Smart SpendingSmart Spending's top 10 scams of 2009

With the ease of the Internet, more scammers are adopting a corporate look to take people in.

By Karen Datko Dec 21, 2009 4:34PM

This post comes from Mark Huffman at partner site


As in so many other fields of endeavor, we can thank the Web for introducing new efficiencies into the business of separating unsuspecting consumers from their money. A credible-looking Web site and a few inexpensive Internet ads are all it takes to get started in a theft-by-Net business with a more corporate look.


This year, our annual review of the top 10 scams finds more fast-buck artists functioning like legitimate businesses. The old tried-and-true scams -- advance-fee loans, phony lotteries, "free" cruises -- have by no means disappeared, but in 2009, clever marketers added a few new twists.


"Free trials." Who wouldn’t want a brighter smile, especially if it were cheap and easy? Or maybe a miracle vitamin supplement. Or a thoroughly cleaned-out colon? These are just some of the questionable products shady operators have used to lure consumers into handing over their credit card information.


One common pitch is for a "free" trial-sized bottle of teeth whitener. The consumer provides credit card information to pay a $2 fee for shipping. That seems like a reasonable request in order to get a free sample, right?


Wrong. Once these people have your credit card information, they can -- and do -- put all kinds of charges on it, claiming the consumer signed up for a membership club or committed to buying a case of the stuff. Chances are there’s something buried in fine print that obligates you, but regardless, you're stuck with trying to get the charge taken off your card.


Unauthorized charges put on credit cards by scammers is nothing new -- it's been going on for years. But it may have finally reached the point where people in positions of power are taking notice.


In December, Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., sent letters to credit card companies asking them to come up with ways to curb aggressive online sales tactics.


In another hopeful sign, Google changed its advertising policy to ban the advertisers instead of the ads. In the past, when Google banned an URL, the advertiser would just create a new URL, shilling the same products. Now, the advertiser is banned and put on notice that it is no longer allowed to sell anything through Google's ad systems.


Mortgage modifications and foreclosure "rescues." Many scams depend on desperation to hook victims, and perhaps nothing drives people to despair faster than the prospect of losing their home to foreclosure. The continuing recession in the housing market has produced a plague of loan- modification and foreclosure-rescue scams.

Scammers charge desperate homeowners a large, upfront fee and tell them not to contact their lender. In these scams, operators promise to either arrange for loan medications or save the home from foreclosure. They never do, however, and the homeowner loses the home.


The Obama administration joined with a number of states during the year to bring charges against companies and individuals accused of fleecing homeowners with phony schemes to save their homes from foreclosure.


Debt settlement. If consumers are on the brink of losing their homes to foreclosure, chances are they are also drowning in debt -- and prime targets for the debt settlement scam. The number of companies claiming they can settle consumers' debts for pennies on the dollar proliferated in the last year, leaving many victims poorer and deeper in debt.


At the end of the year the attorneys general of 40 states asked the Federal Trade Commission to tighten regulation of companies offering debt-relief services to consumers. The FTC is reviewing a new rule proposal to amend the current Telemarketing Sales Rule. The move follows a number of individual actions by various states.


Government stimulus. In February, Congress passed and President Obama signed a $787 billion stimulus bill, a massive infusion of federal spending designed to stimulate the economy. Almost immediately there appeared Internet ads with the president's smiling face, promising consumers they could cash in and get a share of the loot. Millions of spam e-mails went out, promising the same thing.


Of course, it was a scam. If you clicked on the ad or on an e-mail link, you were asked for bank account information so that the operators could deposit consumers' share of the stimulus directly into their bank account. Instead, the scammers drained consumers' accounts of money and disappeared.


A bogus e-mail may appear to be from government agencies and ask for information to "verify" that you qualify for a payment. The scammers use that information to commit identity theft. Some e-mail scams don't ask for information, but provide links for consumers to find out how to qualify for funds. By clicking on the links, consumers download malicious software or spyware that can be used to make them a victim of identity theft.

Acai berry. The acai berry scam is testament to the Oprah Effect. When the Queen of Talk expresses interest in a subject, it creates major buzz. So when Oprah devoted several of her shows to the powers of the acai berry to help control weight, scammers went into overdrive.


