A growing number of companies promise to help people drowning in debt. They “guarantee” to lower your monthly credit card payments and get collection agencies off your back.
I don’t have a crystal ball, but I can predict with a great deal of confidence what will be some of the top scams in 2009.
Many will target people hurt by the recession. But there will be plenty of old scams in the New Year, too.
Here’s a roundup of what to look out for over the next 12 months:
Credit counseling and debt relief
A growing number of companies promise to help people drowning in debt. They “guarantee” to lower your monthly credit card payments and get collection agencies off your back. Phony debt relief outfits take your money and do nothing. In some cases, they make the situation worse. You’ll owe just as much as when you started, plus have additional late fees and other penalties to pay.
Advance fee loans and credit scams
You need money and you need it now. So the promise of a loan or credit card – regardless of your credit history – is mighty appealing. But there’s a catch: you need to pay some money first.
Legitimate lenders do not “guarantee” you will get a loan before you apply, especially if you have bad credit or no credit. They may charge fees, but those are normally paid after the loan is approved.
Work at home schemes
If you believe the ads – and you shouldn’t – you can stuff envelopes, process insurance claims or run an online business from your home and make thousands of dollars a month. To start your work-at-home business you’ll need to pay for instructions or a list of contacts. If you get anything at all, it’s often useless or outdated information.
Overpayment scams are frequently used to rip-off people selling things online or via newspaper ads. The fraudster agrees to pay the asking price but he always wants to send a check for thousands of dollars more than that amount. And he’ll have some reason for you to wire transfer the difference to someone. For example, with a car purchase you could be told the extra money is for a shipping company that will pick up the vehicle. It’s a lie!
The check look reals, but it’s bogus. The bank may cash it or accept the deposit, but once the check bounces (and that could take weeks) you’ll be stuck paying back the bank.
Scammers love wire transfers because they are quick and virtually irreversible. They also make it hard for law enforcement to track them down.
Sweepstakes, contest and foreign lottery scams
“Congratulations! You just won thousands of dollars!” All you have to do is pay the taxes, insurance, handling charges or some other bogus fee. You may be pressured to give a credit card number, send a check via overnight delivery or wire money right away. Don’t do it! You didn’t win anything and you’ll never see that money again.
Many prize letters now come with a fake check for a few thousand dollars. You’re told to cash the check and wire off the money required to claim your winnings. As with the overpayment scam, once the bank figures out the check is counterfeit, you’ll be required to repay that money.
Home repair scams
A shady contractor can do a lousy job or simply take your money and run. That’s why it’s so important to do your homework before you hire a contractor.
Check with the Better Business Bureau. Make sure the company is licensed (if required in your state) and bonded. Get a list of references and call them.
Look at other jobs they’ve done. Take the time to get several estimates. The goal is not to get the lowest price; it’s good work at a fair price.
Internet auction scams
Internet Auctions are very popular. But they remain a risky way to buy (and sell) things. Will you really get what’s advertised? Is the merchandise stolen or counterfeit?
According to a recent survey by Consumer Reports more than one in four people who used an online auction reported experiencing a scam or deceptive practice.