be a winner avoid consumer fraud - connecting …their own best protection against fraud. remember...

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FACT SHEET

H E A L T H I E R F U T U R E S F O R O U R F A M I L I E S

Be a WinnerAvoid Consumer Fraud

Be a WinnerAvoid Consumer Fraud

• Learn about the agencies, regulations andlaws that have jurisdiction over fraudulentactivities.

Reasons Consumers FallVictim to Schemes

Frauds and deceptions continue to exist inthe marketplace because of

• Consumers’ vulnerability.• Tactics of unscrupulous sellers.• Problems in proving deception and enforc-

ing laws and regulations against fraud.

Why Consumers are VulnerableIn deceptive situations, greed is perhaps

the most common motivation on the part ofconsumers.

The feeling that you can get a lot for a littleor even something for nothing has greatappeal. This can be described as the“sweepstakes mentality,” the feeling that “it’smy turn to win, to get a good deal.”

Other reasons are

• Consumers who lack specific knowledgeabout a product or service are more likelyto be deceived than others who are betterinformed. In today’s market, it is difficultfor consumers to be well informed in allareas of purchasing.

• Some people are vulnerable because ofpersonal problems and changes in theirlives. If you are worried, lonely, or upsetfor any reason, you are more apt to handover your money without careful thoughtand study.

• Some consumers are too trusting and donot ask enough questions. They may betoo sympathetic to the stories told bydeceptive sellers. Some of the most com-mon frauds are presented in ways that

“You Definitely Have Won .....!” says thepostcard in your mail box or the caller on thetelephone.

Many frauds and deceptions use the mailand telephone, as well as newspaper,magazine, and television advertisements, toreach unwary consumers.

Others use personal contacts, such as salestalks, either in a rented space or a regularstore, or through door-to-door sales.

Whatever the method, alert consumers aretheir own best protection against fraud.Remember the saying: “If it sounds too goodto be true, it probably is.”

Consumer fraud is a continuing problem inour society. Some con games and swindleshave been around for many years, whileothers have developed as telemarketing,computerized information, and advertisingmethods have expanded.

It is harder than ever to distinguishbetween somewhat exaggerated claims(known as puffery), deception, persuasiveadvertising, and actual fraud.

Prevention is especially important in thearea of fraud and deception, because it isdifficult to legally prove fraud.

Even if a seller is proven to have brokenthe law, finding that person or business and/or collecting money for damages is oftenimpossible.

Although most businesses are legitimate, asmall number of sellers practice fraud andcause problems for consumers.

This fact sheet will help you:

• Recognize the warning signs of fraud anddeception in the marketplace.

• Learn about some of the most commonareas where fraud is prevalent.

• Follow techniques to avoid being takenadvantage of.

“...alert con-sumers aretheir ownbest protec-tion againstfraud.”

COOPERATIVE EXTENSION SERVICE • KANSAS STATE UNIVERSITY

Outdated Publication, for historical use. CAUTION: Recommendations in this publication may be obsolete.

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make you feel stupid if you don't acceptthe deal being offered to you. It requiressome assertiveness to be a careful con-sumer.

• Sometimes people are too busy. They optfor convenience, often via telephone orcomputer, rather than taking time tocheck things out or shop in person.

• Inaccurate beliefs about laws and busi-ness practices are also prevalent. Forexample, believing that newspapers ormagazines who accept ads screen themfor reliability or that infomercials ontelevision are regulated more closely thanthey actually are can reduce a consumer’smotivation to check things out beforebuying.

Infomercials are presented in amanner similar to regular programs. Theymay be designed to sell legitimate prod-ucts, but often promote useless items.

• People who lack knowledge aboutdeceptions and scams often fall victim topressures to “act now,” not recognizingthe warning signs of fraud.

Marketplace ProblemsA few deceptions are nearly impossible for

consumers to recognize because of thecomplexity of the marketplace. Price fixingand control of supplies are examples.

Other problems are

• Hard selling or high pressure sales tacticsmeans that the consumer is being “sold”by highly persuasive practices.

• Sometimes these techniques border onmisrepresentation without becomingactual frauds. People who promote fraudsare experts at outright lies and exaggera-tions, as well as at staying just within thelaw.

• Lack of understandable, easily accessibleinformation is a problem. To muchinformation can also be a major problemwhen it is not well organized or docu-mented.

Legal and Enforcement ProblemsMost consumers who are swindled do not

complain because they feel embarrassed.Estimates indicate that only two to ten

percent register their complaints withrelevant agencies.

Con artists can make a lot of money beforecomplaints are received and authorities areable to investigate and prosecute.

