Money Crashers » Scam Alert

The Car Allowance Rebate System And Scams to Avoid

Erik Folgate — Wed, 01 Jul 2009 03:48:05 +0000

The Car Allowance Rebate System was signed into law last week, but there are already scammers out there trying to phish information from consumers looking to trade in their old cars. Here are some things you need to know to avoid these scams:

If you come across any website that uses the term “cash for clunkers”, it’s not official by any means.
The program will not get started until late July or early August, because regulators have up to 30 days to figure out a system for distributing and collecting vouchers.
Avoid websites and “dealers” that ask for personal information or ask you to pre-register for the program.

Information about the real program:

Allows up to $4,500 for a qualified trade-in to purchase a new car that gets better gas mileage than the trade-in.
The purchase price of the new car must be less than $45,000
Trade-in vehicles must be newer than 1984, get no better than 18 miles per gallon, and be registered and insured for the past year.
You won’t get any more than $4,500 from the dealership, so make sure that your trade-in isn’t worth more than that. Don’t apply for the program unless you know that the car is worth less than $4,500 on the private market.

Here is a chart for the Car Allowance Rebate System qualifications. And remember, the mileage you get on a daily basis does not matter. The program will judge mpg based on the government data at FuelEconomy.gov.

How to Spot A Loan Modification Scam

Erik Folgate — Wed, 15 Apr 2009 02:16:45 +0000

I live in Florida, which was one of the hardest hit states by the bursting of the housing bubble. If you live in Florida, Nevada, Arizona, California, New York, or other states that experienced a rapid downturn in the housing market, make sure you don’t get sucked in by loan modification scammers.

If the loan modification company wants money up front, it’s probably a scam. In the state of Florida, it is now illegal for non-lawyers to take money up front for loan modification services.
If the company offers more promises and guarantees than you can handle, it’s definitely a scam. The loan modification rests in the hands of the mortgage company or bank. If they don’t want to modify it, there’s not a slick salesman on the planet that will get them to modify it. Real loan modification companies will tell you that there are no guarantees that they can help you.
They claim to have an attorney in-house, but you never get to see or talk to the attorney.
They try to do everything over the phone and don’t have a physical address.
They should never ask for your bank account information.

Watch out for these crooks. They are running around like crazy in states with high foreclosure. They prey on those in desperate situations, the elderly, and those that do not speak English well. If you think a scam artist approached you, report them to your state’s financial department and the Better Business Bureau.

The $50 Billion Dollar Reason To Manage Your Own Money

Erik Folgate — Mon, 15 Dec 2008 13:51:00 +0000

Over the weekend, Bernard Madoff of Madoff Funds, was arrested for securities fraud, and he has admitted to swindling hundreds to thousands of investors out of $50 billion dollars over an undisclosed period of time. Madoff has been in business managing investments since 1960, but he also ran a hedge fund that was basically a Ponzi scheme. A ponzi scheme is a scam where early investors are paid investment returns from later investor’s money. Eventually, all of the money is gone and everyone loses out. There is never enough money to support the money paid back to earlier investors. Madoff’s hedge fund was boasting huge returns on investment, and this is how he attracted so many investors, including big names like Steven Spielberg.

My opinion is that Madoff started a hedge fund without the intention of it turning into a Ponzi scheme, but when he made bad investments and the hedge fund went broke, he tried salvaging it with illegal practices and reported false returns in an effort to attract more investors to pay off earlier investors. The only good news about this story is that he confessed to everything and by the honesty of his information to the Feds, it sounds like he is remorseful about the entire situation. However, that doesn’t help the fact that he ruined the financial lives of many charities, retired people, and other high net worth investors that lost their retirement nest egg.

What can we learn from this story?

