FRAUDSTERS are thriving in the fraught economic situation by targeting vulnerable consumers with scams that purport to offer an escape from their money troubles.
Elderly Scots, in particular, are at risk of losing money in simple but effective scams that seek to exploit a growing need for financial breathing space.
More than three million UK consumers fall victim to scams every year, according to the Office of Fair Trading, losing a total of £3.5 billion in the process.
The OFT has warned that not only is the number of scams on the rise during these difficult economic times, but also the range of scams seems to be getting greater.
Perhaps the most worrying trend in Scotland is the proliferation of fraud schemes that deliberately target and exploit people already struggling with debt problems.
Duncan Dennett, manager of Clackmannanshire Citizens Advice Bureau (CAB), reported a marked rise in the number of people falling victim to dodgy debt arrangement schemes.
They call known debtors claiming to be from Citizens Advice – except while they offer similar advice to the charity, the schemes take a cut of up to 30 per cent of the outstanding amount.
“What’s upsetting about this one is that they offer the same services as us, except they charge the debtor. If you’re in debt, the last thing you need is to pay someone to try and get out of it,” said Dennett.
Another prominent scam is also one of the most established – the promise of a cash prize once a fee has been paid. Elderly people, in particular, are caught by these scams, whether they’re in the form of junk mail, spam e-mails or phone calls, according to Citizens Advice Scotland
“More access to the internet is causing problems,” said Dennett. “Many people in their 70s and 80s have computers now, but they’re not generally computer literate and they’re getting caught in e-mail scams asking for their account details and other information.”
Elderly people are also the prime targets of landbanking scams, reportedly rife in parts of Scotland.
This is where investors – often retired – are offered plots of land with the promise that they’ll be able to develop there in future and potentially make significant returns.
The hard sell isn’t technically illegal, but investors are typically sold land that doesn’t exist, has no planning permission and/or is protected from development, making it entirely worthless as an investment.
Dozens of rogue firms are involved in landbanking and none have made a profit for the investor, according to the UK government’s Insolvency Service.
It said that one in ten of the firms it closed down in the three years to March 2012 had profited from schemes that tricked people into parting with their life savings, with half of those dodgy firms involved in landbanking.
Robert Burns, head of investigation and enforcement for the Insolvency Service, said: “These scams are particularly unpleasant because they target the most susceptible members of society: older people who may be unsure how to seek advice or afraid to say no. They can destroy lives at a time when those targeted should be taking a break from worry and enjoying life after working hard.”
Also increasingly commonplace is the upfront loan fee rip-off, where victims are contacted by companies offering them a loan in return for a fee.
The money has to be paid before the loan is arranged – except the loan, in many cases, never materialises.
The perpetrators can take the form of seemingly bona fide loan companies or fake credit brokers.
Some appear convincing and seem professional in their approach, but if you’re given a company name, then it’s always worth checking if it’s registered. The Financial Services Authority has a register of all firms and individuals it regulates, at http://www.fsa.gov.uk/fsaregister.
The success of upfront loan fee scams lies in their promise of a loan regardless of the applicant’s credit record. At a time when even some pay-day lenders are rejecting applications from people with poor credit histories, such scams have a growing market to target.
One Scotsman reader, who requested anonymity, recently contacted Smart Money after falling victim to an upfront fee rip-off. On applying for the loan, she received an e-mail from the firm setting out her user identity and password and providing documents to sign online.
Within a day, and before she had completed the documents, she decided to withdraw the application. However, it had already taken from her account a £69.50 “broker’s fee” for processing her details, using debit card details she had given over the phone after being told they were needed to start the application.
A series of phone calls and e-mails asking for the loan to be cancelled and for the money to be refunded met with silence.
The good news is that she eventually got her money back. “As soon as I contacted the Financial Ombudsman Service and let the company know I was discussing the case with the media, they paid me right away. I think these companies just depend on people having the ‘there’s no point doing anything’ attitude,” she said.
Unfortunately, however, she was in the minority. The nature of scams means recovery of loan fees paid upfront, or money lost in other ways, is often very difficult or, ultimately, impossible.
While the likes of Citizens Advice can raise awareness of scams, there’s often nothing they can do for people who have fallen for them.
It urged Scots who fall victim to fraudsters to report what has happened. Its research shows that while half of us have experienced some form of scam, just 5 per cent have been reported – allowing fraudsters to go on perpetrating them.
Margaret Lynch, the chief executive of Citizens Advice Scotland, said: “The fraudsters who commit them are confident that, even if they don’t always get a ‘result’, they will hardly ever be reported so they may as well keep trying. Let’s be more vigilant in spotting scams, and let’s report them when we see.”
Scams can be reported to the Trading Standards Office of your local council or at your local Citizens Advice Bureau. Alternatively, you can contact Action Fraud on 0300 123 2040 or file a report on its website, at www.actionfraud.police.uk.
The “dos and don’ts” of loan company scams
DO be very careful when dealing with loan companies that charge upfront fees
DO be cautious if a loan company cold-calls you
DO some research about the business offering the loan – look for proper phone numbers and physical addresses and ask for information in writing
DO check that the company has a credit licence on the Consumer Credit Register at www.oft.gov.uk/ConsumerCreditRegister
DON’T believe adverts which indicate a loan is “guaranteed”
DON’T give out your card details “for security reasons” as the company may then debit your bank account without you knowing
DON’T wire money to loan companies using money transfer services when applying for loans
DON’T go ahead with a loan if a company approves it and then demands a fee before you get the money.
Source: The Office of Fair Trading
Stay on your toes – Citizens Advice Scotland’s five rules for not falling victim to scams
• Be Sceptical
• Take Your Time
• Know Who You’re Dealing With
• Protect Your Information
• Report It
Margaret Lynch, chief executive of Citizens Advice Scotland, said: “Scams are too often successful, and CAB advisers see many very sad cases where people have been conned out of their hard-earned money. But if we all work together, keep an eye out for each other and report scams when they happen, we can cut their numbers considerably. So let’s start to do that today. And remember: if it looks too good to be true, then it probably is.”