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Telemarketing can be a convenient way to learn about products and services and to make purchases without leaving the comfort of your home. But consumers should be aware: while many telemarketers represent honest, reputable companies, there are others who will attempt to take your money.

The Federal Trade Commission (FTC) estimates that fraudulent telemarketers swindle American consumers out of more than one billion dollars each year. They promote everything from useless water purifiers to interests in nonexistent oil wells.

HOW TELEMARKETING SCAMS WORK

The heart of the telemarketing operation is usually centered in a "boiler room," a rented office space filled with desks, telephones, and experienced salespeople. These people spend their days talking to hundreds of potential victims all across the country. Older consumers, who may be lonely and trusting and may have savings, may be particularly vulnerable to con artists.

Fraudulent telemarketers and sellers may reach you in several ways, but the telephone always plays an important role.

* Cold calls. You may get a telephone call from a stranger who got your number from the telephone directory or a mailing list. A telemarketer calling from a boiler room may know, through a mailing list, your age, income, hobbies, marital status, and other information -- all to help personalize the call. This is the classic telemarketing scam.

* Direct mail. You may receive a letter or a postcard saying you have won a prize or contest, which often is a front for a scam. You are told to return the postcard with particular information. If you do, you will be called by a salesperson using persuasive sales pitches, scare tactics, and exaggerated claims to deceive you and take your money.

* Broadcast and print advertisements. You may make the telephone call yourself in some cases, in response to a television, newspaper, magazine advertisement, or a direct mail solicitation. However, just because you make the call does not mean the business is legitimate or that you should be any less cautious about buying or investing over the phone.

A con artist may try to get your credit card or checking account numbers using any one of these methods. Remember, do not give your credit card number or your checking account number. over the phone unless you are familiar with the company and know it is reputable. A fraudulent telemarketer may put a charge against your credit card without your authorization. Or the telemarketer may do an automatic debit scam.

AUTOMATIC DEBIT SCAMS

These scams involve unauthorized debits (withdrawals) from your checking account. You may get a postcard or a telephone call saying you have won a free prize or can qualify for a major credit card. If you respond to the offer, the caller may ask you to read off all of the numbers at the bottom of your check. Sometimes you may not be told why this information is needed. Other times you may be told this account information will help ensure that you qualify for the offer. And, in some cases, the caller may explain this information will allow them to debit your account and ship the prize.

The fraudulent telemarketer places your checking account information on a "demand draft," which is processed much like a check. However, unlike a check, the draft does not require your signature. Your bank then pays the telemarketer's bank. And, you may not learn of the transaction until you receive your bank statement.

How to Protect Yourself

Automatic debit scams involve a fraud that is hard to detect, but there are some precautions you can take. Do not give your checking account number over the phone in response to solicitations from people you do not know. If anyone asks for your checking account number, ask them why they need this information. And, ask to review the company's offer in writing before you agree to a purchase. For more information on this scam, write for the free FTC brochure, Automatic Debit Scams.

'900' NUMBERS

The use of "900" telephone numbers is a new twist in telemarketing. By dialing a "900" number you can: order products; get financial tips; talk to a willing stranger; and more.You usually pay a flat fee for the entire call or are charged for each minute you stay on the phone.

Using "900" numbers can be a good way to do business or get information if you know exactly what you are getting and how much you will be charged. Nonetheless, the FTC is receiving and investigating complaints that some consumers have been charged excessively for "900" number services or have not received the services advertised.

How to Protect Yourself

Be wary of "900" number advertisements, usually found in newspapers or on television, that fail to disclose clearly the cost of the call or make it difficult to determine the total cost. Also be cautious of appeals that entice you to call a "900" number for a "free" gift. Check your phone bill carefully for any "900" number charges.You can learn more about such telemarketing scams by writing the FTC for the free brochure, '900' Numbers: New Rule Helps Consumers.

'GOLD' AND 'PLATINUM' CARDS

Marketers of "gold" or "platinum" cards may promise in their ads that by participating in their credit programs, which might have an initiation fee of $50, you will be able to get major credit cards and improve your credit rating. But generally, this is not the case. Many of these credit card marketers -- who often target people in lower-income areas through direct mail, television, or newspaper ads featuring "900" numbers -- do not report to credit bureaus. And rarely can they help you to secure lines of credit with other creditors. In fact, some of these cards only allow you to purchase merchandise from the marketer's own catalogue -- and only after you have paid an extra charge.

How to Protect Yourself

Be skeptical of plans promising to secure major credit cards or erase bad credit. Contact your local consumer protection agency or the local Better Business Bureau (BBB) to learn if any complaints have been lodged against a particular marketer of "gold" or "platinum" cards. And be aware that unless marketers subscribe to credit bureaus, they are unable to report any information about your credit experience. For more information about "gold" and "platinum" credit card scams, write for the free FTC brochure, 'Gold' and 'Platinum' Cards.

LAND SALES SCAMS

Con artists may entice you to buy undeveloped or partially developed land through newspaper advertisements that promise attractive vacation or retirement locations. If you call the advertised number, high pressure sales agents also may "guarantee" that the land's value soon will increase. And to pressure you into making a quick buying decision, sellers may warn you about rising prices or competition from other buyers. However, once you sign a contract, you may discover that the seller's promises about the value of your land were greatly exaggerated.

