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Can you spot a scam? Take our quiz to find out.
The economic crisis has left many Americans deep in debt and looking for a deal-or a savior-to get them through tough times. But instead of a white knight, many are getting a shady scammer.
Inspired by the headlines, con artists slap new stories on old tricks, preying on the financial fears and desperation of hardworking citizens. After all, when you're drowning, you're interested in what the guy who claims to be selling life preservers has to say. Here, some of the newest and newsiest ploys to avoid.
Scam: You receive an e-mail that says, "Do not let the financial markets' collapse affect your life. Protect yourself by clicking on the link below right now." This is the latest twist on the classic phishing scam: The link goes to a fake Web page that looks like your bank's. If you log in to update your account information, as requested, you've handed the keys to your account over to an identity thief.
The Details: Hillery Peacock, a 24-year-old student from Gainesville, Florida, received one of these e-mails, but a few warning signs tipped her off that it was a scam. It was from a free e-mail service rather than a company website, the "reply to" line was different from the "sent from," the subject line was blank, and the e-mail was text-only, says Peacock, without any "fancy ads" that usually come with official company marketing e-mails.
Fight Back: Never log on to your bank from a link in an e-mail. Always type in your bank's URL, then log on. You should also call your financial institution to report the incident and forward the e-mail to the Federal Trade Commission at spam@uce.gov.
Banks are lending only to those with excellent credit.
Scam: Debt-settlement companies say they'll repair your credit, but instead they take your money and don't pay off your debt.
The Details: Dave Perks, 30, of Richmond, Virginia, was $23,000 in the hole. He had a wife and a six-month-old son and was working as a waiter, hoping to land a job in advertising. Then he heard a radio ad for a debt-relief firm.
A company representative told him to stop paying his creditors, that the company would make the payments for him with the $300 he'd authorized to be deducted from his bank account every month. The rep also told Perks to list the firm's office as the contact for his creditors so that he could stop receiving the collection calls and letters.
In seven months, Perks saved up enough money to rent a small house. Because the landlord would need to pull a credit report, Perks wanted to warn the debt-settlement firm so it wouldn't think he was taking out a new line of credit, which was forbidden under the agreement.
When Perks called the office, he listened to a message that said the firm had been forced into involuntary bankruptcy due to fraudulent business practices. Perks called his bank. It hadn't received a single payment from the firm and was about to write off Perks's account as uncollectible, leaving a serious black mark on his credit report.
Perks was out $2,100. His tiny nest egg went to paying down the debt, which had ballooned to more than $25,000. "It's so easy to fall into a trap when you're desperate for a solution," he says.
Fight Back: There is nothing any debt-settlement, relief, or consolidation company can do to wipe out your debt legally that you can't do on your own. However, if you feel you need professional help, find an accredited counselor through the nonprofit National Foundation for Credit Counseling (www.debtadvice.org). And watch for these warning signs:
- Hefty or hidden fees-anything over $50 per month
- Someone who wants you to sign up for the service over the phone
- Agents who work on commission based on the total debt they're able to collect (if you're not sure, ask)
- Anyone who tells you to stop paying your creditors
- A "counselor" who doesn't take a genuine interest in ensuring you're educated about your financial options.
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