The average life of a fraudulent salesscheme is only thirty to ninety days.

Deceptive sellers often escape from statelaw by moving beyond the state boundariesand set up similar businesses under differentnames.

The Kansas Consumer Protection Act isthe primary state law governing consumertransactions. This act is administered by theConsumer Protection Division of the StateAttorney General’s Office.

The Attorney General’s Office can getconf licts resolved on a voluntary basis, aswell as prosecute when illegal acts have beencommitted.

Targets for the Con ArtistMany scams and schemes are aimed at

consumers in general, although some sellersand con artists target certain groups ofpeople.

Particularly vulnerable to deceptions arethe

• Elderly• Widows• People who have recently become unem-

ployed• Parents of new babies• Students• Military personnel• Recent immigrants

What Is Consumer Fraud?Consumer fraud involves “the making of

a false statement of a past or existing factwith knowledge of its falsity, or with areckless indifference as to its truth, with theintent to cause someone to rely on such astatement.”

In other words, fraud occurs when a sellerknowingly misrepresents an important fact orfails to tell the consumer about an importantfact.

Several elements must be proven to showfraud. This is why it is so difficult to prove acase of consumer fraud in a court of law. Toprove that fraud occurred, one must show:

• False representation.• Knowledge that the facts stated were

untrue.• Intention to deceive the victim.• Actual belief by the victim, who is igno-

rant of the falsity of the representation,that the false representations are true.

• Damages were suffered by reliance on theuntruths.

“...fraudoccurs whena sellerknowinglymisrepre-sents animportantfact or failsto tell theconsumerabout animportantfact.”


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DeceptionDegree Mills

Look-a-like Checks

False Platinum andGold Credit Cards

Going Out of Busi-ness Sales

Health Club Spas,Weight-loss Centers,Martial Arts Facili-ties, Dance Lessons

Home Improvementsand Repairs

Magazines

Phony Bank Examin-ers

Phony Bills

Song Writing andVanity Publishing

Term Papers

Unclaimed Funds

Unordered Merchan-dise

Work at Home

DescriptionSell diplomas for a price with a minimum of on-site educational experiences.

The check made out to you,and stamped “This is not a check”or “non-negotiable.”

High membership fee for a“similar” looking card.

Sign looks legitimate and thestore seems full of goods.

Consumer signs a contract for a series of servicesand some success is quickly achieved.

Promises high-quality work. A substantial cashamount must be paid in advance.

Young people sell magazines pretending that theyare working their way through school or highpressure telemarketers convince you to placeorder.

Asks for help in identifying teller who is embez-zling funds by having consumer make withdrawalfrom that teller.

Bill comes in the mail, perhaps for a deceasedrelative.

Promise to publish your workand you can expect to makeroyalties on the sales.

Sell term papers on any topic.

Letter on official-looking stationery saying a“routine audit” has determined that you are owedmoney; send $35 for processing fees.

Company mails something with the hope thatreceiving party will pay.

Advertisements for huge profits for at-home tasks.

A List of Probable Deceptions and Frauds

Source: Adapted from Garman, Ripoffs and Frauds

SchemeSuch diplomas do not meet the standards of thegenuine accrediting associations.

Can only be used to purchase over-priced productsfrom a catalog.

Can only be used to purchase over-priced productsfrom a catalog.

Lots of poor quality merchandise brought in whenliquidating alegitimate business; must be licensed.

Firm often cannot deliver what was promised;many companies go bankrupt.

Unlicensed repair personstake the money and run;or do shoddy work with poor materials.

Either one overpays for thesubscription or the “salesperson” disappears withthe money.

The receipt from the “bank examiner” is worthlessbecause he really does not work for the bank.

A likely fraud; ask for a copyof a signature on the order form.

Firm collects a substantial up-front fee that paysthe cost of production; consumer never receives aprofit.

Poorly written and referenced essays that willresult in disciplinary action if turned in to aschool.

The consumer sends in the fee, but never hearsanything more.

You do not have to pay. You may keep anythingshipped to you as a gift if you have not ordered it.

Products completed at home are often refused bythe seller; sometimes the “deal” requires consumerto pay a lot for supplies or run similar ads to getmoney from other consumers.


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Mail fraud involves the use of the mail forany scheme to defraud or obtain money orproperty under false or fraudulent pretense.

Health fraud or quackery is thepromotion or sale of a medical remedy thatdoesn’t work or hasn’t been proven to work.

Telemarketing fraud refers to the use oftelephone communications to fraudulentlypromote goods or services.

The Many Dimensions of FraudWe can look at consumer fraud from

several different perspectives.

