New survey bites back at 'free lunch' seminar scams

I don’t know about you, but whenever I get one of those “free” lunch or dinner invites in the mail from some financial services outfit, I can’t throw it away fast enough. Sometimes I want to use tongs.

But lots of people apparently take up the offer. Some 6 million Americans have attended one of these cringe-worthy events in the past three years, according to AARP and the North American Securities Administrators Association (NASAA). 

Typically billed as educational seminars, the lunches and dinners often tend to be little more than sales pitches for inappropriate, high-commission products—or worse.  A joint survey released today by AARP and NASAA reports that 40 percent of respondents who attended one (all Americans 55 and older) said the presenter tried to sell them something during or after the seminar. And it doesn’t end with dessert: 46 percent said the presenter tried to make a follow-up appointment at their home.

If you or anybody you know are ever tempted to take up a free-meal offer, here's some food for thought: 

• The AARP/NASAA survey referenced above.
• Some related news from the Securities and Exchange Commission (SEC).
• Advice from Consumer Reports on avoiding investment scams, including those that involve a supposedly free meal.  — Greg Daugherty

Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.

Phishing crime's up nearly 600%. Don't get hooked!

Criminal "phishing" attacks have risen by nearly 600 percent this year, according to a report from the Anti-Phishing Working Group, an association of financial institutions, online retailers, law enforcement, security and research groups that have combined forces to fight Internet crime.

Phishing is typically carried out by e-mail, instant messaging or text messages that appear to be from banks, online retailers or auction sites. Phishers are using increasingly sophisticated techniques to trick people into divulging information, usually by directing them to a fake website that appears nearly identical to the legitimate site. 

Earlier this month, for instance, the FBI announced it had arrested 100 members of an international criminal ring that used e-mails to direct banking customers to phony bank Web sites, where they were asked to provide account log-ins, passwords and other information the crooks then used to raid their bank accounts.  Victims included thousands of customers at U.S. banks, including Wells Fargo and Bank of America, according to the industry trade publication Bank Information Security.

Who would be naïve enough to be tempted by phishers’ bait?  For starters, how about the highly-security-conscious head of the law enforcement agency that just made that 100-cybercriminal bust (which is now being referred to as the “phish fry”)?  In a San Francisco speech announcing the arrests, FBI Director Robert Mueller said that he’d recently received an e-mail purporting to be from his bank asking him to verify some information about his account.  It looked so legitimate that he started to respond, and was only a few clicks away from being hooked when he suddenly realized this was a classic phishing scam.

Latest phishing scam: Mobile text message from bank

Paul Eng, our electronics blogger, recently discovered a new phishing phenomenon: a mobile text message posing as a legitimate communication from his bank. He was sharp enough to know something was phishy, and avoided the potential scam. 

The incident underscores the need for vigilance in all your communications, particularly with merchants, financial institutions, and government agencies. As the holiday shopping season rolls around, it's a good time to review these cautions to prevent identity and data theft, outlined by the Federal Trade Commission. 

Variable annuities may be getting even worse

Regular readers of Consumer Reports will know that we’ve never been big fans (or even small fans) of variable annuities, insurance contracts that promise you payments based, in part, on the performance of whatever mutual funds you pick when you sign up. 

So we were interested to see this Wall Street Journal article on variable annuities the other day, indicating that many insurers may be reducing the guarantees on their products, making them an even worse deal for consumers.

While annuities have a tax advantage over conventional mutual funds, in that your earnings are tax-deferred until you take money out, they also have some serious drawbacks. Those typically include high sales charges and considerably higher annual fees than regular mutual funds, plus punishing surrender charges if you need to get your money out early.  And don’t even get us started on the aggressive sales tactics often used to push them.

The only reasonable case we can see for buying an annuity is if you don’t have access to other tax-deferred accounts, such as a 401(k) plan or an IRA, or if you have already maxed-out on them. If you must buy one, be sure it’s from a really solid insurer. 

Subscribers to our Consumer Reports Money Adviser newsletter will find a more comprehensive analysis of variable annuities in their December issue.  

