Too good to be true: Staying ahead of the scams

With Americans suffering through the most devastating bout of long-term job loss in decades, it’s not surprising to see scams rearing their heads. They always do during tough economic times.

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The health care hustle

What are they? According to the Federal Trade Commission (FTC), operators advertise plans that appear to be health insurance coverage. This “insurance” sounds good to consumers who are uninsured — some are unemployed, don’t work a job that provides insurance, have pre-existing conditions etc. The perpetrators behind the scam charge hundreds of dollars in upfront fees and monthly fees every month. The scam is that this is NOT an insurance policy, instead it’s a medical discount plan. When the people who bought it go to the doctor or the pharmacy, they find their plan isn’t accepted. They can’t cancel and they’re out big money. The FTC is cracking down on this one in particular, as they announced at a news conference Wednesday.

Affinity scams

What are they? Think Bernie Madoff. Affinity groups are organizations where the members share a common religion, ethnicity, profession or interest. That could be a country club or a church. Scam artists join the group or pretend to be members, gain the trust of others (particularly the leaders) and then execute their plan. The plan could be getting you to invest in a particular stock or fund, buy a particular franchise or real estate. There are many different permutations. Be wary of new friends who want to do business with you or want to introduce you to friends to do business with them.

Job placement scams

What are they? Scammers ask for upfront payments before you can get a job. Sometimes those payments are “application fees”; other times they are fees to take different exams. Some say you have to pay money to get credentials to get the job. Or pay money to subscribe to a website that gives you leads, and that website has nothing in your area or too few options, or the ones that are listed require additional fees to apply. The FTC has sued a couple of companies like this. You’ll recognize them because they don’t want to take cash or a check; they want the checking account number or credit card information. Note: Any ad that guarantees that you’re going to get a job — which plays right into the fears of the long-term unemployed — is probably a scam, too.

Stimulus scams

What are they? These scam artists advertise that stimulus money is available and the government is giving it away — often these scams say “pursuant to American Recovery and Reinvestment Act.” According to the FTC, these are entirely fraudulent. “The government does not provide personal grants to people to remodel their kitchens,” a spokeswoman said. If you suspect a stimulus offer is suspect, go to www.grants.gov, operated by the U.S. Department of Health and Human Services, the official source for information about federal government grants. The Commission also issued a consumer alert stating that the promise of stimulus money in return for a fee or consumers’ financial information is always a scam.

Loan modification scams

What are they? Scams that claim they can save your home. With nearly one-quarter of homeowners underwater on their mortgages, the possibilities of foreclosure loom extremely large. No wonder the scammers are out. According to the FTC, the scam artists search public records, the newspapers and the Internet for homeowners in distress or place ads like “Stop Foreclosure Now” or “We Can Save Your Home.” Then they come after your money — again they may tell you they can negotiate a deal to modify your loan with your lender if you pay a fee first, or to make mortgage payments to them while they negotiate your mortgage. They may try a bait-and-switch, asking you to sign documents that you think are for a new loan that will make your mortgage current, but will actually surrender the title of your house in exchange for a rescue loan. Or you may be asked to surrender the title and told you can rent the house now and buy it back in the future — but of course that never happens. If you’re having trouble paying your mortgage, either talk to your lender directly or contact a not-for-profit credit counselor through the HOPE NOW alliance at hopenow.com or 1-888-995-HOPE. And for more information on loan scams, you can go to preventloanscams.org.

So how do you avoid all of these scams?

• Avoid upfront fees. If anyone is asking you for payment to apply for a job or apply for insurance or anything else for which common sense tells you there should be no upfront fee, walk away.

• Pause. There should be no pressure to sign on the dotted line immediately. You should always be able to walk away and decide if this is something you truly want. The urge to do it NOW is always the sign of a scam.

• Check the credentials of any company on the other end with the local Better Business Bureau at BBB.org. I also routinely type the name of the organization and the word “scam” into Google and see what emerges.

• Avoid anyone who offers to fill out paperwork for you or pressures you to sign something you haven’t had a chance to read or don’t understand.

Oh, and if it sounds too good to be true, it is.

Jean Chatzky is the financial editor for TODAY, a contributing editor at More magazine, and the author of six books, including “The Difference: How Anyone Can Prosper in Even the Toughest Times.” Check out her daily blog at JeanChatzky.com.