• One is to examine the types of productsor services most often associated withfraud and deception. Remember thatmost businesses are honest and only a fewcreate problems.

• Another is to think about the methodsmost often used—telephone, mail,internet, media advertising, door-to-doorsales, or other personal contacts.

No publication can provide acomprehensive list of all possible frauds. It isnot easy to distinguish between deliberatefraud or deception and the situation whereconsumers pay a higher price for a product orservice rather than getting their money’sworth.

The chart on the previous page lists avariety of areas where deception and fraudare frequent

Warning Signs of FraudDeceptive schemes and scams have several

characteristics in common.

• Misleading advertising is frequently usedto lure consumers into deceptiveschemes. People are led to believe they aregetting a really good deal, maybe evensomething for free.

• Consumers are often fooled into puttingup money for a product or service ofinferior quality and overpriced. This isbecause the offer “will soon expire” or thechoice items are almost all gone.

• Consumers are enticed into going into asales office to listen to a sales pitch. Theymay be subjected to hours of pressuresales tactics including many false promisesand then be pressured into making amajor purchase. Appeals to vanity arecommon.

• Many schemes have contractual obliga-tions. Consumers may be able to get out ofsome contracts but may have a continuing

legal obligation to make payments onmany.

• Scare techniques, rush deals and secrecyare common techniques used by conartists. These techniques warn of impend-ing disaster, often to health, home, orfinances, or of missing out on the lastchance to benefit from a great opportu-nity. Speed and secrecy prevent manyfrauds from being detected in a timelymanner.

• Contracts, order forms, or other formswith blank spaces are also a commontechnique. The seller later fills the spacesin above the signature, and the consumermay be legally obligated to pay for morethan expected.

Common Methods ofFraud

The next sections provide moreexplanation of several common methodsoften used by deceptive sellers. Again,remember that careful study is required todistinguish between fraud and persuasivesales techniques.

Mail FraudMail fraud is one of the top areas of

consumer complaints to governmentagencies. Most schemes work because peopledon’t recognize them as frauds or deceptionsuntil it is too late.

Deceptive mail order schemes seem to be agood deal, an excellent opportunity, anapparent bargain, or a chance to make a fastbuck.

The most familiar mail fraud tactic ismisleading or false advertising. Consumersare led to believe they are getting a good dealor receiving something for free.

Distance and lack of physical contact makeidentifying and apprehending mail ordersellers difficult and expensive.

Prizes: Prizes are offered to interest con-sumers in buying anything from vitamins towater treatment systems, from home securitysystems to land for investment purposes.

Nearly all consumers in the United Stateshave received—and will receive—officiallooking notices or telephone calls stating thatthey are the “guaranteed winners” of one ofthe following prizes—a vacation, a new car,jewelry, or cameras—worth thousands ofdollars.

Such claims are rarely true. They aresimply come-ons to get you to buy something

“Scaretechniques,rush dealsand secrecyare commontechniquesused by conartists.”


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else. Most “winners” will receive a verycheap prize.

In some frauds, they may be told toprovide credit card numbers or a fee toverify their winning.

Sweepstakes: Sweepstakes prizes areawarded to participating consumers bychance with no purchase or entry feerequired. One’s chances of winning aredetermined by the number of participantsand the number of prizes to be awarded.

A sweepstakes is very effective ingenerating attention for the sponsoringcompanies. It is often an effective form oflegitimate advertising.

To be legitimate

• The company generally puts up themoney itself.

• A sweepstakes sponsor must disclose theodds of winning.

• The consumer must not have to make apurchase to participate.

Fraudulent sweepstakes operators callconsumers telling them they have won butmust submit cash or a certified check tocover the expenses of shipping, handling,and/or taxes or to “guarantee” the moneywill be awarded. They volunteer to have themoney picked up by a courier to “speedthings up.”

Contests: A variety of legitimate compa-nies offer prizes or premiums to promotetheir products. Most contests have easy,simple solutions, and the consumer receivesa small prize for sending in a winning entry.

“You’re a winner” on a postcard or anofficial looking document is often the keyto a scam. The directions ask you to send inmoney.

Some contest scams require that you call a900 number to collect your prize. To verifyor redeem your prize may require anotherpayment.

A common ploy is that “as a credit cardholder, you have won.” You are asked to givea card number for “verification.” The resultcan be unauthorized charges made to yourcard.

Telemarketing FraudTelemarketing is selling a product or

service over the telephone. Manyworthwhile products are marketed thisway, and a great majority of companiesinvolved in telemarketing are reputable firmswhich use the telephone to sell products andservices.

On the other hand, telemarketing callsare often made from “boiler rooms.”

