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The 11 Principles Series: Avoid Scams and Financial Predators

By Erik Folgate

The old saying, “If it seems too good to be true, it probably is too good to be true” can help you save a great deal of money in your lifetime. At some point in your life, you will probably be a victim of a scam whether it’s on a small or large scale. The reality is that there are people out there that don’t care what it takes to steal money, so they try to do it in creative ways other than robbing a bank. Unfortunately, the elderly and the those in financial distress are targeted the most when it comes to money scams. It is always in a time of financial hardship that we tend to be more susceptible to a scam, because we are more willing to let go of our common sense and go for something that does not feel right. You could dedicate an entire book about all of the scams to watch out for, but I will touch on a few that I have been in contact with lately, and I will also touch on identity theft and how you can protect yourself from it.

Email Phishing/Other Internet Scams: More people are more familiar with how to spot an email or internet scam, but there are still those who will fall for it, and that is why internet scammers keep “phishing” for it. The term “phishing” refers to a scammer who will send out a spoof email that may either redirect you to a website such as paypal or a bank website, and they will steal your personal information when you enter it in the form fields. It may also just be an email asking you to give personal information like a bank account number or social security number because, “We think that your account has been breached or we have seen suspicious activity”. The number one thing to remember is that a financial institution will NEVER call your or email you to ask you for your personal information or verify it. You would not be able to do business with them if they didn’t already HAVE that information. if you call THEM, then it is perfectly fine for them to ask you to verify your social security number or credit card number, because YOU initiated the conversation. Although, make sure that you are dialing the correct number for that business. I’m sure there are fake 800 numbers out there too trying to trick people into thinking they are talking to a Bank of America representative, but they really are not. The common theme is having common sense. When you use common sense, you will never be scammed out of money.

Ebay/Craigslist Fraud: You have probably already been exposed to the scammers on eBay and Craigslist by now, because they are a dime-a-dozen on these websites. The main thing to remember is that if that person is from Africa, tries to offer you more than your original offer, or wants to do the deal through western union or some company you’ve never heard of, then just respond to them with a little message such as, “Stop emailing you scum of the earth”. Let’s be honest, scammers are the scum of the earth.

Multi-Level Marketing and Pyramid Schemes: They are still popular, even though they are the old trick in the book. I was recently presented with an opportunity to put money into a program that had all of the characteristics of a pyramid scheme or a variation of it. The name of it was Team National. You may be familiar with it, and it may not truly be a pyramid scheme, but it sure sounded like it. First, if the company does not have a real product, then it could be a pyramid scheme. If you have to put up a large lump sum of money up front to join the organization, then it might be a pyramid. If the only way you can make good money being a part of it is by referring other people to the program, then it might be a pyramid. I’m not a big basher of Amway, because theoretically, one could make decent money off of selling their line of products. The thing is that who would buy that kind of stuff when they can go to Target or Wal-Mart and buy the same stuff for a fraction of the price? Amway gets criticism because the only way to make REAL full-time income doing it is by building your referral base and making money off of their commissions. I would say don’t get involved in these programs altogether. There are so many ways to make money in the world these days, why bother with these old fashioned schemes.

Financial Predators:
Financial predators come in all shapes and sizes. My definition of a financial predator is anyone who tries to coerce someone into buying or financing something that they know he or she cannot afford. A car salesman, a mortgage broker, a payday loan lender, a financial advisor, a life insurance broker, and anyone who is going to make a big financial gain off of your decision, can be a financial predator. Professionals in the financial industry should have a moral, ethical, and fiduciary duty to give their clients and customers an honest opinion about a financial product, car or piece of real estate. Look at all of the people going into foreclosure, because their mortgage lender “found a way” to make it affordable for them. And before you start writing hate comments, I know that consumers are responsible for making stupid decisions as well. No one is putting a gun to their head to get a crazy loan on a house or car they can’t afford, but those so-called professionals still have a responsibility to know when to say “no” and when to say “yes” to someone. I’m also not saying that you are a crook if you work in one of those professions. What I am saying is that you need to watch out for those salespeople that only care about themselves. Seek out a financial professional that wants to help educate you rather than figuring out how much commission they can make from you.

My hope is that you will continue to be a more educated consumer, and use common sense when making decisions about your money. If it does not smell right, then don’t eat it.

(this post was getting very long, so I will speak about my thoughts on identity theft a later date)

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://www.lostspots.com Amber Yount

    Great tip…I’ve been hit with an ebay scanner…except this guy actually sounded real.

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