While Oprah's enthusiasm was limited to the berry itself, it wasn’t long before Internet ads where hawking the benefits of acai berry "supplements," promising all sorts of dubious health benefits. At least one company offered a small bottle for $4.95, just to get the consumer’s credit card information.

With Oprah’s picture plastered all over the supplement ads, Winfrey and her company filed trademark infringement suits against 40 Internet marketers of acai berry supplements.


Work-at-home schemes. Rising unemployment this year prompted many people to grasp at work-at-home schemes in hopes of producing an income or getting rid of a stressful commute. While the brochures and Web sites made the prospect sound very easy and appealing, it seldom turned out that way.


Bogus work-at-home job offers almost always require the "employee" to deposit checks, money orders, or accept funds wired into his or her own personal account, then keep a commission and wire the balance somewhere else, often to places outside of the United States.


Some victims of these scams have also been asked to process packages or perform certain tasks, such as stuffing envelopes.


"Whether the task is stuffing envelopes or forwarding checks, the net result is the same for the consumer, who almost always ends up losing a lot of money and getting a lot of trouble for their effort," said Arkansas Attorney General Dustin McDaniel.


In addition to work-at-home jobs, hucksters also pushed work-at-home "business opportunities," which often required victims to put up thousands of dollars to participate.


Kevin Trudeau. Marketer Kevin Trudeau is always selling something, and in 2009, it was his book "Debt Cures They Don’t Want You To Know About", his follow-up to "Natural Cures They Don't Want You To Know About."


Some who bought the book claim it has almost no usable information that can't be easily gleaned from other, free sources. But the overwhelming majority of those who have written to complain about the aggressive sales tactics they encounter when buying the book over the phone.


Online car sales. Online car sales continue to grow and so, unfortunately, do online car sales scams. These scams work two ways, with scammers posing as either buyer or seller. As buyer, the scammer will send a cashier's check for much more than the sale price, telling the victim to cash it, take out enough to cover transportation costs, then wire the balance back to the "buyer." The cashier's check is fake, but by the time the bank discovers that, the victim has sent several thousand dollars to the scammer.


In a new wrinkle in the online car sales scam, the FBI reports scam artists are now posing as members of the U.S. military.


"Victims find attractively priced vehicles advertised at different Internet classified ad sites," the agency warns. "Most of the scams include some type of third-party vehicle protection program to ensure a safe transaction."


After consumers receive what the FBI calls "convincing e-mails from the phony vehicle protection program," they are told to send either the full payment, or a percentage of the payment, to the third-party agent using a wire payment service. "No vehicles are delivered to the victims," the FBI said.


Consumers can protect themselves by doing their homework before buying any vehicles on the Internet, the FBI said. Consumers should also know and follow the rules used by the Internet sites they visit. If someone asks you to break those rules, the FBI warns, that person is likely trying to rip you off.


Auto warranties. Many scams target seniors, and one of 2009's most senior-targeted scheme was the auto warranty scam. Scammers used telemarketers and direct mail to warn seniors that the warranty on their automobile was about to expire, but could be extended for a small fee.


"Not only are these telemarketers lying about the consumer's coverage, they are potentially ignoring federal laws such as the Do-Not-Call registry," the Better Business Bureau warned in February.


Bank failure e-mail. In many ways, 2009 was the year of the bank failure, as more than 100 banks failed in the first 11 months of the year. The Federal Deposit Insurance Corp. was so busy closing banks that some e-mail scammers tried to ride its coattails.


By mid-year consumers were finding e-mails in their inboxes that appeared to be from the FDIC, warning them that their bank had failed and they needed to enter their bank account information to make sure they were insured.


It was, of course, a phishing scam, and quite a few people fell for it before FDIC and the FBI began issuing warnings. The FDIC said it never sends out e-mails asking for sensitive information. In fact, if any e-mail asks you to enter account numbers, user names or passwords, you can be assured it’s a scam.


How can you avoid becoming a scam victim in 2010? We recommend keeping an eye on emerging scams through our Scam Alert section, and our daily and weekly newsletters. And remember -- if it sounds too good to be true, it almost always is.


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