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Charity Fraud

FRAUDULENT fundraisers take advantage of donors' goodwill by misrepresenting who they are and what they do with the money they raise. To collect money from sympathetic individuals, solicitors often pick such popular charitable causes as support for police or firefighters and their families, or for veterans or terminally ill children. They also take advantage of such current events as the war in Iraq or the terrorist attacks of Sept. 11, 2001.

Consumers can ensure their donations benefit the people and organizations they want to help by calling the charity to find out if it's authorized the use of its name and is aware of the solicitation. Also ask what percentage of the donation will be used to support the causes described and what percentage will be used for administrative costs. Contributors should get a receipt that shows the amount of the contribution and states it is tax deductible.

Credit-Repair Scares

ALLEGED credit-repair services claim the ability to erase bad marks from a consumer's credit history or to create a new credit identity, which is illegal. Such companies cannot do anything for consumers that consumers cannot do themselves at little or no cost, and they often charge high rates before services have been delivered. Many such companies vanish with consumers' money without delivering service. The most reliable way to clean up a credit history is to work with counselors in arranging a realistic repayment plan.

Debt Negotiations

DEBT negotiators and debt-settlement companies offer to cut consumers' bills in half by negotiating lower payoff amounts with customers' creditors. Often they tell customers to stop paying creditors and to send the money to them instead. The money gets placed in an account until the negotiator decides to make an offer to the credit card company. Meanwhile, the customers' accounts go unpaid and their credit is trashed.

Creditors often write off debt if no payment has been made for 180 days or six months. A write-off remains on consumers' credit reports for seven years plus 180 days from the date of the first nonpayment. So even if the negotiator manages to reduce the credit card balance, the consumer is still stuck with bad credit. A write-off may also cause problems with the Internal Revenue Service, because the amount of forgiven debt is viewed as income to the borrower.

Debt negotiators are also known to charge high fees. On top of application fees, they charge processing fees and demand a percentage of the money customers supposedly save when negotiators lower credit-card balances.

Employment and Work-at-Home Schemes

EMPLOYMENT scams usually end up costing people money rather than making them money. Employment ads boast high pay in fast-growing industries for those who want to work at home. Classic employment schemes range from medical billing to envelope stuffing and assembly or craftwork.

These ads don't disclose that consumers are often required to pay for instruction, equipment and supplies, and work many hours with no pay. Also, "employees" are responsible for selling their products. Promoters of these seams target people searching for family-friendly employment or who have low incomes. Ask yourself: If working at home is so easy and profitable, why isn't everyone doing it?

Identity Theft

THE Federal Trade Commission has named identity theft the fastest-growing white-collar crime today. Also called identity fraud, the crime occurs when thieves steal personal information with the intent to assume--or sell--another person's identity.

Thieves are after names, addresses, financial account numbers, Social Security numbers, dates and places of birth, tax records, cancelled checks and credit-card statements. They use these stolen identities to obtain credit from banks and retailers, steal money from existing accounts, apply for loans, establish accounts with utility companies, rent apartments, file bankruptcy, obtain jobs or apply for Social Security benefits.

Most identity-theft victims don't know thieves have made a mess of their good names and credit histories until banks deny them home loans or auto financing. For more information on identity theft, go to www.soldiersmagazine.com for Volume 4, No.2, of Hot Topics.

Internet Auctions

SOME online marketplaces promise merchandise at cheap prices but fail to deliver the items or send low-quality goods. Consumers should check out retail prices to see if prices are too good to be true, and check out the seller's reputation. While credit-card purchases can be disputed, be sure purchases made online are done on secure sites.

Investment and Financial Scares

FRAUDULENT investment promoters claim they can offer high returns and no-risk deals. But no financial investment is risk-free, and a high rate of return usually means greater risk.

Investment promoters feign high-level financial connections and pose as stock brokers or portfolio managers. They may create false statistics and offer share, mortgage or real estate investments; high-return schemes; option trading and foreign currency trading.

The Better Business Bureau suggests consumers take the following precautions when approached by anyone selling an investment opportunity:

* Take your time before investing money. Don't be pressured into buying. Be wary if you are urged to "buy now or forever lose your opportunity to profit."

* Research the investment opportunity. It's unlikely you will make money in a business deal you can't understand or verify.

* Before investing in stocks, bonds or mutual funds, get written financial information such as a prospectus or manual report, and inquire about fees for services.

* Learn about the company's reputation. Verify the data with impartial, outside sources. Is the company licensed in your state? Has it had run-ins with regulators or received serious complaints from investors? Contact the Better Business Bureau for a reliability report on the company.

* Invest only in offers you know something about.

* Ask about fees for establishing, changing and servicing your account. Also ask how the investment adviser is being paid--at an hourly rate, flat fee or commission that depends on your investments.

* Be skeptical and cautious about unsolicited phone calls concerning investments.

* Don't believe everything you read or assume it is legitimate.

* Don't send money by overnight delivery or wire transfer, or authorize a credit-card payment or automatic debit from your bank account by anyone you don't know.

* Talk to the previous owners of an asset or business you're acquiring to determine its value history.

* Discuss all investment ideas and plans with an accountant or an adviser you know and trust.

Life-Insurance Fraud

LIFE-insurance fraud ranges from the sale of nonexistent or overpriced insurance to the sale of policies incorporating restrictive clauses that limit payment.

Individuals selling life insurance to soldiers must follow Department of Defense Directive 1344.7, "Personal Commercial Solicitation on DOD Installations," and Army Regulation 210-7, "Commercial Solicitation on Army Installations." Prohibited practices include attempting to sell insurance to soldiers without appointments or during duty, and claiming DOD sponsorship or endorsement.

Soldiers should seek third-party review for life-insurance policies through local legal-assistance offices or other qualified individuals. They should also compare policies from various companies.

Many financial planners do not recommend soldiers invest in nonmilitary insurance since service members have access to government-sponsored Service Members' Group Life Insurance for about $12 a month.

Loan Scams

THE variety of consumer loans makes it important for consumers to understand the terms and conditions before applying for loans.

Consumers who have trouble getting credit may be lured by advertisements for advance-fee loans. Companies advertising these services pretend to offer loans without considering the consumer's credit history, then ask for an up-front fee and never deliver the loan. Legitimate lenders usually do not require processing fees, although they may require appraisal and credit-report fees after applications are completed or approved.

According to the Federal Trade Commission's Telemarketing Sales Rule, it's against the law for any person or company to ask for or accept payment for arranging a loan or other form of credit before the consumer receives the loan or credit.

Payday loans are somewhat similar to advance-fee loans, and are among the most expensive ways of borrowing money. Also known as cash-advance loans, check-advance loans, post-dated check loans or deferred-deposit check loans, such loans offer borrowers a certain amount of money in exchange for personal checks written for the borrowed amount in addition to high borrowing fees. The lenders agree to not cash the checks until the borrower's next payday.