Don’t Be Bamboozled

Recession-fueled scams are on the rise. Heres how to avoid financial fraud

Employment scams are also on the rise. With unemployment reaching nearly 10%, the highest since 1983,  enticing job offers and advertisements have become a way to cheat consumers out of their money. All federal positions are listed and available free to the public on www.usajobs.gov, but several recent scams offer “previously undisclosed” federal government jobs—for a fee. These promotions usually mention the federal stimulus plan in an effort to anchor the scam in something legitimate.

The housing foreclosure crisis is yet another high-profile news story that scammers use to prey on consumers, says Breyault. In some instances, con artists tell a homeowner they can prevent the home from going into foreclosure—for a fee; in others, scammers promise to pay the mortgage for homeowners who sign over their deeds and pay rent. In both instances, owners are advised not to contact their lenders because any interference could jeopardize the new mortgage terms.

“They claim they’ll negotiate on your behalf, but even if they do, it’s nothing you can’t do for yourself by dealing directly with your lender or mortgage servicer,” says Frank Dorman, a spokesman for the Federal Trade Commission. “People in financial trouble at all socioeconomic levels can be misled by the promise of high reward for low effort.” The outcome of most foreclosure scams? The homeowner loses the house and no longer owns the deed, yet remains responsible for the mortgage. Such victims take the credit hit while the scammer gets away with the fee and, in some cases, rent money.

Here’s how you can avoid the latest cons.

Avoid high-pressure sales pitches that require you to buy now or risk losing out on an opportunity. A request to wire money immediately is also a sign of fraud. Never provide a company with personal banking information before receiving the products or services you are contracted to receive. “Generally speaking, reputable companies don’t ask for payment in advance,” says Dorman.

Thoroughly research any financial investment on your own before you open your wallet. Don’t rely solely on referrals from friends or family, says Ken Fisher, author of How to Smell a Rat: The Five Signs of Financial Fraud (Wiley; $24.95). Instead, ask about credentials and licenses, and consult your local office of the Better Business Bureau. Any company should be able to explain to you in 30 seconds or less how they make their money, says Breyault. Don’t let anyone brush off your questions or tell you their business is too complicated to explain.

Talk to your lender or creditor first. It should be your first point of reference. Also, the U.S. Cooperative Extension System provides personal finance education through local workshops, seminars, and home study opportunities and online at www.extension.org/personal_finance. To find an Externsion office near you, go to www.csrees.usda.gov/Extension/index.html.

Be wary of all unsolicited offers of assistance with foreclosure rescue, credit repair, or job placement, Breyault advises, especially if they ask for bank account information or Social Security numbers. Remember, government agencies will never contact you by e-mail to offer assistance.

Place a fraud alert on your credit report if you believe your Social Security number has been compromised. Also file a complaint with the FTC.

Be discreet. Limit the information you reveal about yourself when making purchases. Consider removing your phone number and address from your personal checks, for example.

This article originally appeared in the November 2009 issue of Black Enterprise magazine.

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