Historically, a boiler room has been aroom in a basement next to the heating unit.The space was rented at a low cost and setup with desks and telephones.

A number of people used high pressuresales techniques to sell a variety of productsor services (such as investments, land,business ventures, travel bargains, and manyother “opportunities,”) as well as donationsto “charities” or purchases to benefitdisabled persons.

Almost anything can be sold byunscrupulous sellers over the phone.

Telemarketers often start with friendlyquestions and conversations, trying toestablish rapport with the consumer beforeembarking on the sales pitch. This makes ithard for the potential customer to asksearching questions or to just hang up.

Many telemarketers use similar techniquesto those used in mail fraud. They involveprizes, sweepstakes, and contest winnings.

New regulations require telemarketers tostate up-front that this is a sales call. Youare under no obligation to continuelistening.

Most consumers assume that all 800-number (and more recently an 888-number) calls are free. However, some 800-number services use techniques whichcharge for calls to access “adult” talk lines,dating services, psychic advice, or otherprograms.

Questionable telephone informationservices often advertise on late-nighttelevision or cable, in tabloids, and inclassified or personal ads.

Deceptive companies may try to:

• Automatically transfer you to 900 num-bers.

• Make collect calls back to you.• Charge you simply for completing the

call.• Charge for information or entertainment

provided during the call, unless you:—use a credit card for payment, or—have already contracted with the 800number service to be billed.

These are warning signs that potentialdeceptions are possible. Remember thatboth legitimate services and those thatviolate the law may advertise in the sameplaces.

Some companies promote informationor entertainment services you can obtain

“Fraudulentsweepstakesoperatorscallconsumerstelling themthey havewon butmust submitcash or acertifiedcheck tocover theexpenses...”


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by calling an international telephonenumber. These calls are billed atinternational long-distance rates and canresult in expensive charges on yourtelephone bill.

Investment SwindlesConsumers looking for investments

typically want to achieve two things:

• A high rate of return (in interest,dividends, and/or appreciation of theinvestment).

• Safety.

Many consumers are lured intoinvestments that are poor deals for them butgreat for the sales persons. Some of theseare actual swindles, while others arelegitimate business opportunities andinvestments that are just not suited for thepeople who buy them.

A swindler is an unscrupulous promoterwho creates an investment scheme whichbrings profit only to the swindler.

They are smooth talking salespersonswho

• Present dazzling statistics; great prom-ises of wealth in a hurry, without risk;and impressive references that seem toconfirm the illusions they present.

• Provide seemingly logical answers toquestions that potential investors ask.

• Reach their victims in the same waysused by legitimate firms—telephone,direct mail, referrals, advertisements, oron-line investment bulletin boards.

• Give the appearance of being reputablefirms, running large, expensive adver-tisements in publications and on radioand television.

Deceptive investment or businessopportunities emphasize suchcharacteristics as:

• A very high return or yield with littlerisk.

• A quick return.• A “secured principal” is guaranteed.• Approved by someone (such as the

Internal Revenue Service).• A once-in-a-lifetime opportunity.• No experience necessary.• The chance to “get in on the ground

f loor.”• The opportunity to make money without

leaving home.

Offers for the financial opportunity of a

lifetime are often that, but the opportunity isall too frequent for the consumer to losemoney. Most such offers promise high profitswith little or no business experience needed.

Among the many types of investments thatare often subject to deception are:

• Collectibles such as rare coins.• Art.• Precious metals.• Gold and silver contracts.• Oil and gas lease programs.• Invention or patent promotion.• Land sales.• Gumball, popcorn, or similar vending

machines.• Greeting card sales.

Pyramid SchemesPyramid schemes are based on the

assumption that many investors can makemoney by selling “distributorships” to othersover a period of time.

In this scheme, an investor buys afranchise or distributorship, which includesthe right to sell additional franchises toothers. When sales are made, profits areshared with the original promoter.

The problem is that the pyramid sooncollapses because there are not enough newpeople available to continue makinginvestments or purchases. It is mathematicallyimpossible for all investors to succeed.

Pyramid investment schemes rely on newinvestors to pay commissions, returns, orbonuses. There is an absence of a legitimateproduct or service being sold.

Chain letters that involve sending moneythrough the mail with the chance thatnothing will be received in return are avariation of pyramid schemes.

It is often hard to distinguish between apyramid scheme and legitimate multilevelmarketing network. In the marketingnetwork, income does come from productsales (frequently cosmetics and householdcleaning products).

Legitimate companies sell quality productsand do repeat business with customers. Start-up fees for legitimate businesses arereasonable and companies that requireinventory purchases will usually repurchaseany unsold items.

