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Don't Pick Up the Phone...Until You Have Read This Article

If you or someone you love has ever been taken in by a phone scammer - someone who attempts to trick people into giving them money by offering “free” trips, “no risk” investment opportunities or “pre-approved” loans - you know how frustrating and embarrassing such an experience can be. Unfortunately, you’re not alone. Although the number of Canadians who have fallen victim to such schemes has fallen drastically over the past several years, criminals are still using the phone to swindle money from hundreds of unwitting Canadians, particularly seniors.

Last year, 947 Canadians lost $1,040,428 to phone scams. This number is down drastically from a high of 19,048 people who lost $11,803,847 in 1996, but each year the story is the same: The majority of this money - eighty-eight per cent in 2001 - was lost by victims over the age of 60. Fraud artists are well aware that seniors are more susceptible to phone scams than any other age group. Therefore, they are targeting them more aggressively than ever.

Although such statistics are alarming, seniors need not be afraid to pick up their phones.  Protecting yourself merely involves becoming aware of the most common types of scams so you can see them coming before you get taken in.

Types of Scams

Phone scams are not always easy to spot because the callers often play on your emotions, hopes and dreams in order to get what they want. It’s difficult to think rationally under such circumstances. In addition, new scams are created each day, so there’s no way you can be aware of every one out there. But you can rest assured that most of them will be variations of the following seven schemes:

1.      The Prize Pitch

With this common scam, consumers are informed that they have been selected to win a prize. They may even be offered their choice of two or more prizes. But here’s the catch: In order to claim the prize, they must first purchase a product and/or pay a prize claim fee. This should be a warning sign. Canadian law requires that for a contest to be legitimate, consumers need not purchase a product in order to qualify. So if a telemarketer says you have to “pay to play,” it’s time to hang up.

2.      The Money Recovery Pitch

Say you buy into a prize pitch scheme and, over time, realize you’ve been scammed. It hurts, but you tell yourself you’ll know better next time. Then one day you get a phone call from someone claiming to be a law enforcement officer or some other official. He or she tells you that their records indicate you have lost money to a certain company, whose assets have now been seized. They then promise to get your money back for you - for a small fee. There’s your warning sign once again: If you have lost money to such a company and the police are able to seize it, they will inform you of this fact, but they will likely do it in writing, not over the phone. And they will never, ever, request money for any reason.

3.      Advanced Fee Loans

Although most phone scams involve outgoing calls, a few scams, such as this one, require you to make the first call. Advanced fee loan schemes usually start with an ad in a newspaper or magazine that offers to give you a loan even if you have a bad credit rating. All you have to do is call to apply. Once you do call, you’re almost always approved. However, there is one catch: In order to receive your loan, you first have to send them a loan-processing fee, which can range from hundreds to thousands of dollars. As you can imagine, if you’re gullible enough to send this money, you may as well kiss it - and your loan - goodbye.

4.      Free Vacations

If you’ve ever been to a home, boat or auto show, you may have filled out a ballot to win a free vacation or show home. However, by doing so, you may have unwittingly provided your personal contact information to a phone scammer. Don’t be surprised if, a few days after filling out the ballot, you receive a phone call from someone who says you have won a “free” or “low cost” prize, such as a vacation. The catch is, they often require your credit card number and/or other personal financial information to hold the prize for you. They may even request a small prize claim fee to be paid in advance.

An easy way to avoid falling victim to such a scheme is to never give out your credit card information over the phone unless you are the person who initiated the call. Otherwise, you really have no idea who is on the other end of the line. If someone calls you requesting such information, ask him or her for the phone number, physical address, and the name of the company for which they work. Tell them you will phone them back and claim your prize once you have verified the legitimacy of the company with the Better Business Bureau or some other regulatory body. If the caller is legitimate, he or she will freely provide such information. If they hesitate in any way or pressure you to pay the fee now or miss out on the prize, terminate the call immediately. Legitimate telemarketers have nothing to hide.

5.      False Charities

Many legitimate charities use telemarketing as a way to raise funds. However, every so often you may receive a call from a charity whose name you do not recognize. If this happens ask some questions: How will the money be used? What is the physical address and telephone number of the charity? Do they have a web site? If the telemarketer is unwilling to provide such information or tries to pressure you into giving a donation right on the spot, you can bet they’re a fraud. But if they freely give the information and the charity interests you, take time to research it before you donate so you can be certain your money is truly going to a good cause.

6.      Pyramid Schemes

“Last one in is a rotten egg!” Unfortunately, this saying fits pyramid schemes to a “T.” A pyramid scheme is a fraud that looks very much like a typical, legitimate, multi-level marketing business. In both cases, the business is based on each person recruiting an ever-increasing number of investors, often to sell products or distributorships. The more investors you recruit - and the more they recruit - the more money you make. The key differences between pyramid schemes and multi-level marketing is that in pyramid schemes, no new money is created, and recruiting new investors is more important than selling products. Unlike multi-level marketing, the only people who make money in a pyramid scheme are those at the top of the pyramid, who take their money from those who join later on. Eventually, the pyramid scheme reaches a point where no new investors can be found, and the last people in lose their shirts.

Pyramid schemes are usually presented over the phone as unbelievable investment opportunities that you simply can’t refuse. But remember: If an offer sounds too good to be true, it usually is. Ask the caller to send you some information in the mail so you can think it over. They will likely object to this request, preferring you to give them money over the phone. If so, hang up. However, if they do agree to send you information, read it over carefully and have someone who knows about investments give you their opinion before you put any money on the table.

7.      1-900 Scams

Like advanced fee loan scams, 1-900 scams require you to make the first call, usually in response to a card you receive in the mail. The card will usually say you’ve won a prize. All you have to do is call their 1-900 number to find out what or how much you’ve won. They usually lead you to believe you have won all manner of wonderful things, such as a car, a boat, a vacation and so on. The catch is, calls cost $4.99 a minute. And when you make the call, you usually reach some type of answering system that prolongs the call for several minutes before providing you with details about your prize. But that’s not the worst of it. After spending $30 or more on the phone call, you typically discover that your prize amounts to $5 or less! So if you get such an offer in the mail, put it where it belongs: in the recycling bin.

Phone Scam Warning Signs:
- It sounds too good to be true.
- You have to “pay to play.”
- You must provide private financial information.
- You are asked to send cash rather than use a cheque or credit card.
- The telemarketer is more excited than you are.
- It’s the manager or some other “important” official calling.
- The telemarketer wants to become your best friend.
- It’s a time-limited opportunity, and you’ve got to decide immediately or you’ll miss out.

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