Consumer Fraud Scam Alert!
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Consumer Fraud Scam Alert!

Millions of people get taken by consumer fraud every year. To save yourself money and headaches, don't take the bait.

When a Kentucky woman received a letter last December congratulating her for winning a Canadian lottery, at first she thought Christmas had come early. Then she got suspicious. Included was a check for $4,200 -- and instructions to send $2,000. When she took the check to a bank, a teller told her it was counterfeit. A Nebraska man who received a similar letter wasn't so lucky. He wired $3,980 from his bank account -- the "taxes" he was told he needed to pay for the windfall. He never saw that money again.

Americans lost more than $1.2 billion to consumer fraud in 2007 -- and that's not counting the cost of shame and heartbreak. And if you think you have to be naive to get duped, remember all the supposedly sophisticated investors who lost millions in Bernard Madoff's Ponzi scheme. The only way to be safe from scams is to spot them coming. We've uncovered some of the more common and egregious ways crooks are trying to get your money right now.

Scam 1: Bogus Foreclosure Help

Phony financial companies take advantage of desperate homeowners with promises of foreclosure rescue.

Because records of bank default are public, it's easy for scammers to find homeowners in trouble, then approach them via mail, phone, or e-mail, promising assistance. A recent Southern California case is a classic of one variety of the con: A couple paid more than $6,000 to a company that contacted them by flyer, promising to help them renegotiate their mortgage. Eventually they learned that the company had taken their money and done absolutely nothing.

In another version of this scheme, the scammer offers "private financing" for a loan or new mortgage. "As collateral for this money, he requires the homeowner to deed her property to him," says Jenny Brawley, a mortgage fraud investigations manager for the Federal Home Loan Mortgage Corporation. Then the scammer assures the homeowner she can stay in her house as a renter. Instead, he uses the deed to obtain a new loan -- which he pockets and doesn't pay off. The bank moves in to claim the house, and the fleeced homeowner loses her home and all her equity.

How Widespread?
Although no one has exact figures, the problem is so common that last year lawmakers in Oregon passed a bill requiring foreclosure consultants to make all fine print clear.

Fighting Back
If you're behind on your mortgage, don't avoid your lender -- in fact, contact the lender to see if you can work something out, advises Brawley. "Be suspicious of anyone who offers unsolicited help. Don't sign documents under pressure or without clearly understanding them. Never sign a document with spaces left blank. And be wary of any requirement that you must deed your home as collateral."

Turn 'em In
If you've been the victim of a foreclosure scam, report it by calling Freddie Mac's Mortgage Fraud Hotline at 800-437-2838. Also contact your state attorney general's office.

Scam 2: Fake Sweepstakes

Fake lotteries and sweepstakes promise mega cash but leave consumers holding the bag.

The Con
As happened to the Kentucky woman and Nebraska man, a letter arrives with the thrilling news that you've won a huge sum of money. Or you get an e-mail saying you've won a foreign lottery. You don't recall entering the contest, but the notice seems official. There's one catch: To claim the prize you have to send a check.

How Widespread?
As of November 2008, the U.S. Postal Inspection Service (USPIS) had intercepted about $2.1 billion worth of fake U.S.-bound checks.

Fighting Back
Hold on to your common sense -- you can't win a contest you didn't enter -- and remember a few basic facts: Lottery tickets can't be sold across national borders. If you win a cash prize, you'll be notified by certified mail. No one who wins a legitimate contest has to pay to collect. If you have doubts about a lottery mailing you've received, contact the USPIS at 877-876-2455 right away.

Turn 'em In
If you've gotten a fraudulent solicitation by mail, call the USPIS (877-876-2455). If a solicitation came online, contact the Internet Crime Complaint Center at

Scam 3: Pack Rats

Rogue moving companies hold your possessions hostage until you pay a steep ransom.

The Con
Operating under names that sound very similar to those of reputable companies and working via "find a mover" Web sites, these scammers give a low-ball estimate for moving your goods, sight unseen. Once they've gotten your possessions on their truck, however, they demand a fee as much as 10 times more than the original quote before they'll deliver. If you protest, they steal your stuff, store it or, as in one case, simply throw it off the truck.

How Widespread?
Americans make a household move about 40 million times each year and in a small but significant number of cases the movers turn out to be rip-off artists. The Federal Motor Carrier Safety Administration (FMCSA), which regulates interstate movers, received nearly 4,000 complaints in 2007 alone.

Fighting Back
One major red flag is a company that gives an estimate over the phone or demands cash or a large deposit before the move. (Reputable companies look at what you propose to move and give a written, nonbinding estimate, take payment on delivery, and are required to deliver for no more than 10 percent above estimate.) Before hiring anyone, go to the FMCSA Web site,, to check whether the mover you're considering is properly registered or has a history of complaints.

Turn 'em In
If you've been scammed by a mover, file a complaint by calling 888-368-7238. While the FMCSA does not resolve individual complaints, its Web site has links to agencies that may be able to help you recover your belongings.

Read the Fine Print

Not all scammers commit outright fraud; some just manipulate you if you don't focus on the details.

Not-So-Free Credit Report
You're entitled to a free annual copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion). Ordering is easy at Don't confuse this site with credit-monitoring agencies that advertise (even those that use the word "free" in their names). Get a credit report from them and you may be signing up for an ongoing service you'll have to pay for each month.

The Pricey Trial Period
Makers of a variety of products, from diet supplements to roadside assistance services, offer you a short "free trial." Look carefully before you sign on or you might find that after the trial's over, the company will automatically enroll you in an ongoing charged-to-your-credit-card service.

Vacation from Hell
If you win a "free" or bargain trip, you might be taken for a ride: The "free" vacation can include hours of high-pressure sales pitches, and the promoter might ask for a hefty deposit and then fail to have travel dates available or refuse to return your money. Be suspicious of any deal that sounds too good to be true. Don't give out your credit card or bank information over the phone and check out the company offering the free travel before you sign anything.

Originally published in Ladies' Home Journal, April 2009.