How to Protect Yourself

Inspect any piece of property before buying. Contact local real estate agents, the county recorder of deeds, and the tax assessment office to learn more about local land values. Also, contact the local or state consumer protection office where the land is located to find out if any complaints have been filed against the real estate developer or sales agent. You can learn more about fraudulent land sales schemes and ways to avoid becoming a victim by writing for the free FTC brochure, Land Sales Scams.

TELEMARKETING TRAVEL FRAUD

These scams have many variations and often involve travel packages that sound legitimate. You may get a phone call or a postcard saying that you have been selected to receive a free trip. The card will tell you to call a toll-free or "900" number for details. On the phone, skilled salespeople will tell you, to be eligible for the free trip, you must join their travel club. Later, you may find another fee is required to make your reservation and you will have a telephone charge if you used the "900" line. In the end, you may never get your "free" trip because your reservations are never confirmed or you must comply with hard-to-meet or expensive conditions.

How to Protect Yourself

While it is sometimes difficult to tell a legitimate travel offer from a fraudulent one, there are some precautions you can take. Always be wary of "great deals," and before you pay for the trip, ask detailed questions that should give you clear answers. Ask for the travel offer in writing, so you can check details. You can try to check the reliability of the travel company by calling your local consumer protection office or the local BBB, but remember, they cannot vouch for the company, but only can tell you if they have any complaints logged under the company name. Learn more by writing for the free FTC brochure, Telemarketing Travel Fraud.

TELEPHONE INVESTMENTS

Typical investments sold by fraudulent telemarketers include coins, gemstones, interests in oil wells and gold mining operations, oil and gas leases, and the sale of precious metals such as gold and silver. Con artists direct their sales pitches to the universal desire to make money with little risk. A caller usually will say that you have been specially selected to participate in an unusual investment opportunity. The caller often requires that money, sometimes thousands of dollars, be transferred immediately because the "market is moving."

How to Protect Yourself

Be wary of telephone investment opportunities that are guaranteed to be risk-free and provide a high return. Before you give anyone your money, it is best to get written information about an investment, to invest in businesses you know something about, and to discuss the matter with a knowledgeable person. You can learn more about individual investment frauds and ways to protect yourself by sending for the free FTC brochures, Telephone Investment Fraud and Dirt-Pile Scams: Mining for Gold.

MAGAZINE TELEPHONE SCAMS

With this scam, an unscrupulous telemarketer may use a variety of methods to trick you into purchasing multiple-year magazine subscriptions you really may not want or could purchase elsewhere for less. Initially you may receive a postcard that asks you to call a telephone number about a contest, prize, or sweepstake entry. When you call, you may get some information about contest prizes, but you also may find the conversation turns into a sales pitch about buying magazine subscriptions.

Be aware that telemarketers may avoid identifying themselves as magazine subscription salespeople. They also may encourage you to make magazine purchases without giving you total costs. Further, they may say they are "approved" or "regulated" by the government when, in fact, no government agency approves magazine-selling operations.

How to Protect Yourself

The best precaution against unscrupulous sales presentations is to be suspicious when anyone tries to sell you a "bargain" or give you something "free" over the phone. Ask for what individual subscriptions cost, the total cost of your order, and the length of subscription times. Before you buy, check their subscription cost against another seller. To learn more about ways to protect yourself, write for the free FTC brochure, Magazine Telephone Scams.

WATER TESTING SCAMS

Some fraudulent telemarketers may get you to buy a water treatment unit by questioning the safety of your drinking water through advertising or direct mail. Others may offer you water purifiers as part of a prize promotion. They may notify you, either by mail or telephone, that you have been selected to win an expensive prize. However, in order to qualify for the prize, you need to buy a water treatment unit, which sometimes costs hundreds of dollars. Later, you may discover that both the prize and water purifier are of little value.

How to Protect Yourself

Learn about the quality of your water before purchasing any type of water treatment system. Check with your local water superintendent. Avoid "free" home water tests as they are almost always part of a sales promotion. Be wary of sales claims about government approval. The government does not endorse water tests or water treatment products. For more information about ways to protect yourself, write for the free FTC brochure, Water Testing Scams.

ART FRAUD

This scam involves the sale of counterfeit art prints of famous artists. You may get something in the mail describing a contest or a drawing for a free original lithograph by a famous artist. To participate, you are asked to return an enclosed postcard with particular information. Later, when you are contacted for more information, the caller will talk to you about buying art as an investment. If you agree, you may pay anywhere from $500 to $3,500 to receive art work valued at no more than $50 or the equivalent of a poster.

How to Protect Yourself

Get professional advice before purchasing any work of art and do not buy any art work sight unseen. Be suspicious of "guaranteed" investment returns, authenticity claims, and high-pressure sales tactics. For more information about fraudulent art scams and ways to avoid becoming a victim, write for the free FTC brochure, Art Fraud.

IF YOU HAVE A COMPLAINT

Always try to resolve complaints with the company first. If that does not work and you believe you have been defrauded, contact your local consumer protection agency or the BBB to report the company. You can get telephone numbers for your state and local consumer protection offices or local BBB by looking in your telephone directory.

You also may contact the National Fraud Information Center at 1-800- 876-7060, 9a.m. - 5:30p.m. EST, Monday - Friday. The Center is a private, non-profit organization that operates a consumer hotline to provide services and assistance in filing complaints. It forwards appropriate complaints to the FTC.

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excerpted from Federal Trade Commission material -- April 1994

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