Watching Out for Phone Fraud

Phone fraud might seem like something you'd never fall for, but it can hit anyone. In fact, AARP says, well-educated, socially active people with higher-than-average income are most likely to fall for crafty telemarketers.

Telemarketing fraud has become one of the most pervasive forms of white-collar crime, the U.S. Justice Department says. Victims lose an estimated $40 billion a year. It's very difficult to get your money back if you've been cheated. 

Many frauds focus on older people on the theory that they're generally more trusting and polite to strangers -- not to mention the fact that many retirees tend to be home during the day to take the calls.

Often it's hard to know whether a sales call is legitimate. Here are some tip-offs:

  • If your friendly telephone huckster says you've won a free gift, prize or vacation -- and all you have to do is pay for postage, handling fees or other charges -- don't believe it. It's probably a scam. Your free prize could end up costing you plenty -- and the promised gift may be worthless or nonexistent.

  • If someone you don't know calls and asks you to "verify" your credit card number or bank account number for any reason, hang up. Before you know it, crooks could drain your bank account or jack up your credit card bills.

  • Beware of "charities" that call asking for donations to worthy causes and ask you to write a check for a courier to pick up. Legitimate charities don't work that way. If you're interested in the charity, ask for information in writing. Make sure the organization lists an address and telephone number -- not just a post office box.

  • Don't give in to pressure to "buy now." Always take your time making a decision and never respond to an offer you don't understand thoroughly. A truly good deal can wait for you to think it over. Often, the "one-time-only" offer or "investment of a lifetime" is something you didn't need or want in the first place.

  • Always check out unfamiliar companies with your local consumer protection agency, Better Business Bureau, state attorney general, the National Fraud Information Center or another watchdog group. Unfortunately, not all bad businesses can be identified through these organizations.

  • Be aware that any personal or financial information you provide may be sold to other companies.

Know your rights

The Federal Trade Commission (FTC) has a telemarketing sales rule, which gives you the power to stop unwanted telemarketing calls. The rule requires telemarketers to make certain disclosures and prohibits them from making certain misrepresentations. The rule covers most types of telemarketing calls to consumers, including calls to pitch goods, services, "sweepstakes" and prize promotion and investment opportunities.

This information from the FTC can help you determine if you're talking with a scam artist or a legitimate telemarketer:

  • It's illegal for a telemarketer to call you if you've asked not to be called. If a telemarketer calls back, hang up and report the call to your state attorney general.

  • Calling times are restricted to 8 a.m. to 9 p.m.

  • Telemarketers must tell you they are making a sales call and identify the company making the sales call before they make their pitch.

  • If it's a prize promotion, they must tell you that no purchase or payment is necessary to enter or win. If you're asked to pay for a prize, hang up. Free is free. They must tell you the odds of winning and any restrictions or conditions of receiving the prize.

  • It's illegal for telemarketers to misrepresent any information, including facts about their goods or services, earnings potential, profitability, risk or liquidity of an investment, or the nature of a prize in a prize-promotion scheme.

  • Telemarketers must tell you the total cost of the products or services they're offering and any restrictions on getting or using them, or that a sale is final or non-refundable, before you pay.

  • It's illegal for a telemarketer to withdraw money from your checking account without your expressed, verifiable authorization.

  • Telemarketers cannot lie to get you to pay, no matter what method of payment you use.

Exceptions to the rule

The FTC's rule generally does NOT cover you as a consumer if:

  • You make the call in response to an ad.

  • You make the call in response to a direct mail ad that discloses all the information required by the FTC.

  • You make the call to order from a catalog.

Where to get help

  • Under the Telephone Consumer Protection Act of 1991, you can ask that companies put you on their "do not call" lists. If the company calls you again, you can bring action in small claims court.

  • To report a scam, see the National Fraud Information Center.

  • To find out more about telemarketing scams, see the National Consumers League.

  • To check out whether a charity is legitimate, look at the BBB Wise Giving Alliance.

  • To file a complaint or obtain information on consumer issues, visit the FTC.

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