Always have full control of your money and your investments. Be involved with your money on a daily basis. If an investment, mutual fund, or hedge fund seems like something fishy is going on, get out of it. Never set and forget your investments, assuming that it will taken care of and your finances are on auto pilot. It’s your money, and you make the final decisions on your investments.
Do your research. Surround yourself with a financial advisor and CPA that you trust to help you make financial decisions. You’re not an expert, and you don’t have time to be an expert, so surround yourself with people that can help you make your investment decisions.
If it seems too good to be true, it probably is too good to be true. Follow this timeless piece of advice, and you will never be lured into a scam. Many investors were lured into the returns that this fund was boasting, so they put much of their nest egg in one basket. We all have gut feelings, and if your gut feeling says something isn’t right about a certain investment, then stay away from it. Your gut is probably right.
Diversify, Diversify, and Diversify. So many investors forget about this crucial key to investing. Diversifying your portfolio is finance 101, yet so many people disregard it. I would never put more than 10 to 20% of my long term investments into one mutual fund, single stock, hedge fund, or any other type of investment.

It’s a sad story, because so many people were affected by this, and now they will be starting over or essentially never experiencing a retirement. But, the good news is that they caught him, and many investors will learn from this story.

Watch Out For Illegitimate Multi-Level Marketing Programs

Erik Folgate — Tue, 12 Aug 2008 04:10:01 +0000

I was listening to the Clark Howard radio show today, and he was talking about fly-by-night MLM programs that pop up during economic slowdowns. They prey on people looking to quickly make extra money. There are plenty of legitimate multi-level marketing programs out there, but for every good one, there are at least 10 bad ones.

What is a Multi-Level Marketing Program?

It’s a business model with two levels. You make money by selling a product/service and you make money by recruiting more people to sell a product/service. Think Amway. Amway is the most famous legitimate multi-level marketing program.

Characteristics of a scam disguised as a multi-level marketing program:

There is no real product or service to sell. If the only way possible to make money is by recruiting new members, this is a pyramid scheme, and they are illegal in the United States. Make sure there is a legitimate product or service to sell to someone before signing up.
Elevated pressure from members to sign up.
Extra incentives to sign up for the program.
Extremely high enrollment fees such as $10k per registration fee.

Characteristic of someone who can do well with an MLM:

The heart and mind of salesman. You MUST be able to talk to anyone and everyone. You’ll be trying to sell to strangers, and you must have the gift of striking up conversations and selling like crazy. Very few people have what it takes to really make good money with a multi-level marketing program.
No Shame. You must be friendly with rejection. If you fear rejection, this isn’t the gig for you.
Tenacity. You must be determined to do well, and you must seek out clients daily.
Perseverence. It will take a long time to make decent money in an MLM. You cannot give up.

I don’t recommend MLM’s as a real way to make a good side income, much less a full-time income. Clark Howard cited a study that was done by Forbes magazine stating that 1 out of 100 people actually profited from an MLM. But, that’s not to say that there are plenty of success stories out there. Don’t get caught up in the hype, because MLM’s love to lure you in by testimonials of people making six and seven figures. Realize that it’s very unlikely that you will get to that point, unless you have mastered the characteristics that I listed above. Beware of those scam artists trying to take your money disguised as an MLM. When the economy dips, the scammers come out like cock roaches. If you have any questions about MLM’s, you can email me through the submissions form above.

Watch Out For Financial Scams Targeting Military Families

Erik Folgate — Wed, 16 Jul 2008 12:07:51 +0000

I read an article in the latest Kiplinger’s magazine today about military families getting ripped off by companies such as First Command Financial and American Amicable Life Insurance. These people are serving our country by laying their life on the line for our freedom, and there are scum-of-the-earth companies out there trying to take advantage of their steady paycheck. And it’s not like our military is making a killing, which is a whole other story in itself. The fact that they get paid peanuts for the work they perform every day, is criminal in itself. If you’ve served in the military and you are on leave or were recently discharged, watch out for the vultures that love to surround the military bases.

Watch Out For High-Fee Investments.

