Steer Clear of Work-at-Home Scams
Grow Your Business, Not Your Inbox
Kathy Ebarb of Stonewall, La., was having a difficult time locating a new position after losing her job last fall. She applied for at least 200 jobs, she says, and became discouraged. At 64, she worried her age was getting in the way.
Her daughter had a comfortable work-at-home position. Ebarb thought this type of situation would be a good way to make money on the side during her job hunt. She searched online business opportunities and e-mailed companies for more information.
Ebarb received a call back from a prospect she described as "an extremely good talker." She said he offered her the opportunity to earn money from a website.
The "four parts that were going to be on my website--Kathy's Travel, Shop n Play.com--were Amazon.com, Hotels.com, Make Money in 24 Hours and Windows Casino," she says. "Every time someone went on and made a bet I would get like $25 and then, depending on how much they bet, if they did $1,000, I would get 40 percent of that."
Ebarb claimed she was told to pay $298, a one-time special, for all four parts of the website. She paid. Family and friends she told expressed apprehension and urged her not to proceed. The next day she took their advice, canceled the purchase on her credit card and was able to get her money back.
Many victims aren't so lucky.
Working at home may offer benefits, such as flexible hours, but some businesses providing the opportunity are offering broken promises and false claims. Not only do they disregard the pay, they also play down costs for resources and "tutorials."
Consumer agencies have noticed a rise in seductive offers that have conned victims out of hundreds of dollars they can't afford to lose. Ebarb's complaint is one of many the National Consumers League has received. In fact, the league warns that nearly one in three consumers could be at risk for fraudulent work-at-home schemes.
"As the unemployment rate nears 10 percent, we expect more out-of-work consumers to explore the option of starting their own businesses, increasing their exposure and vulnerability to such business opportunity scams," Sally Greenberg, the league's executive director, told the Senate Consumer Protection, Product Safety and Insurance Subcommittee.
"The Better Business Bureau is very concerned about seeing a rise in instances of fraud targeting job hunters [in 2009] in light of the increase in the unemployment rate," says Alison Southwick, spokeswoman for the BBB. She made the comment despite the BBB's decline in complaints against work-at-home companies, from 3,662 in 2007 to 3,539 in 2008.
Work-at-home schemes traditionally have involved stay at-home moms, the elderly and the disabled. But as a result of the recession, "the net is cast much broader" and "there are larger pools of fish for these schemers to go after," Southwick says.
Fake check scams topped the NCL's recent semi-annual ranking of the top telemarketing and internet scams. The average victim loses $3,177.88, NCL found. Work-at-home schemes involving this type of fraud have occurred in two ways, according to the NCL. One method involves the perpetrators claiming that the victim will process checks from their "clients." The victim deposits checks and then wires money minus his or her "pay" to the perpetrators. The other method involves the perpetrators sending the victim a check "by mistake" for more than the victim earned. The scammers request that the victim wire them the excess. In both cases, the bank makes the funds readily available, but when the check is processed it isn't any good.
Fake franchises and distributors were listed as the sixth most highly reported scam. These scams typically appear in e-mail advertisements to "be your own boss" and make big profits.
Classic scams have become more common, including product assembly and medical billing, says John Breyault, the NCL's vice president of public policy. Product-assembly schemes, such as putting together craft baskets, occur when a person pays upfront for the assembly kit and receives shoddy materials or items that weren't requested. Medical billing scams involve the perpetrator describing a list of doctors in need of people to help with medical billing. The person pays to get the list of doctors, but all the scammer did was copy the Yellow Pages.
Although classic scams have increased, a new wave of internet work-at-home scams is becoming more prevalent. Before, internet scams persuaded people to pay for CD-ROMs or training materials that would teach the victim how to make money by sending e-mails out to people--basically spamming people, Southwick says. Now scammers promote training materials that teach a victim how to make money with Google. The items and websites feature the Google logo and messages--for example, "as seen on CNN"--to make the business appear legitimate.
"You have to pay for shipping and handling, which is mainly $1.99, and then you are supposed to receive your CD-ROM," Southwick says. "What's buried in the fine print, though, is the fact that you are going to start getting billed, say, $100 dollars every month from the day that you request the CD. You may not even get the CD-ROM and have a chance to review it before you start getting billed." The CD-ROMs are worthless in any case, Southwick says. All the victim is supposed to do is pay for Google ads and earn commissions.
As a single woman with a mortgage, Alexandra Durham of Nashville, Tenn., wanted to have a backup plan. "Things were getting dicey at work, and I was scared," Durham says. She responded to a Google work-at-home ad.
"Instead of having a backup plan, I was taken for a ride," Durham says. "I went into my credit card and saw all these charges; it just blew me away. One charge was eightysomething dollars, another charge for seventysomething dollars, and then I had all these charges for foreign transaction fees. Come to find out these people were overseas." She went through months of disputes to get charges totaling nearly $160 off her credit card.
You can protect yourself from these fraudulent work-at-home companies. The Federal Trade Commission, the BBB and other consumer agencies advise the following tips:
- Watch out for heavily advertised business opportunities that offer lots of money for very little work, no experience, no risk and that demand immediate action. Also, be wary of opportunities offered in spam e-mails and high-pressure sales tactics.
- Examine the ad's disclosures and learn about the business's performance.
- Prior to getting involved ask:
What tasks will I have to perform?
Will I be paid a salary or will my pay be based on commission?
Who will pay me?
When will I get my first paycheck?
What is the total cost of the work-at-home program, including supplies, equipment and membership fees?
What will I get for my money?
- Get everything in writing, especially if the opportunity is $500 or more.
- Find out if the company has received complaints by contacting local and government authorities, such as a local consumer protection agency, the attorney general's office, the FTC and the Better Business Bureau.
- Try to conduct interviews with the business promoter in person at the place of operation.
- Get recommendations from several people and try to meet them in person as well.
- Contact an attorney, accountant or other business advisor.
If you do suspect fraudulent activity:
- Request a refund.
- Let the perpetrators know you are contacting the authorities.
- Resolve a dispute and file a complaint with authorities including the local postmaster and the advertising manager of the publication where the ad ran.
Places to file a complaint: