Top tips on how to spot a scam – and avoid being ripped off
Before you accept an offer that looks too good to be true, examine the facts, says James Daley
Saturday 23 February 2008
In 1588, a number of Spaniards found themselves the victims of a clever confidence trickster, who claimed he was raising money to secure the bail for a wealthy businessman in a local jail.
The con artist would tell each of his targets that if they helped put up the necessary ransom, they would not only be rewarded with great riches, but would also be given the hand in marriage of the wealthy businessman's beautiful daughter. As soon as the money had been handed over the trickster would disappear, never to be seen again.
Four hundred and 20 years later, and very similar scams are still catching out thousands of people a month. Today, however, the sums at stake are considerably larger, with an estimated £3.5bn being lost every year in the UK alone, according to the Office of Fair Trading.
Here, we look at the most common cons, and give some tips on how to spot them. The golden rule for avoiding the tricksters, however, remains exactly the same today as it was four centuries ago. If an offer sounds too good to be true, it almost certainly is.
Bogus holiday clubs robbed Brits of more than £1.1bn last year – this is the most common con around. The clubs usually target holidaymakers when they're overseas, handing them scratch cards in the street which tell them that they've won a "free" prize.
To collect it, all they have to do is go along to a presentation, where they are told that they have been given membership to an exclusive holiday club, granting them free stays at top-class resorts all over the world.
Victims are then usually put under pressure to pay some kind of fee to complete their membership or will be forced to pay hundreds of pounds worth of extras if they ever take advantage of the holidays.
Many of these holiday clubs are good at presenting a professional front. But any holidays you eventually go on are likely to be to resorts you didn't want to visit, and will cost a lot more than you would have paid if you'd booked independently.
Top tip: don't trust free scratch cards. Unless you're buying an official lottery scratch card at your local newsagent, the "prize" you have won probably doesn't exist.
Golden investment opportunities
You get a call or letter from a stock broker claiming to have a little-known exciting investment opportunity for you. The returns are set to be astronomical, and the salesman will tell you that you can't lose.
However, once you've parted with your cash, you're likely to discover that your investment is in an unquoted company, and that your shares are impossible to sell on – rendering them worthless.
These scams often seem to have an element of legitimacy, as the buyer can hear the salesman in a busy call centre. Usually, however, the broker is overseas, and the other voices are all pitching similarly dodgy investment deals to other would-be victims. These are often known as "Boiler Room" scams, and cost consumers almost £500m a year.
Top tip: Check if the salesman is regulated by the Financial Services Authority. You can find out by visiting www.fsa.gov.uk/register.
These tend to work by sending out letters claiming that you've won a lottery overseas – perhaps in Canada – and that you merely need to send an administration fee to receive your prize. This can be as little as £5, but is often much more.
Alternatively, you may be asked to call a telephone number beginning with 09 to claim your prize, but these will charge you more than £1 a minute and will keep you hanging on the line for hours at a time. If you ever get through and are sent a prize, it will be worth much less than you spent on your phone call. More often, victims walk away with nothing.
Around 140,000 people fell victim to this ruse last year, losing a total of £260m. The average loss was a massive £1,900 per victim, although the median loss was a more modest £42.
Top tip: Never call 09 numbers to claim a "prize" – it's a sure sign of a scam. If you've really won a prize, you shouldn't have to pay any administration fee.
Pyramid schemes have been around for decades, but are still as popular as ever, robbing their victims of an estimated £420m a year. They work by asking people to pay to become a member, but promising them a quick return on their money if they recruit a number of new members to the scheme.
The members may be allowed to keep a fraction of the fees which are raised from any new recruit, with the rest of the money being passed on up the pyramid. Those at the bottom, however, are most exposed, and won't receive anything if they can't keep signing up new recruits.
Eventually, the scheme gets too big and collapses, leaving all but a few of those at the top of the pyramid completely out of pocket.
Top tip: Avoid schemes that depend on you signing up new members.
Letters predicting the future
These are now the most common direct-mail scams – letters purporting to be from psychics or clairvoyants. The letters will claim that the psychic has knowledge about you which will change your life forever, and may even warn you that you could be in danger if you do not respond to the mailshot.
Typically, recipients are asked to send money to reveal the predictions. Worse still, those who reply are usually added to a "sucker" list, and find they are then targeted by dozens of more scams. Some £40m a year is being lost to these scams.
Top tip: Stop junk mail by registering with the Mailing Preference Service (www.mpsonline.org.uk).
