Consumer Fraud Issues
Almost any consumer transaction can be wrought with peril and senior citizens are particularly susceptible to consumer scams. Professional salespeople can make even the most unnecessary item seem indispensable. Be cautious and know when to say no. Never feel pressured to buy something from an unsolicited salesperson.
Almost every transaction you enter into involves a contract. When you extend payments over time, make sure you know what the total cost will be including interest payments.
SIDEBAR: The Federal Truth in Lending Act requires the seller to inform you of the finance charge and interest rate on your purchase. The Act also allows you to cancel certain contracts within 3 days of purchase.
TIP: Make sure to read through any contract before signing it. Keep copies of the contract and all payments.
What financial plans or consumer scams should I watch out for?
Deceptive practices are not limited to predatory loans. The Federal Trade Commission warns homeowners-especially the elderly-to be aware of other fraudulent practices. These include:
- Home Improvement Schemes. Be wary of any door-to-door salespeople that try to sell you unsolicited home improvements. These contractors may want your money up front to "buy" the needed supplies. Chances are they will disappear with your money.
- Debt Consolidation. An unsolicited mortgage broker or other lender may pressure you to consolidate all of your existing debt into one mortgage. In reality, this consolidated loan will generate fees for the broker and you will be no better off-in some cases even worse off.
- Foreclosure Assistance. In these schemes, someone will approach you after you have missed a couple of house payments. You sign papers after being told they will give you enough money to pay off the loan, but in reality the papers sign over the title to your home to the unsolicited lender for the price of your outstanding mortgage. Then, not only are you short on cash, but now someone else owns your home.
- Equity Stripping. These loans sound great because they are based on the equity you have in your home. The more equity you have, the more the lender will let you borrow. But they do not take into consideration your income and your ability to pay back the loan. You may end up in foreclosure if you cannot make your monthly payments.
- Bait and Switch. The lender may offer you what seem like rates that are too good to pass up. Then when you go to sign the papers, there will be reasoning as to why the fees and interest rate is more. They will pressure you in to signing the agreement with the higher rates.
- Door-to-Door Sales. Most cities require door-to-door salespeople to get a permit before hitting the streets. Ask anyone who appears at your home to sell something to see his or her permit. Do not buy anything on the spot. Take a few days to think about it.
- Identity Theft. People can use your driver's license and Social Security card to open credit card accounts in your name. Give out this information sparingly.
- Telemarketing. While most telemarketers are legitimate, some are not. You may be told that you have won a sweepstakes but need to pay a small fee to collect your winnings. If you have to pay for something you "won," chances are you will never hear from the telemarketer after they receive your fee. Never give out your financial information over the phone unless you know and trust the requesting person.
CAUTION: If you do not understand exactly how much you are borrowing, the interest rate and the costs associated with the loan, do not sign any paperwork. Be completely satisfied with all the answers given by the lender. If you do not feel comfortable, get a second offer from another financial institution to see if the rates compare favorably. Use only established banks, credit unions or other financial institutions. Any reputable lender will not call you on the phone to solicit you or approach you as a door-to-door salesperson.
I need to repair my roof quickly. What should I do?
Home repairs can involve a number of people. Get at least two references, preferably three or four. Check references and the local Better Business Bureau. Make sure you have a contract for the work and that it is in writing. Never agree to pay the full amount in advance. It is best to pay a good faith amount to start the project, with installments during the project and a final payment at completion. Make sure the amount of work agreed on is done before paying the installments and do not pay until all work is completed according to the contract.
CAUTION: Contractors can file a mechanic's lien on your property if you do not pay the full amount. This places a lien on your property for the amount owed. Be sure that the contractor removes all liens on your property as part of any dispute settlement.
My car is in the repair shop, and the cost of the repairs is more than the estimate the repair shop quoted me. Do I have to pay the amount above the estimate?
Most states require automobile repair shops to provide you with an estimate for repairs over a certain amount and to disclose the hourly labor rate. You may have to pay for amounts over the quoted estimate if the repairs are unforeseen but necessary and the amount is within a specific percentage of the estimate.