These investments benefit the salesman and no one else. First Command Financial is paying out $12 million dollars for making misleading statements about an investment product with a 50% front sales load fee in the first year! You invest $10,000, and they take $5,000. That’s predatory financial practices at its finest. American Amicable Life Insurance was selling a horrible life insurance product packed with high fees, and they are now paying $70 million dollars in refunds and increased life insurance benefits. Life insurance is unbelievably important to military personnel with family. Make sure that you know what you are buying. Agents are not allowed to pitch you a product unless you attended a voluntary meeting.

Get Free Financial Education

Kiplinger’s offers these three websites to help get free financial education for military personnel:

Save And Invest , Military Money , and the SEC’s Military Page

I always stress the importance of self educating yourself about personal finance. If you’re in the military or fresh out of the service, you can do no better thing for yourself than teach yourself about investing, budgeting, and insurance. If you are in the military and you have any questions that I can help you with, please do not hesitate to Contact Me. Related Posts:

Watch Out For Financial Scams Targeting Military Families is a post from: Money Crashers

Exposing The Universal Default Provision In Credit Cards

Erik Folgate — Wed, 09 Jul 2008 02:46:01 +0000

Some of you don’t like the fact that I don’t like credit cards. One of my regular readers criticized me for putting too much blame on credit cards. He thinks that the lack of personal responsibility is what causes people to misuse credit cards, not the credit card itself. I agree that personal responsibility is the key to sound money management, but credit cards are a horrible financial product. The universal default provision, which many of you are familiar with, is the best reason why it is such a horrible product.

What is the universal default provision?

It is a clause in many credit card agreements which states that if you are late on ANY credit payments, the credit card company reserves the right to increase your interest rate at any time without notice. Not only will it kick in if you are late on a different credit card, it also applies if you are late on a utility, mortgage, or car loan payment. Your “fixed” interest rate of 9% could increase to 29% in one day if your credit card contains this provision.

Is It Fair?

This is a matter of opinion. On one hand, when you sign on the dotted line to receive a credit card, you are agreeing to all of the terms and conditions of the card. On the other hand, does anyone ever read all of that fine print? Plus, it’s seen as shady and opportunistic on the part of the credit card company. Although, it does make a little sense on the part of the credit card company. You may have had a great credit score in 2005 that allowed you to receive a great interest rate, but now your credit score is 100 points lower for late payments. Shouldn’t the credit card company have the right to charge you more interest since you are a higher risk to them?

Congress and Legislation

Since 2003, Congress has attempted to pass several bills to completely eliminate the use of the universal default provision in credit card terms. Congress views it as a predatory lending practice. So far, Citi Bank and JP Morgan are the only credit card issuing institution to remove their universal default provision. United States Senator, Carl Levin, has given the credit card issuers an ultimatum, either they remove it themselves, or Congress will do it for them. So Far, Bank of America, Discover Card, and Capital One are still defending the provision.

There is a lot of money to be lost for the credit card companies if they lose the battle. I’m not a fan of credit cards for many reasons, and this is one of them. They cause you to spend more money, they tempt you to spend when you shouldn’t spend, and they will take any angle to make more money off of you when possible. If credit card companies ever create policies that benefit the consumer, I’ll consider using them. I know there are many of you out there that make a couple hundred dollars a year by paying for everything on a cash-back rewards program card, but it only takes one wrong move or one personal disaster to allow the credit card company to make their money back from you. Think about it, and feel free to post your thoughts in the comment section. Related Posts:

Exposing The Universal Default Provision In Credit Cards is a post from: Money Crashers

Watch Out For Mortgage and Housing Scams

Erik Folgate — Mon, 23 Jun 2008 02:04:46 +0000

We are continuing to see the fall-out of the housing slump which means more foreclosures, falling home values, and more financially distressed homeowners. Scam artists love to prey on people that are in a tough financial situation. It is only fitting that scammers are trying to capitalize off of the housing crisis. Here are some housing scams that you need to watch out for:

Rescue Scams: Con artists will set up fake companies acting like they want to help you keep your house or pay your mortgage payment. What they do is get you to sign a document called a “quit claim deed” that essentially signs the deed to the property over to them. Then, they go and sell your house out from under your feet, and you are forced to leave the house.

