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Cons and Scams
Business
Opportunity & Franchise Tips
Credit
Cards
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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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 CCCS office,
call toll-free, 1-800-388-2227. |
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| 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. |
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| Ask
questions to make sure you understand the deal. |
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| 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. |
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| Ask for -
and read - a written copy of the contract before you agree
to buy. |
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| Do the
math. You could end up paying hundreds of dollars for
subscriptions that sell elsewhere for less. |
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| 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. |
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| 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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| 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. |
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| 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. |
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| 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. |
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| 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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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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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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| 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. |
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| Do not be
pressured into buying "NOW!" This should be your
first warning sign. A good offer today will remain a good
offer tomorrow. |
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| 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. |
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| 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. |
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| 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. |
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| 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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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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 CCCS office, call
toll-free, 1-800-388-2227. |
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| 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? |
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| 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. |
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| 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. |
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| 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. |
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| 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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