t give you details before asking for your credit card, then it’s a scam.

  9. tylerk4 says:

    Another foreclosure “prevention” scam my office is seeing quite a bit of these days is those who charge people to attend a seminar on how to get out from under their mortgage or how to prevent foreclosure, convice the borrower to sue their lender under a handful of supposed “legal theories” while promising to ghost write the borrower’s pleadings for them (despite not being licensed to practice law), and walking away when the borrower loses and has judgment for fees and costs entered against them.

  10. kittenfoo says:

    I have a website (and no, the money does not just roll in – far from it) and it always makes me cringe when one of the ads on it is for Direct Buy, because I’ve heard it is a scam. I actually hope nobody clicks on those.

    • _catlike_ says:

      @kittenfoo: There’s a discussion about Direct Buy on gardenweb’s kitchen forums currently. It sounds borderline scammy from the descriptions. At best, it seems a pain in the ass to get your money’s worth.

      • bobznc says:

        @_catlike_:
        Haha, I was recently back in the Suburbs of Chicago, and saw an old Checker’s fast food restaurant was finally being renovated into a new business. Upon closer inspection, I saw a sign saying that it was being turned into a Direct Buy Warehouse. This place was no bigger than any Burger King or any other fast food joint.

  11. Aesteval says:

    #4: But so long as you can filter out the garbage, a free lunch is
    still a free lunch right? Go for the hopefully halfway decent food,
    ignore the ad pitch.

  12. MercuryPDX says:

    I see “Free Lunch” meetings all the time. They’re usually run by some kind of financial consultant. If you can withstand the high pressure “I can manage your money better than you.” sales pitch, it’s a free lunch. ;)

  13. akacrash says:

    Easy Money: Just help a Nigerian prince get his father’s finances straightened out!
    Cha-ching!

  14. wattznext says:

    ” Free Lunch – Anyone offering you a free lunch for attending an “information” session is probably full of crap. If their investments are so good… why are they selling them to you!? The Times says that an SEC report said that “about half the seminars it attended featured misleading claims, and 13% appeared to be engaging in outright fraud.””

    OK, so the information they are trying to sell you is crap…but the lunch is still free!

    • YOXIM says:

      @wattznext:

      A guy I worked with loved those things. He would go to these timeshare seminars where they’d put you up for three days in a beachfront hotel, and all you have to do is listen to their little b/s sales pitch once a day. He’d go on a mini vacation with his wife and kids that would hardly cost him a dime.

      At the end of the deal, he’d sign up for the next one. :)

      • Parapraxis says:

        @YOXIM:

        Reminds me of one of my friends’ dad, who would attend them when he was in Orlando for free Walt Disney World tickets.

        He would sit there with the Mrs., paste a smile, and simply repeat “no” each time.

        Sometimes, they would quit by the second round of tactics and simply give them the tickets to leave.

        I’ve gotta try that sometime…

  15. Trencher93 says:

    Apparently the only way to ride out the recession is to be a scammer? I guess being a sucker who paid his mortgage and taxes wasn’t the smartest thing I’ve ever done. Maybe I should go underground, and start a few scams? I sure the heck won’t get any return on my money, and if I did the bailout means big-time inflation will erode it. The government is teaching us that being honest doesn’t pay. If I was an ex-Russian mafia type, I’d come to America and do seminars on how to get involved with organized crime :)

    • wagnerism says:

      @Trencher93:

      Yes. Good guys finish last. I’m bitter too.

      We live in a world where the ignorant, stupid and unethical people get an indirect reward by not suffering the full consequences of their actions.

      I can live with myself. That’s worth something. It isn’t worth as much as the bailout and it can’t pay my bills.

  16. atomicovaries says:

    I’ve found that there’s a ton of the start-up business related scammers on craigslist. It’s really horrible because I’m desperate for a job right now, as mine is about to end, so I apply to a ton of the data-entry based positions, only to reveive a follow up email that promises my application will only be processed if I sign up for a service on this website.
    Takes a special type of black hearted jerk to scam people who are desperate for employment. :(

  17. Fist-o™ says:

    I went to a lunch but I had to bring my own! LOL!

  18. frodo_35 says:

    Scam the scammers. Cost them some money. Some times I have nothing better to do then hit redial on some crappy companies 1800 or 1888 phone number. This costs them money and bugs the hell out of them. How would you like to say Hey Bill no I’m not calling to pay my bill or order just costing you S.O.B.s a little money your company sucks talk to ya again in 5 minutes bye. Small victories for the easily amused.

    • dweebster says:

      @frodo_35: One way to keep a few pay phones available and tie up the lines so less people get scammed. Good idea for keeping busy while waiting for a bus…

  19. SadSam says:

    The free lunch/free dinner seminars are huge in Fla. My Mom and her husband attend them once in a while simply for the free food.

  20. pecan 3.14159265 says:

    The saddest part about the scams is that for a lot of people, they don’t work. But these flyers are posted all over lower-income areas (like near where I work) and there’s a cycle of sadness, anger, depression, and desperation when you find yourself in a dire situation. When people are at their weakest, these vultures are there to grab them, and it seems that no one is capable of educating some people on how not to succumb to these tricks.

  21. pecan 3.14159265 says:

    And another thing that aggravates me are the people who perpetuate these scams simply because they think they’ll get lucky. I work with someone who actively puts her name into drawings and contests, knowing full well that they might be scams, but she’s so convinced that someday she’ll get lucky and actually win something, that she keeps on doing it. And she’s gotten a few calls, and she’s never committed to going to anything to get her “free vacation” but it’s just aggravating that she doesn’t think she’s doing anything wrong or that what she’s doing actually affects anyone else.

    • dweebster says:

      @IHaveAFreezeRay: I had someone give my information out to one of those “win a car” kiosks in a mall once. I was not happy when I got the idiot calling me to pitch their true intent.

      My friend had no idea they’re a scam, it was done from love, I educated them.

  22. Paddlacus says:

    When I was in university a woman came into our common room and announced “I have left over sandwiches, first come first served.”

    Before she finished saying this most of them were gone. She took her tray and left the room.

    While I believe in the sentiment of this expression, I can’t help but think “for those fast-acting people, on that one day, there really WAS a free lunch.”

    • dweebster says:

      @SameenaIshbob: Literally. Most people have kindness and charity in their heart. Unfortunately, this natural goodness in people is exactly what the scammers use as an entrypoint into ripping us off.

  23. quail says:

    Be extra careful of set up your own business and be your own boss scams. To be truthful, if you were going to be a business owner you’d have done it already.

    One scam I know about dealt with setting up your own janitorial company. The business setting you up required you to pay for classes, and required you to buy their vacuums and use their chemicals. They promised that they’d get you x amount of work. The guy who I knew who did this got burned bad. He was in essence their 1099, contractual slave for a period of time. He made no money.

  24. Anonymous says:

    The non-ibvious bankruptcy scheme seems to be very commojn. Here in the UK, where a lot of legal details are different, it does seem to pop up even on national TV adverts.

    And, yeah, it’s a lawful option. But I don’t think much of the guys pushing it. The offers to convert future pensions to cash now are also legal, but potentially very dodgy. They seem to have dried up since the crash became apparent.

  25. Anonymous says:

    I’m curious. Why is it illegal in the United States to steal $5.00 from a person, but there are no laws cracking down on these multimillion dollar scams? I would love to hear from a politician on that one.