How can somebody bill companies for cleaning supplies they didn't order? With a little help from your coworkers.
Whether it was selling computers to military members, light bulbs to local governments, or horoscopes to coupon lovers, July was full of inventive scams that finally ran out of steam.
We at Debt.com find it fascinating what scammers come up with, who they go after, and what people fall for. We rounded up seven cases that made the news last month. They’re in various stages of the legal process, and these are all civil cases, separate from any potential criminal charges which may be coming. But they’re all weird enough to read about — and they all have a life lesson worth learning…
1. Ghost in the machine
The scam: Companies and individuals based mostly in India were cold-calling people (including numbers on the Do Not Call Registry) to let them know their computers had a virus. According to the Federal Trade Commission, they pretended to be affiliated with companies like Dell and Microsoft and would charge hundreds of dollars to access the computer and “fix” it for the consumer.
The slam: All together, the companies are being ordered to pay more than $5 million, are banned from selling computer security, and have some onerous record-keeping requirements if they ever want to run another business.
Avoiding the sham: It would be nice if real tech support was this proactive, but the truth is, legitimate companies don’t really know if your computer has a virus. They’re more than happy to sell antivirus software or bundle it with your computer purchase, but after that, it’s up to you to call them about any problems.
2. Home-saving (?) lawyers
The scam: More than a dozen state and federal agencies are accusing a handful of law firms of ripping off thousands of struggling homeowners — and costing some their homes. Their lawsuits allege the firms collected up-front fees and promised to negotiate with mortgage lenders to get loan modifications. “In the end, many consumers learned that the defendants had not contacted their lenders or obtained any meaningful relief for them,” the Consumer Financial Protection Bureau says.
The slam: This legal battle is in its earliest stages, but the lawsuits claim the total comes to more than $25 million in ill-gotten money. If everybody from the FTC to the CFPB to the State of California win, they’ll probably seek at least that much.
Avoiding the sham: The CFPB has some tips, like beware a hard sell: “Most licensed lawyers do not call or e-mail you directly and push you hard to pay money right away.” Don’t believe anyone who guarantees you a successful loan modification, and be wary of up-front fees, which are only legal in limited circumstances. Learn more here.
3. Payday loans
The scam: Two guys running a Florida-based group of companies pretended to be online payday loan lenders affiliated with a network of more than 120 others, the FTC says. But they weren’t, and they didn’t actually make any loans. They basically just took thousands of people’s bank details and sucked money out of their accounts.
The slam: The duplicitous duo settled with the FTC for $6.2 million — the amount they’re accused of swindling. But they won’t have to pay that much, because they don’t have it:
The settlement requires [Odafe] Ogaga to surrender nearly all his assets: $50,000 in cash, and proceeds from the sale of his 2011 Rolls Royce Ghost, 2007 Lexus LS460, and 2006 Ferrari. Once he surrenders these assets, the remainder of the judgment against Ogaga will be suspended. The judgment against [Sean] Mulrooney is entirely suspended, due to his inability to pay.
Aside from that, the pair are banned from offering any credit-related products or services.
Avoiding the sham: Payday loans aren’t a great option to start with — they generally have steep interest and fees compared to credit cards or loans from credit unions, and many consumers get stuck taking them out over and over again. But if you’re going this route, try to find the lowest interest rate available and a company that has a nearby physical location.
4. Bright ideas
The scam: The FTC accused more than a dozen affiliated companies in Maryland and Florida of billing small businesses and towns across the country for overpriced light bulbs and cleaning supplies they didn’t order. They apparently called to “confirm” an address or the right contact person for a purchase, then submitted invoices claiming those employees made the orders. The operation “bilked nonprofits, businesses, and municipalities out of millions of dollars,” according to the FTC.
The slam: A federal court has stopped the companies’ operations and frozen their assets while the lawsuit is pending. The FTC is asking all the money to be returned — however much is left.
Avoiding the sham: Don’t volunteer personal information to strangers over the phone, especially other people’s. And if you’re a business or municipality, maybe you should think about establishing a procedure to verify that products and services are rendered before paying for them.
5. Auto-renewing horoscope subscriptions
The scam: Six companies stockpiled phone numbers through websites offering freebies and then signed people up for useless text messaging services that added charges to their phone bills. “Text messages sent to consumers’ mobile phones contained short celebrity gossip alerts, ‘fun facts,’ horoscopes, and other items,” the FTC says. “The subscriptions typically cost consumers $9.99 or $14.99 per month and were set to renew automatically each month.”
The slam: The FTC shut down a scheme that charged more than $100 million to people’s phones. The companies’ assets are frozen while the court deals with it and the FTC tries to get refunds for the victims.
Avoiding the sham: Be wary about not-so-free freebies. Anything that requires personal information, including a phone number, probably isn’t worth it — especially if you aren’t familiar with the company offering the deal. Check your monthly phone statement for any unauthorized or unusual charges, then talk to your provider if anything looks wrong.
6. Justice for hire
The scam: A federal class-action lawsuit accuses a Missouri-based debt collection company called Bounceback of partnering with county prosecutors’ offices in Washington state. The prosecutors have traded the use of their official seals in exchange for a portion of whatever Bounceback collects. This is apparently legal in some places but very controversial — because the company uses the seals to send letters threatening consumers with criminal charges and jail time if they don’t pay the debt plus fees. The letters don’t say they’re from a collection agency, either.
The slam: This is a fresh lawsuit, so nothing yet.
Avoiding the sham: There’s an awesome law that protects you from collector harassment. It’s called the Fair Debt Collection Practices Act. Here’s everything you need to know about it in plain English.
7. The fall of Rome
The scam: A company called Culver Capital, formerly known as Rome Finance, offered military service members financing on electronics, including TVs and computers. The contracts for the products fudged the numbers, inflating prices and lying about finance charges. “This trapped servicemembers in contracts that generated millions of dollars for the company and substantial debt for its customers,” the CFPB says.
The slam: This is the final nail in the coffin for Culver and its parent company Colfax after a string of lawsuits that are finally forcing it into bankruptcy. Thirteen state attorneys general and the CFPB are cancelling $92 million in debt owed by about 17,000 service members, and any damage to credit scores from these loans will be cleaned up.
Avoiding the sham: It’s hard to defend yourself against completely hidden charges, but comparison shop and understand the terms and fees of any loan you consider. Reputable companies will make those fees easy to locate.