Buzzword: Fiduciary standard

What does it mean? Financial advisors who follow a fiduciary standard are required to put the needs of clients first. They must fully disclose how they are compensated, and any conflicts of interest they might have. Registered Investment Advisors (RIAs) have such a duty, and are registered with Securities and Exchange Commission. Members of the National Association of Personal Financial Advisors and Financial Planning Association have taken similar oaths or adhere to codes of ethics. The vast majority of brokers, however, many of whom work for the large brokerage houses, have no fiduciary duty. The commissions they earn for selling investments may lead them to promote their own company's products or ones that earn them the most money. Their loyalty is to their company first, not to you. Advisors with a fiduciary responsibility, however, forgo commissions and often are fee-only, meaning they charge a flat fee or charge based on a percentage of assets under management.

Why the buzz: This slightly arcane subject has taken on new importance in light of the market meltdown of 2008. Some of the stock brokers or other investment professionals on whom people relied for guidance in making financial decisions may have not provided the best advice (one of the charges in lawsuits against Bernie Madoff was "breach of fiduciary duty"). Brokers have the duty to ensure the "suitability" of investments for their clients, but critics say that standard doesn't necessarily restrict fee-laden investments or place clients in investments that correspond with their tolerance for risk. As a result, Congress is this week discussing how to introduce more transparency into the world of financial advice as part of the Investor Protection Act of 2009 and potentially bring all people who dispense investment advice under a fiduciary standard. Whether the job of creating new regulations for investment planners will fall to Congress, the SEC, or independent regulator, FINRA, remains to be seen. For advice on screening a broker, check Consumer Reports' advice here.–Chris Fichera

Electronics prices too good to be true? That's because they are.

Sometimes when you’re shopping online you’ll come across prices that are so much lower than anyone else’s, it’s hard to believe they’re real.

That may be because they’re not.

Some retailers, especially some online electronics stores, post ridiculously low prices. Shoppers who bite typically receive a phone call from a salesperson trying to “upgrade” them into buying accessories or other products or services, often at inflated prices.

If they refuse to purchase additional items, shoppers find that the retailer cancels the sale, claims the product has been back-ordered for months, or, if they did purchase the additional product, sends lower-quality merchandise or items that were never ordered. Returns can be difficult, if not impossible.

And in June, New York Attorney General Andrew Cuomo announced $765,000 in settlements with seven Brooklyn, N.Y.-based retailers he accused of using such tactics to bilk consumers nationwide out of hundreds of thousands of dollars. Together the companies operated under more than 100 names and Web sites, reported the Web site HD Guru. It posted a complete list, which it said it obtained from the New York State Attorney General’s office. 

Along with bait and switch practices, Cuomo said, the companies posted fake customer testimonials and changed their names and Web sites so often that prospective customers couldn’t find any truthful online testimonials about them.

The companies are Best Price Camera, Foto Connection, 1 Way Photo, 86th Street Photo, Broadway Photo, Camera Wiz, and Sonic Photo. Camera Wiz and Sonic Photo agreed to go out of business immediately. The remaining companies have agreed to change their business practices.

Some of the settlement money will be used to reimburse consumers. If you’ve been victimized, you should file a claim with the New York Better Business Bureau. The BBB  still is setting up filing procedures. Updated information will be posted on the organization’s Web site.

To protect yourself when shopping online, be wary of unrealistically low prices. Don’t be persuaded to buy additional products or services just because you’re getting what looks like a good deal on one.

Stick with retailer reviews found on major shopping sites, such as Amazon.com, PriceGrabber.com or Shopping.com. Even if reviews are positive, find out whether the company has a report at the Better Business Bureau. (Look for a company that has at least a “B” rating.) Also, do a Web search using the company name and keywords such as “rip off” or “complaint” to see if the retailer is mentioned on message boards or elsewhere online. Don’t assume that the absence of a BBB report or message board complaints mean the company is worthy of your business.

Also, find out whether the product you’re buying comes with a manufacturer’s warranty. Some discounters can sell at below-market prices because the products are intended for sale in non-U.S. markets and aren’t covered by U.S. warranties.

Finally, use a credit card. If there are any shenanigans, you can dispute the charges.–Anthony Giorgianni

 

More work-at-home, get-rich-quick nonsense

As I explained in a recent blog, my name is making the rounds on business opportunity and work-at-home sucker lists, thanks to my signing up for some suspicious-looking work-at-home schemes for my Consumer Reports article, “Beware of work-at-home stings.”

