OBJECTIVE 2.02

1. OBJECTIVE 2.02 Students will understand threats to financial security.

2. Essential Questions • What consumer behaviors can threaten a person’s financial security and lead to financial losses? • What scams and schemes can lead to financial losses? • How can a consumer communicate caution and report incidents of fraud?

3. Threats to personal and family financial security come from within the consumer and without (outside). Threats • Threats from within are: • the result of consumers behaviors that lead to financial problems • often the result of lack of knowledge • YOU must be your own best ADVOCATE! • How? Educate yourself in financial matters • How? Use your brain. If it seems too good to be true…it probably is! • Threats from without are: • the result of deceitful, sometimes even fraudulent, scams and schemes designed to manipulate or trick consumers in ways that lead to financial loss. • YOU must be your own best ADVOCATE! • What is FRAUD? A material misrepresentation with intent to take advantage of another party

4. Consumer behaviors that lead to financial losses Failure to plan • Not comparing job offers carefully in light of expected expenses • Shopping without a list, which often leads to impulse buying • Spending without using a spending plan (budget), which often leads to overspending

5. Consumer behaviors that lead to financial losses Examples: Failure to plan • Judy accepted a great modeling job in NY City. Her apartment rent in Charlotte was $800, but the shared cost of a smaller apartment is over $2000 monthly. She is having trouble making ends meet. • Meg and her two children took $300 to shop for back to school clothes. Purchases included a new basketball and 2 video games for her sons. • Tony and Lana charged $300 in restaurant bills on their weekend anniversary fling because they stayed at a 4 star hotel that used up their cash.

6. Consumer behaviors that lead to financial losses Failure to protect • Making personal information available that can lead to identity theft • Not securing life, health, and property to minimize risks of crimes and emergencies • Not following Internet safety practices

7. Consumer behaviors that lead to financial losses Examples: Failure to protect • Fran dumped old credit card statements and other bills into her garbage can without shredding any of them. • Neta parked her car in the parking garage after work. She did not lock the car. When she returned her cd player, cds, and a wedding present she had purchased had been stolen. • Sarah used a simple pass code and did not change it for over 5 years. She was surprised when a hacker accessed her computer and got personal banking information.

8. Consumer behaviors that lead to financial losses Failure to be informed • Not reading the fine print in sales agreements, product labels, contracts • ALWAYS read and understand contracts BEFORE signing • Not researching sales offers in depth before making a commitment • Not separating facts from opinions in considering advertisements

9. Consumer behaviors that lead to financial losses Examples: Failure to be informed • Kevin and Nate are friends. Kevin got a new cell phone. Nate wanted a new cell phone like it. He signed the 2 year contract without reading it. When the first bill came, he found he only had 100 free text messages per month. All texts over 100 cost $.15 EACH. His first bill was over $300. • Nate realized that he should have shopped several companies and reviewed various plans to find one that would meet his texting needs. • Kevin bragged to Nate that his phone would access internet and 50 other apps for free. Nate tried the apps and there were minimum monthly fees for each one. Kevin did not know the cost because his mom still paid his bill.

10. Consumer behaviors that lead to financial losses Failure to communicate • Not asking sufficient appropriate questions to inform financial decisions • Not discussing financial decisions with all parties/family members involved • Not taking enough time to make a careful decision because of sales pressure • Not saying “no” when needed video link- Grover's high pressure sale

11. Consumer behaviors that lead to financial losses Examples: Failure to communicate • Tom forgot to ask about the truck’s warranty and thought it was 100,000 miles. It was only 70,000 mile and excluded the 4WD components. • When Tom arrived at home with the new truck, his wife was very upset that monthly payments would be over $300. Their agreed upon budget was only $250.00. • Tom told his wife that the salesman was so helpful and nice that he just could not say no after taking up his time. Can you say “no”? • The salesman said he had another customer wanting this truck and if Tom really wanted it he should commit before the other buyers returned later that day.

12. Types of Deceitful, fraudulent scams that lead to financial losses • Vague offers---e.g., expecting you to pay up front in order to receive full information about a product or service • Television infomercials to order cd’s or books and make a lot of $! • Lotteries---prizes awarded by chance after purchase of ticket; very small chance of winning • Earn-money-at-home offers--- on the condition that you purchase software; once paid for, nothing arrives Television infomercials to order cd’s or books

13. Types of Deceitful, fraudulent scams that lead to financial losses • Winning bid in auctions---you pay the bid amount, but never receive the item bought • Identity theft---stealing one’s personal information in order to commit theft or fraud • Sweepstakes letter---states that you have won a valuable prize, but need to pay a processing fee to claim the prize • Wide variety of other unsolicited online offers video link How-To-Prevent-Identity-Theft video link to citibank theft commercial video link - ftc.gov identity-theft video link - id theft fbla national winner

14. Types of Deceitful, fraudulent scams that lead to financial losses • Lying--e.g., accepting money for a stated purpose, then using it for a different purpose; • Selling a product or service that will not perform as promised video - charlotte sales scam-BBB "F" • Concealing information---e.g., sellers not willing to state their physical addresses, only POBoxes or Internet sites

15. Types of Deceitful, fraudulent scams that lead to financial losses • Deals that are too good to be true---e.g., a pyramid scheme, an illegal scheme that influences people to contribute money based on the false promise that they will get rich quickly; the pyramid collapses and money is lost, not gained • Chain letter---a variation of the pyramid scheme that involves postal correspondence, also illegal • High-pressure sales approaches---e.g., claiming the offer is only good for one day, or if you call in the next 15 minutes, or stay with you until you purchase video clip- how ponzi scheme works Video link: Is this a high pressure car sale?

16. What to do about scams? • Communicate or report deceitful/fraudulent scams • and schemes to fellow consumers • Use available communication media---live conversation, telephone, texting, emails, etc. • Contact the local media to get attention to the topic • Be specific, include key details • Report to government agencies and other consumer advocates • Go to the Federal Trade Commission (FTC) website; complete a Consumer Complaint Form

17. The Federal Trade Commission • The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. • The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. • To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. video link- filing a claim with FTC

18. What to do about scams? • Communicate or report deceitful/fraudulent scams • and schemes with fellow consumers • Call or visit the website of the National Fraud Information Center of the National Consumers League • Contact local consumer protection agency • Contact BetterBusiness Bureau • Contact State Attorney General’s office • Contact the post office if you receive a fraudulent offer by mail