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Consumer Fraud

Fraud
The Cooling-Off Rule
Automatic Debit Scams
Prize Offers: You Don’t Have to Pay to Play
Credit and Charge Card Fraud

Consumer Fraud Prevention Tips and Links 

• Make sure the company has a phone number that you can call back.

• Check with Information to see if that number belongs to that company.

• Contact the Better Business Bureau in the area of the company you are about to deal with.

• Check to see if the company / firm has a pattern of bad complaints at the Attorney General Office.

• If your sending in payment try to send it to a physical address instead of a P.O. Box Number.

If you do find yourself in the middle of a scam and you cannot resolve your problems by contacting the company, contact the following sources:

• Attorney General Office in the State of the company that's defrauding you.

• Chief Postal Inspector at (202) 268-4267.

• Chicago Area Better Business Bureau.

• Federal Trade Commission's Chicago Regional Office at (312) 353-4423.

Following are Facts for Consumers from the Federal Trade Commission.

The Cooling-Off Rule

When you buy something at a store and later change your mind, you may not be able to return the merchandise.  But if you buy an item in your home or at a location that is not the main or permanent place of business or local address of the seller, the Federal Trade Commission's (FTC's) Cooling-Off Rule gives you three days to cancel purchases of $25 or more.  With the Cooling-Off Rule, your opportunity to cancel for a full refund extends until midnight of the third business day following the sale.

Locations not considered the seller's place of business include temporarily rented rooms, restaurants, and home "parties."  The Cooling-Off Rule applies even if you invite the salesperson to make a presentation in your home, unless the sale is covered under the exemptions noted below.

Under the Cooling-Off Rule, the salesperson must orally inform you of your cancellation rights at the time of sale.  The salesperson also must give you two copies of a cancellation form (one to keep and one to send) and a copy of your contract or receipt.  The contract or receipt should be dated, show the name and address of the seller, and explain your right to cancel.  The contract or receipt must be in the same language as that used in the sales presentation.

Some Exceptions

Some types of sales cannot be cancelled even if they do occur in your home. The Cooling-Off Rule does not cover sales that:

• are under $25;

• are not goods or services primarily intended for personal, family or household purposes. (The Rule does apply to courses of instruction or training regardless of the purpose for which they are taken);

• are made entirely by mail or telephone;

• are the result of prior negotiations made by you at the seller's permanent business location where the goods are regularly sold;

• are needed to meet an emergency, such as the sudden appearance of insects in your home, and you write and sign an explanation waiving your right to cancel;

• are made as part of your request for the seller to perform repairs or maintenance on your personal property (although, any purchase made beyond the maintenance or repair request is covered);

• involve real estate, insurance, or securities;

• are of automobiles sold at temporary locations, provided the seller has at least one permanent place of business;

• involve arts and crafts sold at fairs or other locations, such as shopping malls, civic centers, and schools.

How to Cancel

To cancel a sale, sign and date one copy of the cancellation form.  Then mail it to the address given for cancellation so that the envelope is post-marked before midnight of the third business day after the contract date.  (Saturday is considered a business day but Sundays and most federal holidays are not.)  Because proof of the mailing date and proof of receipt are important, consider sending the cancellation form by certified mail so you can get a return receipt.  If you prefer, you may hand deliver the cancellation notice before midnight.  Keep the other copy of the cancellation form for your records.

If you are not given cancellation forms, you can write your own cancellation letter, but remember it also must be post-marked within three business days of the sale.  Again, for proof of mailing, consider sending your letter by certified mail. Further, let the FTC know that you were not given the required cancellation forms.

You do not have to give a reason for canceling your purchase. Under the law, you have a right to change your mind.

What the Seller Must Do If You Cancel

If you cancel your purchase, the seller must, within ten days:

• cancel and return any papers you signed;

• refund all your money and tell you whether any product left with you will be picked up; and

• return any trade-in.

• within twenty days, the seller must either pick up the items left with you, or, if you agree to send back the items, reimburse you for mailing expenses.  If you do not make the items available to the seller or if you agree to return the items but fail to do so, then you remain obligated under the contract.

What To Do About Problems

One of the best safeguards against problems in this area is to take your time when you buy and to make sure you really want what you purchase. However, if you have a complaint about sales practices that involve the Cooling-Off Rule, write: Correspondence Branch, Federal Trade Commission, Washington, D.C. 20580.

You also may wish to contact a consumer protection office in your city, county, or state. Some state laws give you even more rights than the FTC's Cooling-Off Rule, and some local consumer offices can help you with your complaint.

In addition, if you paid for your purchase with a credit card and a billing dispute arises about the purchase (for example, if the merchandise shipped was not what you ordered, or if you cancelled the purchase within three days under the FTC's Cooling-Off Rule), you can notify the credit card company that you have a dispute over the purchase. Under the Fair Credit Billing Act, the credit card company must acknowledge your dispute in writing and conduct a reasonable investigation of your problem. You may withhold payment of the amount in dispute, until the dispute is resolved. (You are still required to pay any part of your bill that is not in dispute.) To protect your rights under the Fair Credit Billing Act, you must send a written notice about the problem to the credit card company at the address for billing disputes specified on your billing statement within 60 days after the first bill containing the disputed amount is mailed to you.

