If you’ve never heard of the “bottom dollar” scam, been sucked in by a “recovery room” or “reloaded” for a double dose of financial pain, consider yourself lucky.
They’re all part of the little-known world of low-tech con artists who have been preying on the most vulnerable among us: Americans desperate for a job, drowning in debt and willing to bet their last dollar on a lifeline that won’t be there.
| Lois Greisman, |
scam battler for the FTC
As head of the Federal Trade Commission’s Division of Marketing Practices in the Bureau of Consumer Protection, Lois Greisman keeps watch against email spam, telemarketing fraud and Internet fraud.
Lois Greisman heads up the Division of Marketing Practices for the Federal Trade Commission’s Bureau of Consumer Protection, which is responsible for federal enforcement actions against email spam, telemarketing fraud and Internet fraud. While that may sound high-tech, the agency has lately focused on “bottom dollar scams,” which target people down on their luck and are no more complex than a phone call or knock at the door. These scams offer false hopes of earning big money from home, doubling your investment or selling your time share pronto. Meanwhile, they pick your pocket clean with your own credit or debit card and cover their tracks with prepaid cards.
Wondering how they work? Greisman takes us behind the scenes of these modern-day grifters.
CreditCards.com: How have your priorities changed since the economic downturn?
Lois Greisman: It has caused us to pivot and focus even more sharply on consumers affected by the economic downturn. We’ve marshaled enormous resources trying to assist people who are victimized by what we call “bottom dollar” or “last dollar” scams. People have either lost their job or they’re unemployed, or their savings have tanked because of the market and they need to find employment. Unfortunately, there are an enormous number of job scams out there with the downturn, which has caused us to better marshal our resources in that regard.
CreditCards.com: These “bottom dollar” scams are surprisingly low-tech compared to the types of scams that you’d been focused on previously. Instead of spam or cyberhacking, somebody knocks on the door.
Greisman: Yes, knocking on the door or creating an online site that says that for $3.99 I can get you government grants to pay off your debts, to remodel your kitchen, to help with your medical expenses. They get your credit card or debit card number and surreptitiously and illegally enroll you in a buyer’s club, shoppers club, or they just start debiting every so often. Just the handful of cases we’ve brought with that scenario, what we call “negative-option” advertising, has caused more than $1 billion in injury in the last couple years.
They get your credit card or debit card number and surreptitiously and illegally enroll you in a buyer’s club, shoppers club, or they just start debiting every so often.
CreditCards.com: Mostly from those who can least afford it.
Greisman: On some level, no one can afford it. That’s a billion dollars that are not going to legitimate marketers as well. It’s not just the consumer injury; it’s the injury to competition because it’s a billion dollars not in the right marketplace.
CreditCards.com: One of your recent judgments was against people who were basically selling bogus credit cards. How does that work?
Greisman: These were what are called “advanced fee” loans or lines of credit. We see bogus credit card offers all the time, and we have brought lots of cases against actors who misrepresent that they’re affiliated with Visa, with MasterCard, or you’re guaranteed a line of credit up to $1,500. Unfortunately, that’s not at all atypical in our portfolio of fraud cases.
CreditCards.com: In these cases, the card company as well as the consumer takes the hit.
Greisman: Sure, and it’s compounded injury to the consumer. It’s not just that they didn’t get what they thought they were getting so they don’t have a credit card, it’s not just that they’re out-of-pocket hundreds of dollars because they were ripped off, it’s further injury to their credit rating. Because oftentimes one of the promises with these bogus credit cards is that they will report positive transactions to the consumer reporting agencies.
CreditCards.com: So your credit is getting dinged for nonpayment on a credit card that doesn’t even exist.
Greisman: That’s right.
It’s not just that they didn’t get what they thought they were getting so they don’t have a credit card, it’s not just that they’re out of pocket hundreds of dollars because they were ripped off, it’s further injury to their credit rating.
CreditCards.com: There’s a lot of concern these days about the sale and possible misuse of consumer information by third-party data miners. How does it intersect your area of enforcement?
Greisman: The data mining I tend to deal with is data mining to develop sucker lists of people who have been victimized in the past and are going to be what we call “reloaded.”
Greisman: Yes. I’ll give you an example of what we call a “recovery room.” People have time shares, which maybe decades ago were worth a lot of money but today are not worth much money at all, and some people are quite desperate to unload them. There is a whole cottage industry of fraudsters out there who are more than happy to say, “I have a buyer in the wings. I know somebody who really wants your property. All you have to do is pay me in advance, and I’ll unload it for you.” Classic fraud.
CreditCards.com: But it doesn’t stop there?
Greisman: Unfortunately. So the person who paid upfront and there was no buyer in the wings and they’re out-of-pocket maybe $500, they then get a call from someone who says, “I know you were ripped off. I can help you get your money back. Pay me upfront to get your money back.” That is the reload. That person is unfortunately on what we refer to as a sucker list.
CreditCards.com: It seems odd that such low-tech fraud persists in our high-tech age.
Greisman: It is low tech in that sense, but some of the complicated ways in which defendants funnel money offshore to keep us from seizing it, that’s pretty sophisticated stuff. If you’ve got to shed $50 million, it’s not that easy. And if you look in the business opportunity world where we’ve sued a lot of bad actors, some of them have really polished sales pitches. Not high tech in the traditional sense maybe, but these are not fly-by-night operations. They’re raking in $150 million because they have a very sophisticated sales pitch, really slick materials and enough indicia that this is the real thing to lure in people who are by no means unsophisticated.
[T]hese are not fly-by-night operations. They’re raking in $150 million because they have a very sophisticated sales pitch, really slick materials and enough indicia that this is the real thing to lure in people who are by no means unsophisticated.
CreditCards.com: It sounds like old-school grift is alive and well.
Greisman: Yes. Old wine in new bottles.
CreditCards.com: How do these grifters avoid detection?
Greisman: Say you’re a bad guy and you want to mask that there is a lot of fraud on your system. You may be worried about charge-back rates in the credit/debit card system, which is done on the basis of how many transactions are put through divided by how many are charged back. One way to mask that charge-back rate is to drive a lot more transactions through your system.
We have actually seen fraudsters purchase thousands of prepaid cards and put through their own systems very low transaction amounts, maybe $2. So instead of showing 100 transactions of which 10 were charged back, if they put through 1,000, then they have 1,000 transactions of which 10 were charged back. What they’re doing is misusing a payment system to evade detection by the Visas and MasterCards of the world.
CreditCards.com: With so much high-tech fraud to thwart, from spam to phishing to telemarketing, what’s your top priority today?
Greisman: Bottom dollar fraud, no question. The pain of the economic downturn remains very acute. We are determined to protect consumers who are at enormous economic risk from being ripped off. When you’re legitimately trying to earn an honest living, the last thing you need is to be victimized by a payday lender, by somebody offering you the ability to work from home and generate significant income or the ability to enter into a commercial relationship where you can recoup your initial investment within six months.