Equity Stripping Scams: Renters beware. Fraudulent investors don’t make the mortgage payments, but rents out the vacant property until the lender forecloses on the property.

Straw Buyers: The identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee’s name and credit history to apply for a loan.

Fraudulent Appraisal: Usually a whole ring of scammers from the mortgage broker, investor, and title company are paid off to help inflate the value of an appraisal on a house. The home might really be worth $150,000, but the house is sold for $200,000 to an unsuspecting buyer.

Air Loans: These are loans secure for property that doesn’t even exist. Every document is made up out of “thin air”.

Silent second: Either the mortgage broker or seller gives the buyer the money for a down payment to help them qualify for the loan. If the primary lender doesn’t know about it, then it’s definitely not a legal move. Make sure if the seller offers this as an incentive to buy the house, that they have received pre-approval from a lender.

Tips for Avoiding Housing and Lending Scams:

Never sign a document that you don’t understand.
Do your homework. Research the area you want to buy a house and recent sales made in that neighborhood.
Never leave any part of your application blank.
Never give out personal information over the phone when someone first contacts you.
Use this rule of thumb. If it sounds too good to be true, it probably IS too good to be true.

Consumer Beware of Professional Service Providers

Erik Folgate — Thu, 05 Jun 2008 03:24:39 +0000

We all know about used car salesmen, auto mechanics, plumbers, and contractors that try to pull a fast one on us by selling us products and services that we may not need. Every time i bring my car in for service, there’s something new that’s “allegedly” wrong with it. In my day job, I deal with plumbers and restoration contractors all day long. Some are very honest and others will milk you for everything they can get away with. It’s pretty well-known that you should be cautious when dealing with these people. However, it’s not as well-known to be cautious when going to see your doctor, dentist, veterinarian, or any other professional with letters after their name. We as responsible consumers, need to be more careful wtih the professionals that we see, because your best interest may not always be on their mind.

Recently, we took our dog to a veterinarian in Jacksonville, Florida that we didn’t know anything about. Our dog has sensitive skin, and she has had an irritation on her back. She ripped out a chunk of hair, so we know that we needed her to see a vet. We take her to vet, and two prescriptions later and a skin scraping procedure, and we owe $235 bucks. The skin scraping was warranted, but I don’t think the pills are helping her at all. We also had a bad experience with a dentist about a year ago. We felt that she was very “crown” happy. My wife got a second opinion from a dentist we trust in my hometown, and he said that a crown wasn’t necessary yet.

The point is that you must keep up your guard, even if these professionals seem trustworthy. The problem is that we tend to see someone in a white coat or a nice shirt and tie, and we think they have our best financial interest at heart. We’re more inclined to think that a guy with grease on his hands that looks a little rough around the edges is trying to screw us over. I’m not accusing you of always profiling someone like that, but you have to admit that it’s easy to do. I know that I am guilty of it sometimes.

If you want to choose a professional that you can trust, ask friends, family, or co-workers for a referral. Thumbing through the yellow pages is a great way to choose someone who loves to spend more money on marketing than their customer service.Related Posts:

Consumer Beware of Professional Service Providers is a post from: Money Crashers

Stay Away From These Two Scams

Erik Folgate — Sat, 03 May 2008 15:37:36 +0000

HITMAN BRIBE SCAM

This is one of the most ridiculous scams I’ve heard about in a long time. Apparently, it started popping up in late 2006 and early 2007, but this is the first time I have heard about it. Which means, it hasn’t been too effective. However, I think it’s still worth bringing to your attention, because it could land in the right person’s inbox and severely scare them into doing something stupid.

It’s called the “Hitman Bribe” email scam. For two examples of the email you might receive, click here.