I get a lot of telephone calls trying to sell me different products. Some seem like a great deal, and the telemarketer seems really excited for me to buy. How do I know if these deals are too good to be true?
Be very cautious of telemarketers calling to sell you something. If something seems too good to be true, it probably is. New laws give you the right to tell them to put you on their "do not call" list, and they can be fined if they fail to do so. Telemarketers must identify themselves and their product, tell you the total costs involved and whether you can be refunded your money or the sale is final.
TIP: Never send money to any salesperson demanding immediate payment. If they tell you that you have to pay a nominal fee for a prize or access to information, hang up. You should never pay for a prize.
I received some unordered merchandise in the mail. Do I have to pay for it?
This is one time you do not have to pay for something. If merchandise that you did not order is sent to you, you do not have to pay for it. The company cannot force you to pay for the product or pressure you to send it back to them.
I ordered something over the phone and have not received it yet, even though I paid for it. What can I do?
A seller must ship ordered products within 30 days if not otherwise stated. If it does not do so, you have the right to cancel your order and get a refund within 7 days. But the law does not apply to all mail-order transactions.
EXAMPLE: Magazine subscriptions and plants or seeds do not have to meet the 30-day requirement.
I bought a camera from a door-to-door salesperson and now do not want it. Can I get my money back?
Yes-if you act quickly and your purchase was over $25. Federal law requires the seller to give you a "Notice of Cancellation." This gives you 3 days to cancel a purchase. Fill out the cancellation notice and mail it within 3 days of the purchase.
I just received a notice that I won a sweepstakes contest and all I have to do is mail in a processing fee. Should I do this?
The law does not allow sweepstakes to require you to pay for any "prize." This includes purchasing any product, such as magazines, to increase your chances of winning.
My neighbor said to be aware of a scam called the "pigeon-drop." What is this?
This scam is especially targeted towards seniors and is used to steal your savings. The scam typically begins with someone approaching you and telling you that he or she has "found" a large amount of money. They will offer to share the money with you, but only in exchange for you giving them some money as a "good faith" gesture. The person will then give you back an envelope with no money in it. Or the scam artist may tell you that he or she has hidden the money and will bring it to you later or even the next day. The person then disappears with your money.
TIP: A variation of this scam has recently been updated, using e-mail to ask for your "investment." Delete or block all such messages.
TIP: Never give money to someone you do not know. If the person wants the money right away, chances are he or she is not legitimate. If you have any reservations about the person, call the police.
After I left the bank, a man approached me and said he was a bank examiner and needed my help. I had an appointment and had to leave. Should I call him and help him?
No. This is a common scheme to defraud seniors and others. The so-called "bank examiner" will try to tell you that he or she works for the bank and is trying to determine if a bank employee is stealing money from the bank. The scam artist will then ask you to withdraw money from your own account so that he or she can check the serial numbers on the bills you receive. Once the money is in the hands of the bank examiner, chances are you will never see your money or the bank examiner again.
How can I know that I am giving my donation to a real charity?
It can be hard to tell if some "charities" are really just businesses looking for a way to make money. To avoid giving your money to a sham, only donate to charities that you know. Some charities will adopt a name that is very similar to a reputable and established charity. Have the person asking you for a donation leave information about the charity that includes a phone number or Web site. Call the charity and the Better Business Bureau to learn more about the organization. Never feel pressured to give money immediately. Any reputable charity will understand that donating is a personal decision that should not be rushed. If the charity only takes cash donations, do not give any money.
TIP: If you have any questions about the legitimacy of a charity, contact:
BBB Wise Giving Alliance
4200 Wilson Blvd., Suite 800
Arlington, VA 22203
You can also call them at 703.276.0100 or visit their Web site at www.give.org.
What can I do if a store is out of an advertised special and wants to sell me a higher priced item?
This is the classic bait-and-switch scam. A store will advertise an item at a bargain price, but when you arrive to buy it, the store will be out of the item and try to pressure you to buy a "better," more expensive item. You should be very wary about buying the higher priced item. This scam works often because you are led to believe the less expensive item was not all that good and that the more expensive item is right for you.
TIP: If you are the subject of this scam, you can file a complaint with the Better Business Bureau.