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Wednesday, Feb. 17, 2010

Scams!

The top rip-offs you should avoid

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Scams have been around since snake oil was invented. But consumer advocates say that scams have taken a particularly nasty turn thanks to two recent trends: new technologies that allow anonymous scammers to create fake relationships with their marks, and the downturn in the economy, which encourages cash-strapped people to do desperate things—like wiring money to strangers in another country, or falling for too-good-to-be true moneymaking schemes.

Here are some of the biggest scams you should avoid:

Haiti Charity Scams

So many people give money after a natural disaster, and the generosity following the January earthquake in Haiti was incredible. But that kind outpouring of cash and support can often wind up in the wrong hands. Just like scammers preyed on donors after the Sept. 11 attacks and Hurricane Katrina, they’re also trying to solicit funds from folks who want to help Haitians.

But be cautious about giving a donation over the phone. “Never be pressured into making a donation on the spot,” said Janet Jenkins of the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP). “Legitimate charities won’t do that.”

Instead, look up the charity in the phone book or online and then decide if you want to contribute.

And don’t trust e-mail solicitations from people you don’t know who say they’re in Haiti and need money. Susan Bach of the Wisconsin Better Business Bureau (BBB) suggests using the BBB’s Wise Giving Alliance (www.bbb.org/us/charity), which reviews nonprofit charities. Check it before sending any money.

Mystery Shopping Scams

With so many people out of work—and so many people posting their résumés online—it’s easy to fall for this scam. Typically, Bach said, it begins with a letter announcing that you’ve been hired as a mystery shopper for a big corporation (scammers have abused the names of local businesses such as Woodman’s, Ashley Furniture, Briggs & Stratton and Manpower for this one). First, though, you must deposit a check so you have some funds to work with. Then you’re asked to test the services of a money-wiring company by sending money to Canada. Sadly, the check that was deposited was phony, and the “mystery shopper” is out the money he or she wired across the border.

“The checks are usually for several thousand dollars,” Bach said. “In Woodman’s case, they were very real-looking checks. They had an account number and they looked like they were professionally printed, except that they weren’t.”

The Grandparents’ Scam

Some grandparents in St. Croix County were swindled out of more than $19,000 by some particularly heartless scammers. The fraudster called the couple and said he was their grandson’s attorney and that the grandson was in an accident in Canada and hit a pregnant woman—now in a coma—and he needed money for her medical care and his bail.

“It was just a big ruse,” Bach said. “They convinced the grandparents to wire money on eight separate occasions to these people in Canada. Three of those wire transfers occurred on Thanksgiving Day.”

Bach said this is a relatively new scam that’s popped up all over the country. Beware.

Tax Time Scams

It’s that time of the year again—the time when scammers try various ways to capitalize on tax season.

Here’s one con: “People will get e-mails from what purports to be the IRS saying that they have a refund and they’re supposed to call a number or click on something and give personally identifiable information,” said Jenkins of DATCP. “But the IRS never contacts people by e-mail. They don’t contact people by phone. They write you a letter. Don’t buy into that type of scam.”

They’re just trying to get personal information.

Here’s another bad bet, although it’s legal: refund anticipation loans. Some tax preparers will offer to give their clients an instant refund—as long as they can take a chunk out of that refund for themselves.

But if you file online and can wait another 10 days or so, you can have your entire refund deposited directly into your bank account.

“Not only will e-filing get you your refund fast, but the majority of us can e-file for free,” said Christopher Miller of the regional office of the IRS. “If you go to IRS.gov, you’ll find 20 or so software providers you can use for free if you made less than $57,000.”

The IRS is offering free tax assistance on Saturday, Feb. 20, from 9 a.m. to 2 p.m. at its offices at 211 W. Wisconsin Ave. If you earned less than $49,000 last year, you can receive free tax preparation and electronic filing help. Otherwise, you can ask questions, get tax forms or request a payment plan if you can’t pay your taxes by April 15. If you want help preparing your tax return, bring a photo ID, your Social Security card, and all relevant documents.

Meaningless Discount Cards

Do some due diligence before signing up for special offers. For example, Jenkins of DATCP said some medical discount cards are pure fantasies. “You’ll see an ad or get something in the mail that indicates that if you purchase this discount card and pay ‘x’ amount of dollars per month then you can get up to 80% discount from all of these providers in your area,” Jenkins said. “The problem with many of them is that the providers who are listed never even heard of this company and certainly don’t offer discounts because you bought this card. You need to check things out and make sure of the ins and outs about things before you pay money for something.”

Debt Settlement Schemes

We’ve all been told that if you have outstanding balances on a number of credit cards, a wise thing to do is to consolidate your debt and pay it down in sensible amounts. That well-worn advice has led to a cottage industry of credit consolidation services. The problem, though, is that many credit counselors work for a for-profit company and earn hefty commissions on the folks they enroll. And the money paid to them doesn’t always go to one’s creditors.

Here’s how it works: A client will sign up with a credit consolidation or debt settlement company. The company will claim to be able to settle the debt for a fraction of what it’s worth, then set up a payment schedule with manageable monthly payments.

But here’s the catch: The first payments—a few months of payments, or even the first year of payments—go directly into the coffers of the company as its fee.

“The higher your debt, the more excited they get, because you’ll have to make bigger payments,” said attorney Michael Mack, who specializes in consumer debt forgiveness.

Later, the payments are split between the company and an account that will eventually go to one’s creditors once a sizable chunk has been amassed.

All the while, though, the creditors have no idea that the client has signed up for the debt settlement program—and, to make matters worse, the client has stopped paying off his or her credit cards and the balances increase. Oftentimes, the credit card companies sue the client for delinquent payments.

But aren’t these credit counselors certified?

“That means nothing,” Mack said. “They certify themselves.”

Instead, look for nonprofit credit counseling services, such as the Consumer Credit Counseling Service (CCCS) of Greater Milwaukee, which is affiliated with the United Way of Greater Milwaukee. (Go to www.creditcounselingwi.org for more information.)

Kathryn Crumpton, the agency’s manager, suggests asking questions first: Is the debt settlement company licensed in Wisconsin? Does it have a physical presence in the state? What are the fees? Does it offer financial literacy education?

“If there’s too much pressure, then you’re in the wrong place,” Crumpton said.

Credit Repair Services

Want to wipe some bad behavior off of your credit report? Don’t bother with hiring a credit repair outfit.

“They can’t do anything you can’t do,” Mack said. “The vast majority of these are scams.”

You can dispute information by writing to the credit reporting agencies. It will be taken off of your credit report for 30 days while the matter is investigated. If the information is inaccurate or cannot be verified, then it can be removed from your credit report. It takes some patience and effort, but it can be done without hiring someone to do it for you.