The scam mail just keeps on pouring in. Here’s more of a sampling.—Jeff Blyskal

• “Official information re: $25,000.00 grant from U.S. Government. APPROVED. Action required ASAP for release…Deadline for response: 36 hours from receipt. Message: Our office is attempting to reach you. Urgent matter regarding upcoming release of government funds. Estimate of funds pending: $25,000.00…Funds may be used at your discretion (bill payment, travel, continuing or advanced education, healthcare).”

• “WARNING: Don’t let business opportunity scam artists rip you off…I’ll be perfectly candid with you. I’m not an altruist or philanthropist. I’m a businessman and realist. It so happens that I can increase my profits and build my business by offering you this unparalleled opportunity…”

• “I’m a single mom and I can’t believe that I found this program. I generated $9,000 in my first 12 days!”—Karen, Oregon

• “Earn $500 to $1,000 every week in just 30 minutes a day sitting at your kitchen table!...helping my company with some simple paperwork…If you are sick of ‘pie in the sky’ offers and want a real, genuine way to earn $500 to $1,000 (or even more) every week in about 30 minutes a day or a couple of hours once a week if you prefer, then you are the person I want to hear from.”

• “Don’t be the ‘first’ mouse! …It’s the ‘second’ mouse that always gets the cheese…you pay only $100 and that will even be credited back to you if you choose to participate! Therefore, participants (winners) actually pay ‘nothing’ for the only plan that costs nothing to promote and will finally get thousands of dollars delivered right to your front door so that you can ‘finally’ have your chunk of CHEESE!…Let me assure you that this is not a trap. It’s real, very real! So get ready. Something wonderful is about to happen! Soon, very soon, you will be living ‘the good life’ and ‘thanking’ the participant (winner) below for spending their money to send this flyer to you.” 
  

Work-at-home schemes don't pay

Would you fall for this nonsense?

Last March, I intentionally played dumb and signed up for several suspicious-looking work-at-home schemes to report and write a Consumer Reports Money article, “Beware of work-at-home stings.”

When you give your name, address, and credit card number to the promoters of get-rich-quick come-ons, they may sell your name to other scammers in search of an easy mark. Before last March, I don’t recall receiving any such offers. In the four and a half months since, however, I’ve received about a hundred print letters, postcards, catalogs, emails, and telemarketing calls promising riches without much work. So I guess I’m now a hot new prospect on the fraud industry’s sucker lists.

Among my mailbag of outrageous promises, tired cliches, and bad photos of “satisfied” customers were these most transparent claims:

• “Please keep what I tell you a secret…There has existed for many years an exclusive association, a secret society, of some of the world’s most famous and powerful people…This association has uncovered some shockingly powerful secrets…The association has analyzed your profile…It seems you, Jeffrey, possess several rare traits we are searching for. Because of these traits…you are eligible to become part of our exclusive club and to share our Greatest Kept Secrets, too, absolutely free!”

• “The worse the economy gets, the MORE money you make…[This business] has all the perks of your own business…no boss…no commute…no ‘office hours’…all the vacation you want…You can sit home and relax while you do this. It’s no wonder many people who do this make well over $100,000 every year!”

Robo Call Relief Starts Sept. 1

Odds are you’ve gotten one of these computer-generated calls:  someone claiming to be with “Card Services” says:  “There are no problems currently with your account, however it is urgent that you contact us concerning your eligibility for lowering your interest rates” or “This is our final attempt to reach you since you’ve not responded to our other calls to discuss your credit card debt.”   

If you mistakenly believe this is a legitimate call from your credit card company and agree to be connected to a “live operator”, a sales rep will then ask you to provide your credit card account number so that he or she can negotiate on your behalf to get a lower interest rate to save you thousands of dollars. 

What may or may not be clear, however, is that they’ll first use the credit card information you’ve given them to charge an upfront fee that may range from $600 to $1,000 simply to call your card company and ask for a lower rate—something you could do yourself for free, as we explain here.

