National Consumer Protection Week is drawing to a close. But before it does, I want to warn you about a few insidious business-related scams that can wreak havoc with your bottom line. All of are mentioned in the Federal Trade Commission’s list of top 15 categories of complaints received in 2009:
Identity Theft is in first place. What many entrepreneurs don’t realize is that it can be very easy, and more lucrative, for a crook to steal a businesses’ identity, rather than that of an individual. Just one example: A California scammer was able to rack up some $450,000 in fraudulent purchases using another company’s identity. Not only is corporate identity theft hard to discover, it can be even harder to clean up.
Advance Fee Loan Scams come in ninth place. Here’s how this one works: You’ve had no luck getting financing from traditional sources, so you finally find a lender (probably online) willing to hook you up with “private investors” or “overseas banks” who will lend your business the money it needs. You fill out the paperwork and are then told that before your loan will be disbursed you must send the company a “down payment,” or an “insurance fee” to protect the lender, or even the first few monthly payments up front. You’re usually told to wire the money to the company. And guess what? It almost always goes somewhere overseas. (Canada seems to be the most popular spot right now.) Of course, the loan never materializes and you’ve just lost hundreds, if not thousands, of dollars.
Business Opportunities are in fourteenth place. Lest you think you are too smart to be taken in by a business opportunity scam, I recommend you take a look at this video of a business scam artist revealing his tricks of the trade. These guys are good, and they make a good living spinning lies. More people out of work means a lot more opportunity for scamers, who can thrive in any economy.
If your gut is telling you something isn’t right with the credit or business offer you’re receiving, do your homework. Start by checking with the Better Business Bureau, of course. But don’t stop there.
Research the company online. If they have a website, find out how long their domain name has been registered, and to whom it is registered. If you find a discrepancy, or the company recently registered their domain name but tells you they have been in business for years, dig deeper.
Check with your state regulatory offices to learn whether they are legally able to operate in your state. Lenders and loan brokers, for example, must be registered in the states in which they do business. To check registration, call your state Attorney General’s office or your state’s Department of Banking or Financial Regulation.
If you have already been taken, be sure to report the crime to IC3.gov, the place to report white collar crime.
Gerri Detweiler’s mission is to provide reliable, unbiased answers to your credit questions. She is the co-author of Business Credit Success: Get on the Financing Fast Track and serves as Personal Finance Advisor for Credit.com.