Recovery ScamsConsumers who have lost money through

prize promotions, merchandise sales,investment swindles, and charity drives often

“Pyramidinvestmentschemes relyon newinvestorsto paycommis-sions,returns, orbonuses.There is anabsence of alegitimateproduct orservice beingsold.”


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have their names put on a “sucker’s list.”The list is then sold to other telemarketerswho call with promises to recover part ofthe lost money.

A recovery fee scam falsely promisesthat, for a fee or donation, they willrecover the consumer’s lost investmentmoney or the product that was neverreceived.

For example, the con artist—oftenclaiming to represent a government agencyor consumer organization—calls a consumersaying that, “the thieves have been caughtand their assets frozen. For a fee, we canrecover at least half of the money youoriginally lost and perhaps all of it.” No realeffort is made to aid the consumer.

Work-at-Home SchemesVarious methods of making money at

home are advertised in newspapers andmagazines around the country.

You may see ads like this:“Would you like to earn hundreds of

dollars a week at home in your leisure time?Many people are supplementing theirincome in a very easy way. Let us tell youhow....”

An offer like this may sound veryattractive, particularly if you are unable toleave your home to work.

While some work-at-home plans arelegitimate, many are not. Homeemployment schemes are one of the oldestkinds of classified advertising fraud.

What many of these ads do not say is that

• You may have to work many hourswithout pay.

• There may be hidden costs.• You may be required to spend your own

money to place ads in newspapers, makephotocopies, or buy the envelopes,paper, stamps, and other supplies orequipment needed to do the job.

• The company may demand that you pay amembership fee or make regularpayments in order to get continuedinstructions or materials.

Consumers deceived by these ads havelost thousands of dollars, as well as wastedtheir time and energy.

Work-at-home ads often advertise thesetypes of employment:

• Envelope-stuffing. Work-at-homeschemes come in many varieties, but the

most common type is envelope-stuffing.Promoters of these programs usually

advertise that for a “small” fee they willtell you how to earn money stuffingenvelopes at home. Only when it is toolate, you find out the promoter really hasno employment to offer.

What you are likely to receive for yourfee is a letter telling you to place that samead in newspapers or magazines or to sendthe ad to friends and relatives.

The only way you will earn money isfrom the people who respond to yourwork-at-home ad.

• Assembly or craft work. Assembly or craftwork is another common type of work-at-home scheme.

These programs often require you toinvest hundreds of dollars in equipment orsupplies or many hours of time to producegoods for a company who has promised tobuy them.

For example, you might be requiredto buy from the company a sewingmachine, a sign-making machine, ormaterials to make items such as aprons,baby shoes, or plastic signs.

However, in fraudulent schemes, afteryou have purchased the supplies orequipment and performed the requiredtasks, the company does not pay you foryour efforts.

Many consumers, for example, havehad companies refuse to pay for theirwork because it did not meet “qualitystandards.” Unfortunately, no work is ever“up to standard.” Thus you are left withrelatively expensive equipment andsupplies, and no income.

In reality, those who produce goodsin response to such ads must usually findtheir own customers.

• Reading and reviewing manuscripts orbooks. Another common scheme suggeststhat you can make money by reading athome.

These ads are not really frompublishers looking for reviewers. Thepromoters’ format is similar to theenvelope-stuffing scheme.

For a fee, you receive a letter tellingyou to contact publishers yourself and askabout working for them. Or, thesuggestion is made that you place a similarad yourself and hope others will respondwith a fee.

“Homeemploymentschemes areone of theoldest kindsof classifiedadvertisingfraud.”


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Health FraudsHealth and fitness are major concerns of

many consumers today. However, manyschemes promise success, but result inunfilled wishes and hope, wasted dollars, andsometimes even endangered health.

Quacks sometimes lure the seriously illinto buying a bogus cure instead of gettingthe most reliable medical care available.“Money back guarantees” are unavailable ifthe company cannot be located.

In simple terms, quackery or healthfraud is the promotion and sale of amedical remedy that doesn’t work or hasn’tbeen proven to work.

Some ineffective products are fairly easy toidentify—like magic pills that promise tokeep you young. More often, the deception isless obvious.

Sometimes they are vaguely based on amedical report that has been in the news orin a generally reliable magazine.

Quackery usually fits in one of threecategories:

• False claims about drugs or cosmetics.• Unsubstantiated food fads and diets.• Unjustified food supplements and

ineffective medical devices, such asmittens, bracelets, or special shoes.

Medical con artists sell their wares throughmagazines, newspapers, television and radio,or making their products available by mail orby calling a toll-free number.