A deluge of complaints about these robocalls prompted the Better Business Bureau and U.S. Sen. Chuck Schumer, D-N.Y., to issue a scam alert earlier this summer warning consumers not to provide credit card numbers or any other personal information to such telemarketers, who typically spoof Caller ID to display various fake phone numbers to disguise where they’re truly calling from.  The Federal Trade Commission also filed suit in July against one of several companies behind these robocalls, charging that Tacoma-based Mutual Consolidated Savings (also known as United Savings Center Inc.)  didn’t reduce consumers’ debts as promised and didn’t make good on its promise to refund its fees of up to $899 if it didn’t succeed in getting consumers’ rates cut. Even so, complaints about such calls continue to pour in, according to BBB spokesperson Alison Southwick, who said she recently received one of these calls herself. 

But some relief may come soon from the threat of penalties imposed by new regulations designed to curtail robocalls that take effect Sept. 1.  Telemarketers who transmit prerecorded messages to consumers who have not agreed in writing to accept such calls will face penalties of up to $16,000 per call. “Starting September 1, this bombardment of prerecorded pitches, senseless solicitations and malicious marketing will be illegal,” says FTC Chairman Jon Leibowitz.  “If consumers think they’re being harassed by robocallers, they need to let us know and we will go after them.”

As the FTC notes here, there are some exceptions to the new rule.  For instance robocalls will still be allowed from most charitable organizations and—not surprisingly—politicians. Unfortunately, robocalls from banks, insurers and telecommunications companies also can continue because they are not covered by the new rules because they are outside of FTC’s legal jurisdiction.

But if you continue to be pestered by other telemarketers who violate the new law by pushing goods and services via robocalls, file a complaint at www.ftc.gov or call 877-FTC-HELP.  You can also report any suspected scammers, whether they use robocalls or not, to the Better Business Bureau at www.bbb.org and to your state attorney general.   And to reduce telemarketing calls in general, place your number on the federal Do Not Call list at www.donotcall.gov. –– Andrea Rock

College students and personal finance, Part 3: Dealing with debit cards

Editor's note: As the new college year revs up, Consumer Reports Money Blog devotes several days to the personal finance issues of college students. Here, Laura Veith, one of our college-age summer interns, muses on what she's learned about debit-card management:

There are many things I’ve learned about my personal finances since leaving the comfort of my parents' house. One of these is that a debit card is not invincible. Thankfully, I have never lost my debit card nor been a victim of debit-card fraud. But with issues arising in a greater frequency regarding debit cards, I wish I initially knew about the complications associated with the plastic in my purse. However, through my own personal experience and the opportunity to work at Consumer Reports, I feel that I have a better grasp of the perils of debit cards. The tips I have gathered below are a good start to the essential information that every teenager or new debit card owner should know.

For one, I have learned to monitor my debit card statements electronically. Though it may seem extreme, I like to check my balance every two days or so. That frequency may increase on days when I have made many purchases, such as at the beginning of the school year when I am responsible for buying books and other school essentials. I may check less frequently at other times. Either way, I think careful scrutiny of your account is the best preventive measure. Also, electronic statements are quick, easier to read than mailed statements, and a great way to stay on top of your expenditures.

My work here at Consumer Reports has taught me other helpful ways to protect my debit card. First, Consumer Reports Money Adviser has suggested that consumers not type in their PINs at the gas pump because it allows easier retrieval of your PIN. Who knew! After reading that article, I have started following those instructions and tell my friends to do the same. With all the horror stories about debit cards floating around, this simple alternative makes me feel more secure.

Second, I learned when to report a missing card or fraudulent purchase. One time during school I lost my debit card. I went on a panicked search for it and when it was nowhere to be found, I informed my parents. I didn’t inform the bank right away because I hoped it would turn up. Sure enough, it did. However, I wouldn’t have known what to do at the time if it went missing. This summer, four years after my receiving a debit card, CRMA taught me the proper procedure: Report any errors or issues with your debit card within two days of noticing the loss. In this time frame, a debit card user has a greater chance of combating the problem. 

Although these helpful suggestions led me on the path to understanding the security of debit cards better, I still wish I knew more. There are probably stacks of written material regarding this issue that I just haven’t found the time to look through yet. But I think my experience through mistakes–and working at Consumer Reports–provided a solid start.

Laura Veith is a junior at the University of Michigan, majoring in English.