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Anatomy Of A Scam

How to recognize a fraudulent sales pitch before it costs you.

How to recognize a fraudulent sales pitch before it costs you.

As she picked up her home-office phone in Naperville, Illinois, Barbara Brabec's first impression was that the man's voice on the other end held sincere concern. He claimed to be calling from Visa International, then said, "I'll bet you don't know that if you give your credit-card number out over the Internet, you can't get your money back after 24 hours." This sounded like news to Brabec, who listened further as the man described a type of credit-card insurance he was willing to sell her for $3 per quarter or $12 per year. When he asked for her credit-card number, Brabec's intuitive credibility alarm kicked in. "I don't know you," she told him. "I need to check out your business further." The man gave her a toll-free number to call back--but told her she could only call at certain times."When I asked about the times, he said he had to free up the computer to get my file online."

Today Brabec, author of Homemade Money (see "Worth Reading" on page 10 for ordering information), a book that includes a section about homebased-business fraud, laughs at how close she came to becoming the victim of a scam. "When I tracked it down, I found he was using a business name that belonged to someone else," she says. "During the phone call, I'd also temporarily forgotten that even if somebody gets access to your credit-card number and makes fraudulent charges, the maximum fee you pay is $50. So no one would need credit-card insurance."

Many experts believe there are more business scams today than ever--and that many of these scams con homebased-business owners out of millions of dollars each year. Perpetrators design scams to appeal to the common concerns of all homebased entrepreneurs and include truthful elements to make the scams seem plausible. Scam artists' pitches are designed to resemble authentic businesses as closely as possible--often with names similar to well-known, established companies. The following suggestions may help you identify--and protect yourself from--homebased-business scams.

Many work-at-home scams claim it's possible to easily earn hundreds of dollars per week at home, in your leisure time. While some work-at-home plans are legitimate, many are not, says Howard Shapiro of the Federal Trade Commission (FTC).

"Home-employment schemes are among the oldest kinds of classified advertising fraud," says Shapiro.

"Consumers deceived by these ads have lost thousands of dollars in addition to time and energy." He explains that many ads don't say you may have to work many hours without pay, or that there may be hidden costs. Countless work-at-home schemes require you to spend your own money to place newspaper ads, make photocopies or buy the envelopes, paper, stamps and other supplies or equipment you need to do the job.

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This article was originally published in the July 1997 print edition of Entrepreneur with the headline: Anatomy Of A Scam.

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