Common schemes are:

• Arthritis cures• Quick weight-loss plans• Fitness devices• Cancer treatments

Marketing products as food supplements,rather than as medicines, may enable thepromoter to avoid Food and DrugAdministration testing and labelingrequirements.

These unproven products are marketed asfoods or dietary supplements with nocurative claims included in the label.

The “wonder cures” are advertisedseparately by f lyers or media announcementsthat claim to cure various physical problems.By the time the fraudulent practices arerecognized, the swindlers have moved on toother scams.

Credit SchemesOne of the most prevalent frauds today is

the credit repair scheme.

Using classified ads or televisioncommercials, credit repair companiesguarantee that they can “fix your credithistory, improve your credit rating, or get youout of debt.”

They charge a large fee up front forservices which they do not provide or whichyou can obtain at low or no cost from alegitimate nonprofit credit counsellingservice.

Other frauds related to credit involve• “Advance fee” payments to guarantee

you a loan in advance. Legitimate lenderscharge a processing fee for loan applica-tions but don't guarantee that you willqualify.

• Advertisements that tell you to call a900 number to arrange for guaranteedcredit cards or loans. The call may beexpensive ($50 or more) and it’s unlikelythat you’ll get credit as a result.

• Second mortgages, often at very highrates, advertised as a quick and easyway to get credit. Many consumers do notrealize they are providing their house ascollateral for these loans.

Fraudulent Sales PracticesFraudulent sales practices include a

variety of techniques which usually involveoffering products or services at fictitiouslylow prices combined with high pressuresales technigues.

Bait and Switch: Bait and switchadvertising is the offer of goods or services atbargain prices when the seller has nointention of selling the advertised products.

Such advertising is illegal. The goal is tolure the consumer into the store. The baitinvolves a product advertised at a very lowprice. The switch is when the consumer triesto make the purchase and the salespersonsays the advertised product is not available,of poor quality, or not worth the money.The buyer is talked into selecting a muchmore expensive item.

This should not be confused with tradingup, where the consumer decides to purchasea higher quality model without beingpressured.

Door-to-Door Sales: Door-to-door sales area continuing source of fraud. A few legitimatesellers, primarily in the cosmetics field, stilluse the door-to-door salesperson as theirprimary method of selling.

Household repairs, such as roofreplacement, driveway repairs, and

“A f lashyinternet website does notguaranteethat theseller islegitimate.”


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magazine sales are often poor buys at bestand fraudulent schemes at their worst.

Home-repair-related frauds frequentlyinvolve a visit from someone who says theyhave just finished paving a driveway,repairing a roof, or installing siding down thestreet. They have leftover materials and cangive you a good price if you’ll arrange to havethem start work (with a cash payment inadvance) immediately.

Other scams use fear tactics. Personsposing as “official” inspectors suggest thehome owner is in danger of carbonmonoxide, water, or termite damage if theproblem is not taken care of immediately.

Fraud on the InternetThe internet enables people to communi-

cate faster than ever before. Unfortunately, italso enables con-artists to milk people out ofcash just as easily.

Fraudulent activity on the internet and“on-line” services is a potential problem asservices expand.

One common problem is ordering softwareon-line from vendors who disappear.Reputable vendors will offer a demo or a trialreview period before requiring payment.Deceptive sellers will not.

Deceptive internet sales also include thesame types of activities and come-onsdescribed under telemarketing or mailschemes.

A company whose only address is a postoffice box or an electronic address, isdifficult or impossible to track down oncethe address is closed.

When you subscribe to an online service,you may be asked for credit card informationas the method of payment. When you enteran interactive service site, beware of conartists who may ask you to confirm yourenrollment by disclosing passwords oraccount numbers.

Internet addresses ending with a “.com”indicate a commercial or business address.

A f lashy internet web site does notguarantee that the seller is legitimate.

How to Prevent beingConned

Uninformed or misinformed consumersoften lose in marketplace transactions. Theyoften pay too much for products andservices, purchase goods of inferior quality,and sometimes suffer the consequences ofunsafe products and illegal discrimination.

The consumer who is too trusting, whodoes not ask detailed questions,who does notcheck references and information foraccuracy, and who makes decisions withoutcareful consideration is vulnerable to conartists.

Frauds and deceptions can generally beavoided by following these guidelines:

• Realize first that nothing is free. It isalmost impossible to get something fornothing.

• Avoid putting yourself in situationswhere you are setting yourself up to bedeceived. Don’t listen to sales pitches onthe telephone or go to motel rooms to hearsales pitches. Don’t let unknown door-to-door salespeople into your home.

