What would you say if someone...
- Called on the phone and offered a free gift, just for allowing them to verify your credit card number and expiration date?
- Showed up at your door on a spring day and quoted a bargain price on repairing the roof or sealing the driveway "because the materials were left over from a big job in the neighborhood?"
Tried to sell you extra health insurance, claiming that your present policy and Medicare will not cover nursing home care?
A Few Good Answers
- I have to check with the Police Department or Better Business Bureau first.
- No, thank you.
- I want to think it over for a few days.
I need to talk to my family and my lawyer before I decide.
A Guide to the Classics
Two strangers tell you they have found a large sum of money or other valuables. They tell you they will split the good fortune with you if everyone involved puts up "good faith" money. You turn over your cash, and you never see your money or the helpful strangers again.
A so-called bank official asks for your help to catch a dishonest teller. He asks you to withdraw money from your account and turn it over to him so he can check the serial numbers. You do and you get a receipt, but your cash is gone. No legitimate bank official would ever ask you to withdraw your money.
Someone offers you a painless way to make money. You invest a certain amount and solicit others to do the same. They then solicit others, and so on...like a chain letter. This is the Pyramid Scheme. Sometimes the initial investors are paid a small dividend, but when the pyramid crashes--and it always does--everyone loses, except the person at the top who has just skimmed off everyone's money and never invested it.
Shortly after the death of a relative, someone delivers a leather-bound Bible that your deceased relative allegedly ordered. Or you get a bill in the mail for an expensive item on which you must make the payments. The Funeral Chaser uses obituary notices to prey on bereaved families. Remember, you are not responsible for anyone else's purchases, and all legitimate claims will be settled by the estate.
Bargains that Aren't Bargains
A "free" inspection uncovers needed repairs that will cost thousands of dollars. Or a contractor comes to your home and offers a special half-price deal on a roof because he has extra materials from another job. These are favorite tricks of dishonest firms or individuals who victimize homeowners.
Always get several estimates for any major work, and don't allow yourself to be pressured into accepting a one-day-only offer. Ask for references and check them out. Verify that the names, addresses, and phone numbers provided as references are legitimate. They could be giving you the phone number of a friend of theirs.
- Get a written contract, and make sure you understand its provisions.
Never pay for work in advance. Withhold payment until the job is completed. Pay by check, not cash.
The cause sounds worthy and the solicitor is sincere, but it's a charity you've never heard of, or its name sounds like that of a well-known charitable group. Before you give:
- Ask for identification on both the charity and the solicitor.
- Find out the charity's purpose, how funds are used, and if contributions are tax deductible.
- Ask what percentage of your donation goes toward the cause and what percentage goes toward administrative costs.
- Call the State Department of Consumer Affairs to see if they are authorized to solicit in your state.
- Never let them pressure you into donating.
If they are a legitimate organization, they can wait for you to make an educated decision. If you are not satisfied with the answers and feel something isn't quite right, don't give.
Regardless of the name given, pyramid schemes are illegal. It is usually implied or stated the scheme is perfectly legal and has been approved by an attorney; however, there is no verification submitted for this claim. In fact, it has been represented by promoters of such schemes that the Attorney General has declared the scheme legal. These assertions could not be further from the truth.
According to the Office of the Attorney General of the State of California, "Every person who contrives, prepares, or operates any endless chain is guilty of a public offense which can be punished by imprisonment in the county jail not exceeding one year or in state prison for 16 months, or two or three years."
Pyramid schemes are illegal in California. They are a form of theft. It is mathematically impossible for everyone who enters to recover their investment, let alone make a profit. It is inevitable that at some point there will not be enough new recruits to the scheme to pay back those who have paid.
Organizers of the schemes typically avoid referring to them as pyramids and are unlikely to provide detailed descriptions of the exact process by which the money is made.
Women Helping Women Scheme
In recent years, there have been "empowering" techniques used by a new pyramid scheme in the called "women helping women." Other names for this scheme include:
- Women Empowering Women
- The Dinner Party
- The Gifting Club
- Women Gifting Women
- Circle of Friends
If you participate in this type of scheme you'll see that they quickly collapse, leaving many with little chance of recovering their money. This is just a con game, preying on people's belief that they can make money quickly.
Please do not be fooled by the " gifting " terminology, the exclusive invitations, or the quick return promises you may be offered. Your money is hard-earned; be careful with it!
Dinner Party Scheme
In the Dinner Party scheme, individuals are invited to the table. Guests are solicited for as " little" as a few hundred dollars or as much as $5,000 (at the "appetizer" or "soup and salad" level). At the "dessert" level, they promise an inflated payoff, and guests are enticed with stories alleging a profit is returned within as little as a month.
In order to achieve the promised profits, a continuous chain of participants must be recruited. That is what makes this an illegal pyramid. The scheme soon runs out of new participants and the house of cards comes tumbling down. California Penal Code Sections 327 and 484 prohibit endless chain and pyramid schemes.
Remember, don't be fooled by any of these schemes. Hold on to your hard-earned money!
Rule to live by: If it sounds too good to be true... it probably is.
Over the last several years, our nation has made enormous progress in expanding access to capital for previously under served borrowers. Despite this progress, however, too many families are suffering today because of a growing incidence of abusive practices in a segment of the mortgage lending market. Predatory mortgage lending practices strip borrowers of home equity and threaten families with foreclosure, destabilizing the very communities that are beginning to enjoy the fruits of our nation's economic success.
If you believe you have been a victim of predatory lending practices there are Federal agencies that can help. Please refer to the list of agencies below and contact the organization or agency that you think can help address your specific problem.
Protect yourself from predatory lenders:
For information about loan fraud and advice about preventing it, see "Don't Be A Victim of Loan Fraud" under the external links below.
Local information on predatory lending:
See "Local Resources" under the external links below to help you avoid being a victim of predatory lending.
Review the FBI "2010 Mortgage Fraud Report Year in Review" (Pulished August 2011)
California Department of Consumer Affairs - http://www.dca.ca.gov
Better Business Bureau in Stockton - http://www.stockton.bbb.org
US Department of Housing and Urban Development - http://portal.hud.gov/portal/page/portal/HUD
US Department of Housing and Urban Development - Don't Be A Victim of Loan Fraud (English)
US Department of Housing and Urban Development - los préstamos abusivos (Spanish)
US Department of Housing and Urban Development - Local Resources
This City of Stockton webpage last reviewed on --- 8/15/2011