Basically, you get an email from a supposed hitman, who is contacting you to make you aware that someone (sometimes specifically a co-worker) has hired him to kill you for a certain amount of money. He tells you that he will not go through with it if you pay him a certain amount of money. Then, he proceeds to tell you that if you go to the cops he will proceed with carrying out the plot to kill you. Many of us would laugh and click “delete” faster than a politician can tell a lie, but there are some out there who may actually have enemies out there. This is what the scammer is hoping for. The scammer is hoping that he’ll catch a handful of people who really start to worry about the notion that a hated co-worker or ex-spouse has it out to kill them. Well, if you do get an email like this, it’s a scam. Thousands of people have received the email, so disregard it. Plus, a hitman would send you an email as contact. They are smart enough to know that leaving a paper trial is not the smartest thing to do.

STIMULUS REFUND SCAMS

There are four different ways that someone might try to scam you out of your stimulus refund check. By phone, by email, door-to-door, or by snail mail.

Here are some tips for avoiding being scammed out of your stimulus refund check.

Never respond to any emails regarding your economic stimulus payment. The IRS is not going to contact you through email. They’ll also never ask you for your social security number or bank account information.
With the option of having your check direct deposited, I can foresee many scammers trying to get your bank account information by acting like the IRS trying to set up bank account information. AVOID THESE SCAMS! The IRS will never call, email, or send a letter asking for your bank account information.
Never accept any offers from people saying they will add an extra percentage onto your refund check unless it is a large retailer such as Sears, Kroger, or other respected retailer. Plus, no one will go door-to-door from a large retailer to offer this deal to you.
Never hand over your refund check to anyone, period. Especially those going door-to-door.
Always keep in mind that the IRS does not have enough time to contact 100 million people for “verification” of your personal information. Believe me, they already have your personal information, they don’t need to verify it.
Don’t believe anyone approaching you that says they can turn your refund check into more money. Unless they’re magicians or wizards, it’s a scam.

Watch Out For Economic Stimulus Rebate Scams

Erik Folgate — Thu, 07 Feb 2008 02:47:59 +0000

According to the AP, via CNN Money, there’s already scammers out there trying to trick you into giving out personal information, claiming to be the IRS. They are telling people that they need to verify their personal information in order for them to receive the economic stimulus plan rebate. These people are the scum of the earth, aren’t they? And you can bet that they are targeting the elderly and college students. College students are usually naive, and they feel that the elderly are more vulnerable and gullible to give out personal information. Someone could be stealing your grandmother’s identity and wiping out her life savings as we speak.

These scammers are using email, phone calls, and probably letters to trick you into giving out bank account information and social security numbers. He are a few tips to remember so you don’t find yourself as a victim of this horrible scam.

The IRS is never going to send you an email requesting personal information such as your bank account number or social security number. If they wanted to know that, believe me, they could find out without having to email you. Just think to yourself, why would the IRS email everyone in America about the economic stimulus plan.
The IRS is never going to call you to verify personal information. Again, they already know your personal information, they don’t need you to verify it.
If you receive an email claiming to be from the IRS website, be very cautious and contact the IRS to report any phishing emails or to verify if they really sent out the email. The chances are extremely slim that they will ever send you an email. Click on this link to read about what to do about reporting a phishing email to the IRS and read about the most recent scammers posing as the IRS and how to detect it.
If you receive a letter in the mail or an email asking you to call a phone number in order to verify your personal information or collect your rebate, do not call the number. There are scams out there that will even go to the lengh of setting up a phony 1-800 number with representatives posing as IRS reps. They’ll ask for your personal information and then steal your identity.

The age of the internet and electronic data storage has forced us to keep our personal information more private than ever before. Many of you are very savvy consumers, and you know how to identify phishing emails and phone calls easily. But, your grandparents or children might not be as good at it, so take the time to educate them about the dangers out there of potential identity thieves.