• Try not to be overly sympathetic to salesrepresentatives. This will help you avoidbecoming a victim of a hard-luck-story-type of sales tactic.

• Be careful about buying things over thetelephone. A useful guideline is not to buyanything over the phone unless youinitiated the call or know the caller. Asktelephone solicitors to mail informationrather than discussing it over the phone.You can call back if you’re interested afterreviewing the information.

• Never give out credit card, checkingaccount, or social security numbers foridentification or verification purposes.

• Never send cash. Don’t send money ordersor checks to a post office box unless youare sure about the company’s reputation,have its street address, and know aboutthe product.

• Don’t send money by a courier servicethat picks up at your home or workplace.

• Be aware that high-pressure sales tacticsare a warning. Some sellers push hardbecause they earn commission or want towin a contest. Even if not dishonest, theydo not have your best interests in mind.

• Do not make quick decisions aboutbuying or investing. Read the fine print.Get help from an important third person.Don't assume you always have three daysto cancel a transaction or that you canalways get out of a contract.

• Watch out for planted people posing asreal users. When you check references,you can use on-line forums, news groups,etc. to talk to other customers about theproduct and company.

“Do notmake quickdecisionsabout buyingor investing.”


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Postal inspectorsCall your local post office and ask for the

inspector-in-charge if you suspect mail fraud.Direct Marketing Association (DMA)

Contact them only for mail and telephoneorders.

Write: DMA, 1111 19th Street, NW,Washington, DC 20036.

Direct Selling Association (DSA)Contact them only for door-to-door sales.

The association can assist you with yourcomplaint if the door--to-door seller is amember.

Write: DSA, 1776 K Street, NW,Washington, DC 20006.

Private attorneyYour controversy may involve rights and

liabilities that include aspects of the law, suchas breach of contract, in addition toconsumer protection. In these cases, yourprivate attorney or legal clinic should becontacted.

National Fraud Information CenterThe center provides information, referral

services, and assistance in filing complaints.Their Internet site provides timely warningsof current fraudulent activities. You can call1-800=876-7060 to register a complaint or toask for information.

The Federal Trade Commission (FTC)Although the FTC does not intervene in

individual disputes, the information youprovide may show a pattern of possible lawviolations requiring action by the FTC.

Write: Correspondence Branch, FederalTrade Commission, Washington, DC 20580.

Other governmental agenciesIf your complaint is against a business that

is licensed or regulated by another governmentagency it may be necessary for you to contactthat office for assistance with your problem.

SummaryRemember that careful decision making is

the key to satisfaction with your purchases ofproducts and services. Decide in advancewhich features of a product or service youneed.

Be alert to signs of deception and fraud.Lack of knowledge about deceptions andschemes and about specific products andservices is one reason people become victimsof fraud.

Think You Have Been aVictim of Fraud?

• First try to resolve your dispute with theseller. Make sure you act quickly. Somecompanies may not accept responsibilityif you fail to complain within a certainperiod of time.

• Send a letter of complaint. A letter isimportant because it puts your complainton record and lets the company know youare serious about pursuing the dispute.

• Clearly identify the problem, documentit, and explain how you want yourcomplaint resolved. Be sure you keep acopy of the letter for your records.

• Keep the original and send copies of thereceipts, etc., by certified mail. Certifiedmail records the postmark date andensures that the seller receives your letter.

Many people are embarrassed about beingdeceived or conned. No one likes to admitthat they have been taken advantage of. Butletting consumer agencies know aboutproblems helps protect others.

Consider contacting the followingorganizations for further information andassistance.

State consumer protection officesThe Kansas Consumer Protection Act is the

basic statute enacted to protect Kansansagainst deceptive and unconscionablebusiness practices. It is the primary duty ofthe Attorney General’s Office to enforce theact.

Complaints made to this office are oftenvoluntarily resolved, but they can lead toaction before a court of law. Violations of theact can result in injunctions prohibiting aviolator from doing business in Kansas, therecovery of actual damages for consumers,and civil penalties.

Write to the Consumer Protection Office,301 W. 10th Street, Topeka, KS 66612, or call1-800-432-2310

Nearest Better Business Bureau (BBB)Information about complaints against

businesses can be obtained there, but thebureau does not make recommendationsabout specific businesses.

Action line and consumer reportersCheck with your local newspaper or

television and radio stations for a contact.

“...lettingconsumeragenciesknow aboutproblemshelps protectothers.”


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Many frauds work because peoplefrequently do not recognize them as deceitfuluntil it is too late. Fraudulent sellers usephony prizes, cheap products, high-pressuresales tactics, and many other methods todefraud unsuspecting consumers.

