This article is taken from Merryn Somerset Webb’s free weekly personal finance email, Money Sense. Click here to sign up now: Money Sense
The many warnings about scams issued by our retail regulator, the Financial Services Authority, are clearly not working – as Paul Gunter and his daughter recently proved by duping 15,000 hapless Brits, mostly pensioners, into buying over £35m of utterly worthless shares in dormant US companies. A particularly unlucky few were conned into cashing in savings accounts, life assurance policies and even property worth up to £1m.
How? Sadly the technique the duo employed was the usual combination of hard sell over the phone and sheer persistence – like other scammers Paul and his daughter did not easily take “no” for an answer. They now face prosecution and up to 25 years in prison but that’s little comfort to anyone who has had their hard earned savings decimated.
With scammers able to target potential victims both over the phone and increasingly over the internet too, the scam statistics for just the UK alone are getting scary – the Office of Fair Trading estimates that up to 3m unwary Brits succumb to a variety of scams to the tune of £3.5bn per year.
And although a “typical” victim is male, aged over 50 and lives in the south east of England, no one is immune – scammers can be both smart and imaginative in dreaming up schemes that will line their pockets at your expense.
Sure, there are people out there employed to stop them such as the Trading Standards “scambusting” teams and the FSA itself, which polices UK financial services firms. The problem is they often only find out about a scam after consumers who have been ripped off contact them. Even then, they may only have limited scope to go after scammers who choose to base themselves overseas.
So, the safest bet is not to assume others will prevent you becoming the next victim. First off, be alert – see our summary of some of today’s most prevalent scams below. Then remember the golden rule – if an offer made by phone, email or on a website sounds too good to be true, it almost certainly is. Ignore it and then ideally flag it to the FSA on 0845 606 1234 so they can get the scammer shut down.
Fake prize draws
The OFT reckons around 1 million of us are scammed this way every year. You may be targeted by phone, post or email but the premise is always roughly the same – you have been miraculously selected for a major prize and the scam is based around how you collect it.
Options include a hideously expensive premium phone line or even sending money overseas to cover “administration” costs. More elaborately you may simply be invited to attend a seminar where you will be persuaded to part with a much larger sum to join a bogus holiday club or property scheme.
Advanced fee frauds
This scam usually kicks off with an email, or perhaps a phone call, suggesting you can help a, typically African, businessman to make a large funds transfer arising from a spurious windfall sale of government assets or perhaps even a newly discovered secret fund operated by a former dictator. All you have to do is supply bank details or make a payment to help with “taxes” or “bank charges”. Don’t be tempted.
Closer to home, you may be invited to join a “work from home” scheme or take out a home loan on very preferable terms. The give away in all cases is the requirement to send cash up front before you have received anything in return.
Boiler rooms
This is the name given to pressure selling, Paul-Gunter style, so called because it is often done from small rooms in hot countries. Usually the scheme involves you buying what turn out to be fake, worthless shares on the promise of huge returns that everyone else has somehow failed to spot.
The harsh reality is there are no guaranteed fast tracks to riches – successful share investing takes time and experience, not a single phone call or even a seminar, should you be invited to one.
Don’t be polite – if you are contacted by someone you don’t know who then launches a charm offensive or starts making unrealistic offers, hang up immediately.
Fake shopping websites
Highlighted recently by the BBC’s Watchdog program on Monday, these are tough to spot. Anyone can set up a bogus site, for around £60, offering anything from gift ideas to sports equipment. Everything on the site will be priced competitively and the owner may even offer a “Paypal” secure payment link. The trick is simple; you enter you card details, a payment is made, no goods arrive and later the site is shut down.
So, what to do? In a nutshell, what shoppers like doing best – shop around. Check prices before you buy and be suspicious of unduly cheap products. If in doubt stick with known online retailers such as Amazon or the websites of major stores.
Bank detail requests
Watch out for any unsolicited request for your bank details. A current favourite in the US is a “consultant” offering to help you reclaim tax credits provided you supply personal data up front. Here, scammers have targeted victims by offering help with complex endowment policy claims or personal injury claims. Others will claim to work for your bank and want to check account security details or perhaps initiate a password change.
Don’t be duped – if in doubt, don’t give away personal data, especially your bank account details, and instead contact your bank directly to verify if they are trying to contact you about anything.
Overall, remember that today’s scammers are often clever, persistent and creative. So, it’s best not to assume you are “not the kind of person who falls for scams” (especially if you happen to be a 50-year-old male living in the south east). And as I’ve already mentioned, never ever forget the golden rule – if it sounds too good to be true, it almost certainly is.
This article is taken from Merryn Somerset Webb’s free weekly personal finance email, Money Sense. Click here to sign up now: Money Sense