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Scams & Schemes

Scams & Schemes. Scam. Fraudulent or deceptive schemes. Pyramid Scheme. A type of financial fraud in which people pay to join an organization in exchange for the right to sell memberships to other people. Ponzi Scheme.

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Scams & Schemes

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  1. Scams & Schemes

  2. Scam • Fraudulent or deceptive schemes

  3. Pyramid Scheme • A type of financial fraud in which people pay to join an organization in exchange for the right to sell memberships to other people.

  4. Ponzi Scheme • Closely related to a pyramid scheme but the promoter generally has no product to sell and pays no commission to investors who recruit new members.

  5. Affinity Fraud • A name for a type of scam that targets members of a specific demographic. Perpetrators may attempt to relate to or exploit characteristics common to the demographic. Targeted groups can include the elderly, ethnic groups, and religions.

  6. Predatory Lending • Overview • Characteristics and warning signs of predatory lending. • The key targets of predatory lending. • Common abuses and scams. • Nonprofit organizations that can help consumers plagued by predatory lending. 6

  7. PREDATORY LENDING • Sell properties for much more than they are worth, using false appraisals. • Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan. • Knowingly lend more money than a borrower can afford to repay. • And many other scams. In communities across America, people are losing their homes and their investments because of predatory lenders, corrupt appraisers, mortgage brokers, and home improvement contractors who: 7

  8. IDENTIFYING • PREDATORY LENDING • Packaging a loan with single-premium credit insurance products • Repeatedly refinancing a loan in a short period of time • Charging excessive rates and fees to a borrower who qualifies for lower rates and fees Predatory lending is not defined by federal law except to the extent that a loan is a high-cost loan and contains one of a fixed list of terms or conditions. Predatory or abusive lending practices can include: 8

  9. TEN WARNING SIGNS OF • PREDATORY MORTGAGES • Unreasonably high interest rates • Multiple refinancing • Unnecessary debt consolidation • Balloon payment • Negative amortization • Door-to-door solicitation • Back-dating of documents • Large loan broker fees • Kickbacks between lender and broker • Single-premium credit life insurance 9

  10. COMMON SCAMS • Advance fee schemes • The prize that will cost you • Online auctions • Fraud jobs • Moneymaking schemes • Bogus charities • Scam schools 10

  11. HOW DO THIEVES WORK? • Skimming • Dumpster Diving • Computer Spyware • Account Redirection • Phishing • Pharming • Wireless Hacking • Stealing • Shoulder Surfing

  12. TOP STRATEGIES TO AVOID SCAMS • Don’t become a victim. • Investigate strangers who have deals too good to be true. • Always stay in charge of your money. • Don’t be fooled by appearances. • Watch out for salespeople who prey on fears. • Monitor your investments. • Report fraud or abuse. • Do your homework. • Be wary of door-to-door solicitations. 12

  13. ADDITIONAL RESOURCES • Department of Housing and Urban Development (HUD)— Office of Consumer and Regulatory Affairs, Interstate Land Sales/RESPA Division. (202) 708-4560; www.hud.gov/complaints/landsales.cfm. • Federal Deposit Insurance Corporation (FDIC)— Consumer Affairs Division. (877) ASK-FDIC (925-4618); www.fdic.gov. • Federal Trade Commission (For federal lending violations involving mortgage and consumer finance companies.) (877) FTC-HELP (382-4357); TTY (202) 326-2502; www.ftc.gov. • Federal Reserve Board of Governors of the Federal Reserve System— Division of Consumer Affairs. (202) 452-3693; www.federalreserve.gov/pubs/complaints. 13

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