Business Law Advisor

[#1]

Today the Federal Trade Commission (FTC) announced “a new law enforcement crackdown on scammers trying to take advantage of the economic downturn to bilk vulnerable consumers through a variety of schemes, such as promising non-existent jobs; promoting over-hyped get-rich-quick plans, bogus government grants, and phony debt-reduction services.”  The sweep, called “Operation Short Change ," includes 15 FTC cases, 44 law enforcement actions by the Department of Justice, and actions by at least 13 states and the District of Columbia.

Spotting Fraud

It’s not always easy to distinguish fraudulent business opportunities from legitimate ones, but the FTC advises that there are certain clues that can tip you off - including the type of business opportunity being advertised.  Promotions for envelope stuffing, medical billing, product assembly, and some Internet-related businesses are common targets for fraud:

Medical billing/electronic claim processing ads may claim that you can earn a substantial amount while inputting data from the convenience of your home.  Brochures, computer applications, and testimonials may be attempts to persuade your investment in the program.  However, the FTC advises that “few consumers who purchase a medical billing business opportunity are able to find clients, start a business, and generate revenues – let alone recover their investment and earn a substantial income (FTC Facts for Consumers).”

Stuffing envelopes at home seems like easy money, but can be common ploy.   After joining a program, you may come to find out that there isn’t employment available at that time.  Promoters of the program might suggest that you’ll earn money if you can recruit others to respond to the ad, but your income will likely depend on whether others fall for the same trick.

Assembly/packaging scams often require investing in expensive equipment or supplies for assembling goods that companies or consumers have allegedly purchased, or intend to purchase.  Even after many hours of assembly, the goods can be rejected for not passing “quality standards” and the company may refuse to pay for what they deem “defective” products.

Evaluating Work-at-Home Opportunities

The FTC recommends that legitimate business opportunity promoters should tell you in writing what’s involved in the program they are selling, and you should consult and attorney, accountant, or business advisor before putting any money down or signing a contract.   If you are evaluating an opportunity, answering these questions may help you determine if it is a worthwhile venture:

• What tasks will you have to perform? (Ask for detailed list of steps required to do the job)
• What is the total cost of the work-at-home program, including supplies, equipment, and membership fees?  What will you get for your money?
• Will you be paid a salary or will pay be based on commission?  Who will pay you and when will you receive your first paycheck?
• For investments over $500: Does the advertisement/promotion include an earnings claims (“make up to $160,000 a year”) without providing the number and percentage of people who earned at least as much as the suggested amount?  If the opportunity involves an investment of less than $500, ask for the earning details in writing.

Reporting Scams  

If you’ve fallen victim to a work-at-home scam, the FTC recommends that you first contact the company and request a refund.  Let the company representatives know that you plan to notify officials about your experience.  If you can’t resolve the dispute with the company, file a complaint with the following resources:

• FTC
• Your state Attorney General’s office (or the AG office in the state where the company is located) – to determine whether you’re protected by any state law that may regulate work-at-home programs
• Local consumer protection offices, including the Better Business Bureau
• If applicable, your local postmaster – the U.S. Postal Service investigates fraudulent mail practices

Additionally, if you see an ad you think is deceptive, you can report it to the FTC via a complaint form at FTC.gov or call toll-free 1-877-FTC-HELP; TTY 1-866-653-4261.

Discuss Business Scams in the Community
Share the telltale signs that caused you to be suspicious of a business opportunity

Additional Resources

• Business.gov guide on Assessing Business Opportunities & Avoiding Scams  
• Blog post - Investigating a Franchise Opportunity: How a Little Detective Work and the Law Can Help
• Blog post - Government Grant Scams
• YouTube Video – Fraud: An Inside Look 
• FTC Facts for Consumers – Could “BizOpp” Offers Be Out for Your Coffers?

Message Edited by ChristineL on 12-02-2009 11:37 AM

[#2]

Nicole,

Thank you so much for posting this. If one more person offers to help me make my "Internet Millions," I am going to just scream!

The Franchise King

Joel Libava

Message Edited by NicoleD on 09-30-2009 12:09 PM

[#3]

Nicole / Joel

Im in the UK  our franchise market is totally unregulated - One of the biggest scams out are things that call themselves "franchises" - and  these are responsible for mass bankruptcies and a heap of misery.

At least "internet millions" scams generally only rip you off for $hundreds. Over here scam franchises can take your lifes savings and more.

 Completely unscrupulous. Have to be careful about naming and shaming- but if you search for the word "franchise" on some forums take uk businessforums. you can find a tip of an iceberg - even mass bankruptcies can be seen on "london gazette"

And worst of all  the government doesnt seem to care.

Mike at 

Wedding Dress Shops

Message Edited by NicoleD on 09-30-2009 12:10 PM

[#4]

Mike, thanks for your comment. I found this link for the Office of Fair Trading in the UK.  It looks to be a good place to report consumer fraud : http://www.oft.gov.uk/oft_at_work/consumer_initiatives/scams/*

*links to a non-US government website

[#5]

Now that you mention it my e-mail inbox is not nearly so full of junk mail lately.  This may be why.   Now if you could just do something about all the offers I get to help some African banker move a huge chunk of money into this country for which I will be paid millions.

Bill Fletcher

Orange County Website Design

Message Edited by NicoleD on 09-30-2009 12:10 PM

[#6]

That's true that an unstable situation for service people in the whole world but freelance work or work at home is the best option for those peoples who have skills to show and prove them self like if we take a example of PHP developer so they have a huge opportunity to make there designs and publish it into some freelance sites..

Regards,

Jack Balboa

Term Paper

Message Edited by NicoleD on 12-02-2009 10:11 AM

[#7]

This is good news.  To many people get taken and fail to look at legit direct selling companies home businesses.  I sure did my homework before I just joined.  ~ www.MiaBellaShop.com

Message Edited by ChristineL on 01-11-2010 10:30 AM