Several factors account for the vulnerabilityof some consumers. Sometimes you think it’syour turn to be lucky or that you deserve afree gift or tremendous bargain. You maythink that problems only happen to otherpeople.

Emotional reasons—when you’re worried,lonely, or feeling overwhelmed—can loweryour resistance to high pressure tactics. Justbeing too busy to check information can alsobe a factor.

Become aware of the many ways you canlose your money. Stop, think, find out, and gethelp if you need it.

“You are your own bestprotection!”

ReferencesConsumer Affairs Fact Sheet Series.

Washington, DC: AARP, 1994-96.Consumer Corner Series. Topeka: Office of

the Attorney General, ConsumerProtection Division, 1995-96.

Facts for Consumers: How to Right a Wrong.Washington D.C.: Federal TradeCommission, 1994.

Garman, E. Thomas. Ripoffs and Frauds.Houston: Dame Publications, revisededition, 1996.

Miller, Roger Leroy. Economic Issues forConsumers. St. Paul: West PublishingCompany, 1988.

National Fraud Center Daily Reports.Internet Complaint Intake System, June1996.

Quackery. U.S. Department of Health andHuman Services, Public Health Service,HHS Publication # 85 4200.

Swindlers Are Calling. Chicago: Allianceagainst Fraud in Telemarketing, NationalFutures Association, 1990.

Too Good to be True. Chicago: NationalFutures Association.

ReviewersAppreciation is expressed to the following

reviewers:Consumer Protection Division, Kansas

Attorney General’s Office, Topeka, KansasJanice Frahm, Kansas Association for Family

and Community Education, Colby, Kansas Joyce Jones, Extension Specialist, Family

Financial Management, Kansas StateUniversity, Manhattan, Kansas

Emily Mark, Extension Specialist, Family andConsumer Sciences, Northeast Area,Kansas State University, Manhattan, Kansas

Lynn White, Extension Specialist, FamilyResource Management, Texas A&MUniversity


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Prepared by Doris “Katey” Walker, ExtensionSpecialist, Family Resources and Public Policy,School of Family Studies and Human Services,Kansas State University.

Developed in consultation with the KansasAssociation for Family and Community Educa-tion Educational Committee.

Consumer Con Questionnaire

The following is a list of “Common Cons.” Can you match the name of the scheme with itsdescription?

A. Schemes in which consumers who have lost money through fraud are called with offers torecover their money if they pay a large fee in advance. The caller accepts their money butdoes not recover anything. Such consumers usually lose money twice, both in the initialfraud and in the recovery fraud.

B. The consumer comes to a store that has advertised a product at an extremely low bargainprice. The product is not available and the seller convinces the consumer to buy a moreexpensive item.

C. Consumers get a post card, letter, or telephone call saying that have been specially selectedto receive a free vacation. To qualify, they must give their credit card number for “verifica-tion” or pay a high fee for handling or special services. The vacation is not really free, andcharges may be made using their credit card.

D. Door-to-door sellers tell the homeowner they can give a low price on driveway repairs orpaving because they are in the neighborhood and have leftover materials. The consumermust pay most of the cost in advance. The repair persons typically use poor materials or donot complete the job.

E. A scheme in which people answer advertisements to work at home and be paid for stuffingenvelops or similar work. The company does not offer them work but suggests they placesimilar ads in local papers.

F. This scheme operates in a manner similar to a chain letter. Quick, high profits are themotivation for people to invest. The original investors make money as new people buydistributorships or franchises, often for pay telephones, vending machines, or oil andmineral rights. The plan does not generate enough money in actual product sales to main-tain the profits.

_____ 4. Driveway repairs

_____ 5. Bait and switch

_____ 6. Money recovery

_____ 1. Free vacations

_____ 2. Envelope stuffing

_____ 3. Pyramid scheme

Answers: (1C; 2E; 3F; 4D; 5B; 6A)

Reprinted through funding provided by PATH, Personal Actions to Health, an initiative ofthe Kansas Health Foundation and K-State Research and Extension.

Kansas State UniversityAgricultural Experiment Station andCooperative Extension Service, ManhattanMF-2228 October 1996Issued in furtherance of Cooperative Extension Work, acts of May 8 and June 30, 1914, asamended. Kansas State University, County Extension Councils, Extension Districts, andUnited States Department of Agriculture Cooperating, Richard D. Wootton, AssociateDirector. All educational programs and materials available without discrimination on thebasis of race, color, national origin, sex, age, or disability.File Code: Consumer Education—5 JR 10-96—15M; JR 1/97—5M


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