Miracle Health cures
These schemes claim to offer a miracle cure for various illnesses – everything from cancer to impotence to multiple sclerosis.
To appear genuine, they will often include a number of bogus testimonials, proclaiming how successful the product proved, but in reality they are worthless. Most have not been medically tested, and some are even dangerous.
Britons lost some £20m to these scams last year – at an average of £90 a time.
Top tip: ask your doctor before taking any pills you're not familiar with.
Foreign money offers
This is the scam most like the original Spanish prisoner trick. Victims are usually contacted by email or fax by someone purporting to be an African government official or wealthy businessman, who claims to need help transferring a large sum of money to the UK. In return for providing your bank account as a haven for the money, you're told you'll be given a hefty commission.
However, once the fraudsters have got hold of your bank account details, and persuaded you to part with other sensitive financial information, they'll do their best to clean out your account. Alternatively, they may ask you to provide some cash in advance to pay a "transfer fee" – money you'll never see again.
Top tip: Don't reply to emails from strangers.
Mobile phone scams
It's increasingly common to receive text messages telling you that you've won a prize, and all you need to do is reply to the text or call a certain number to claim it. However, these texts and calls are often premium rate and will cost you more than £1 a minute, or £1 per text.
Another recent trick is executed by calling people's phones from 070 numbers, and hanging up immediately. The phone owner sees the missed call, and because it begins 07, they call it back believing it to be a mobile. However, 070 numbers are actually personal forwarding numbers, and can be charged at several pounds a minute if you call them back from a mobile.
Top tip: If you don't recognise a missed-call number on your phone, don't call it back. If it's important, they'll leave a message.
Other popular scams
A popular scam involves email communications offering you free gifts such as iPods and games consoles in return for spending a small amount of money, say £20, on another product. Whatever you buy will not be worth anything like what you pay for it, while the free gift is unlikely to ever arrive.
Another frequently occurring con is the working-from-home scam – these are adverts or flyers which claim you could earn hundreds of pounds a week. These schemes often require you to send off a fee to get started, after which you'll never hear from the company again.
Similarly, bogus loan adverts may require you to send off a fee for insurance before they hand out the money – but will then disappear. For details on other scams, visit the Office of Fair Trading's website, www.oft.gov.uk/oft_at_work/consumer_initiatives/scams.
What to do if you are a victim
In most cases, there's not much chance of recovering your money if you're caught out by a scam. However, if you suspect that you are being tricked or that you've already been the victim of a scam, it's still important to report it, so that the authorities can work towards preventing other people being caught out.
Most scams can be reported on the Consumer Direct website at secure.consumerdirect.gov.uk/reportascam.aspx, but in the case of investment scams, you should contact the Financial Services Authority at www.moneymadeclear.fsa.gov.uk/contactus.aspx, or call 0845 606 1234.
Ten questions worth asking
* Was the offer unsolicited?
* Does it look too good to be true?
* Can you verify the identity of the email or phone call?
* Do I have to respond "at once" – what's the rush?
* Do I have to make a purchase to win a prize?
* Do I have to call a premium-rate telephone number?
* Do I have to give my bank or credit card details?
* Do I have to send the money to a PO Box number?
* Am I asked to keep it confidential?
* Can I afford to lose the money?
'I was cheated out of £3,000'
Graham Allison, 66, a retired security guard from Essex, fell victim to a racing tip scam two years ago, which promised to make him a millionaire in less than a year. For £3,000, the company said it would provide Graham with a series of dead-cert racing tips and, better still, offered a money-back guarantee if it did not deliver on its promises.
"He gave me one winner," he says. "But it was at 8-13. After that it dried up, and eventually I decided that it wasn't working and asked for my money back. I never heard from them again."
In the years since, Graham has been inundated with offers of similar schemes in the mail, receiving more than 20 in the last month alone – and suspects his name has been put on a "suckers" list used by scammers.
"I'd say to anyone that's thinking of signing up to these kind of schemes – don't be fooled," he says. "Don't give any of your hard-earned money away.
"We're lucky. We can keep our heads above water because my wife's still working. But many people they target do not have any money. If I can save just one or two people by talking about my experience, I'd be happy."
Diving in at the deep end is no excuse for shirking the style stakes
- 2 Loom bands: Bids for dress made from colourful rubber reach almost £154,000 on eBay
- 3 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 4 Why I'm on the brink of burning my Israeli passport
- 5 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square