If the 60-day period has expired or if your dispute concerns the quality of the merchandise purchased, you may have other rights under the Act. If you have questions about the Fair Credit Billing Act, write for the free brochure Fair Credit Billing. Write: Public Reference, Federal Trade Commission, Washington, D.C. 20580.

Automatic Debit Scams

Fraudulent telemarketers have found yet another way to steal your money, this time from your checking account.  Consumers across the country are complaining about unauthorized debits (withdrawals) from their checking accounts.

While automatic debiting of your checking account can be a legitimate payment method (many people pay mortgages or make car payments this way), the system is being abused by some telemarketers.  Therefore, if a caller asks for your checking account number or other information printed on your check, you should follow the same warning that applies to your credit card number do not give out checking account information over the phone unless you initiate the call or are familiar with the company.  Remember, if you give your checking account number over the phone to an unknown person for "verification" or "computer purposes," that person may use it to improperly take money from your checking account.

How the Scam Works

The new telemarketing scam usually works like this.  You either get a postcard or a telephone call saying you have won a free prize or can qualify for a major credit card, regardless of past credit problems.  If you respond to the offer, the telemarketer often asks you right away, "Do you have a checking account?" If you say "yes," the telemarketer then goes on to explain the offer, making it sound too good to pass up.

Near the end of the sales pitch, the telemarketer may ask you to get one of your checks and to read off all of the numbers at the bottom.  Sometimes you may not be told why this information is needed.  Other times you may be told the account information will help ensure that you qualify for the offer.  And, in some cases, the telemarketer may explain that this information will allow them to debit your checking account and ship the prize or process the fee for the credit card.

Once the telemarketer has your checking account information, it is put on a "demand draft," which is processed much like a check.  The draft has your name, account number, and states an amount.  Unlike a check, however, the draft does not require your signature.  When your bank receives the draft, it takes the amount on the draft from your checking account and pays the telemarketer's bank.  You may not know that your bank has paid the draft until you receive your bank statement.

What You Can Do to Protect Yourself

Automatic debit scams involve a fraud that is hard to detect and could expose you to large financial losses.  However, the following suggestions may help you avoid becoming a victim.

• Do not give your checking account number over the phone in response to solicitations from people you do not know.

• If anyone asks for your checking account number, ask them why they need this information.

• Beware of offers that sound too good to be true, especially any offers that require your checking account number. Ask to review the company's offer in writing before you agree to a purchase.

What to Do if You are a Victim

If a telemarketer has issued a draft against your checking account without your knowledge or permission, or the amount is more than you authorized, contact your bank immediately.  Depending on the timing and the circumstances, you may be able to get your money back.  You also may want to contact your local consumer protection agency, state Attorney General and the Better Business Bureau to report the telemarketer.

Prize Offers: You Don’t Have to Pay to Play

Congratulations!  It's your lucky day!  You have won one of the following fabulous prizes: a diamond pendant; a deluxe vacation for two; a food processor; a stereo system; or a six-foot grandfather clock.

If you receive a letter or phone call with a message like this, be skeptical about the value of these "fabulous" prizes.  They may not be worth collecting.

What could be wrong with these prizes?  You need to see them to understand.  The diamond is probably the size of a pin-head.  The vacation for two might be a certificate for inexpensive lodging.  But chances are it includes so many restrictions or hidden charges that it's worthless.  The food processor might be described more accurately as a hand-operated food chopper.  The stereo system might be a plastic toy that fits in your hand. And the clock?  It's probably made of cardboard or plastic.

Scam artists often use the promise of a valuable "prize" or "award" to entice consumers to buy vitamins, cosmetics, or other merchandise or services, or to contribute to bogus charities.  Typically, they falsely describe the "prize" as being worth more than the price of the merchandise they're asking you to buy.  In addition, they describe prizes deceptively to attract customers to sales meetings for land or vacation timeshares.  As a rule, if you have to pay to receive your "prize," it's not a prize.  You haven't won anything.

Too Good to Be True?

How can you tell if a prize promotion is on the level?  The Federal Trade Commission (FTC) suggests that you listen to the pitch carefully:  Under the FTC's Telemarketing Sales Rule, telemarketers who use prize promotions must tell you important information before you pay for any goods or services.

In the case of a "cold" call from a telemarketer - when a telemarketer calls you - the telemarketer must state promptly when you answer the phone that no purchase or payment is required to win a prize or participate in a prize promotion.  If you ask, the telemarketer must tell you how to participate without buying something or paying anything.  In every telemarketing call involving a prize promotion - whether it is a cold call made by the telemarketer or a call you make to respond to a written solicitation - the telemarketer must let you know:

• the odds of winning a prize.  If the odds cannot be determined in advance, you must be told the factors used to calculate the odds;

• that no purchase or payment is required to win a prize or participate in a prize promotion;

• how to participate without buying or paying anything;

• what you'll have to pay or the conditions you'll have to meet to receive or redeem a prize.

A telemarketer who offers to sell goods or services in connection with a prize promotion must give the sales pitch before the prize description.  If it's the other way around, hang up!  The telemarketer is breaking the law.

The Telemarketing Sales Rule also bans misrepresenting any material aspect of a prize promotion, including the odds, the nature or value of a prize, or the fact that a purchase or payment is required to win.  Prizes are free.  If any payment or purchase is required, it's a sales transaction, not a prize.

How to Protect Yourself

The next time you get a "personal" letter telling you it's "your lucky day," keep these points in mind:

Some contest promoters use names that resemble official organizations, such as the lottery or a parcel delivery service. Others use an envelope that looks like it contains a telegram or government check. Don't be deceived by letters that look official or urgent. It's illegal for a telemarketer to misrepresent an affiliation with or an endorsement by a government agency or other third party.

Read the letter carefully, including the fine print. In some cases, the letter may tell you the cash value of each prize or that you must attend a sales seminar as part of the contest.

Think carefully before you attend a sales meeting just to win an "expensive" prize. Your chances of winning a truly valuable prize are likely to be very slim. You also may be required to pay a handling charge that is equivalent to the value of your prize. Remember, free is free. If you have to pay, it's not a prize.

Be cautious of contest promoters who use a toll-free "800" number that directs you to dial a pay-per-call "900" number. Charges for calls to "900" numbers may be high.

Before you send a check to a contest promotion company, think twice. If a company urges you to use an overnight delivery or courier service, beware! Fraudulent telemarketers sometimes use these services to take consumers' money fast - before an unwary consumer realizes he or she has been cheated.

Do not disclose your checking account or credit card account number on the phone unless you have a relationship with the company or know its reputation.

Call the Better Business Bureau and your state or local consumer protection office to check out the seller's reputation. Be wary of offers that claim to be "limited time" only and efforts to urge you "buy on the spot." Although some state laws provide cancellation periods under certain circumstances, don't count on being able to cancel and get your money back unless your right to do so is spelled out clearly in your contract.

Read all contracts carefully before you sign. Generally, once you sign, you are obligated. If the salesperson makes claims orally that are not in the contract, the written document counts.

Credit and Charge Card Fraud

The cost of credit and charge card fraud to card holders and to card companies alike was $864 million in 1992.  Everyone pays for credit and charge card fraud in higher prices, whether or not they are personally defrauded.

While theft is the most obvious form of credit and charge card fraud, fraud occurs in other ways, as well.  For example, someone may use your card number (not the card itself) without your permission.  This may occur in a variety of ways:

A thief rifles through trash to find discarded receipts or carbons to use the card numbers illegally.

A dishonest clerk makes an extra imprint from your credit card or charge card for his or her personal use.

You receive a postcard or a letter asking you to call an out-of-state number to take advantage of a free trip or a bargain-priced travel package. When you call, you are told you must join the travel club first. You are asked for your credit card number so you can be billed for the membership fee. The catch? New charges continue to be added at every step and you never get your free or bargain-priced vacation.

How to Guard Against Credit and Charge Card Fraud

Here are some suggested precautions you can take to help protect yourself against credit and charge card fraud. You also may want to instruct any other person who is authorized to use your account to take the same precautions.

• Sign your new cards as soon as they arrive.

• Carry your cards separately from your wallet. Keep a record of your card numbers, their expiration dates, and the phone number and address of each company in a secure place.

• Keep your card in view, whenever you can, after you give it to a clerk. Retrieve your card promptly after using it.

• Avoid signing a blank receipt, whenever possible. Draw a line through blank spaces above the total when you sign card receipts.

• Void or destroy all carbons and incorrect receipts.

• Save your card receipts to compare with your billing statements.

• Open billing statements promptly and reconcile your card accounts each month, just as you would your checking account.

• Report promptly and in writing any questionable charges to the card issuer.

• Notify card companies in advance of a change in address.

In addition, here are some things you should not do:

• Never lend your card(s) to anyone.

• Never leave your cards or receipts lying around.

• Never put your card number on a postcard or on the outside of an envelope.

• Never give your number over the phone unless you are initiating a transaction with a company you know is reputable.  If you have questions about a company, check with your local consumer protection office or Better Business Bureau before ordering.

What To Do If Your Cards Are Lost or Stolen

If your credit or charge cards are lost or stolen, call the issuer(s) immediately.  Most card companies have a toll-free number for reporting missing cards.  Some companies provide 24-hour service.  By law, once you report the loss or theft, you have no further liability for unauthorized charges.  In any event, your maximum liability under federal law is $50 per card.

What To Do About Suspected Fraud

If you suspect that someone has illegally used your credit card, call the card issuer immediately. Use the special telephone number that many card issuers list on their billing statements. You also may want to follow up your phone call with a letter. You may be asked to sign a statement under oath that you did not make the purchase(s) in question, but you cannot be required to do so.

For more information about your credit rights, write to: Public Reference, Federal Trade Commission, Washington, D.C. 20580 for these free publications: Credit Billing Errors; Fair Credit Billing; Lost or Stolen: Credit and ATM Cards; and Telemarketing Travel Fraud. You also can write to this address for a free copy of Best Sellers, which lists all the FTC's consumer and business publications.