Every business owner knows there's
no such thing as bad publicity, especially when it's free. Newspaper articles,
business exchanges and other means to get more people exposed to your company's
name are great, especially if your business is small. When you don't have a big
advertising budget, these organizations can be a lifesaver.
Unfortunately,
scammers realize that this desire for publicity is a powerful motivation. Scams
targeting business owners involving fake businesses directories are on the
rise. These schemes come in a variety of flavors.
One
variant has the scammer call, fax or email asking the business to
"confirm" or "verify" its contact information for a
business directory. No discussion about price occurs. The scammer usually tries
to target office professionals, receptionists and personal assistants who are
more likely to be bullied into saying yes. In the case of a fax or email, the
terms and conditions on the statement may include fine print about exorbitant
listing fees. Of course, there is no directory, but that won't stop them from
billing.
After the
initial contact, the next step is a slew of invoices marked "urgent,"
for anywhere from a few hundred dollars to thousands. Many scammers are
counting on a low-oversight accounts payable system, where invoices are posted
and paid without much investigation. If the invoice is not paid, the scammer
will escalate to collection notices and calls, and may threaten the business'
credit. They may even discuss litigation.
At this
point, the scammer will usually offer a "settlement" amount which
seems incredibly generous. This is a powerful psychological tactic which takes
advantage of the contrast effect. Paying $500 when you've previously been told
you'll have to pay $1000 seems much more reasonable than just being told to pay
$500.
Other
variants may claim to confirm Yellow Pages listings. They may also claim to
represent a charity network and target small not-for-profit groups like
churches or community food banks. The process is the same in all cases.
Authorities
suspect the scams originate in a small number of large call centers located
outside the US. Recently, the FTC filed suit against a Montreal-based call
center which had defrauded thousands of business and charities in the US. Despite
these charges, the scam continues to grow in popularity.
If your
business or charity is targeted by this scam, there are a few things you need
to know. To keep your business out of trouble, make sure you do the following:
1)
Protect and educate your employees
If you
have a marketing department, establish a policy that all promotion efforts go
through that department. Add language to your employee handbook or other
documentation specifying who is authorized to make promotional deals on behalf
of your business. Make sure it's written down and that your employees know
about it. This language will protect them should they be the ones to sign one
of these fake agreements.
Also,
make it a point to discuss this and other scams with your employees during
regular meetings. This scam preys on the unwary and relies on ignorance to make
a cheap buck. Knowledge is your best defense!
2)
Don't pay them a dime
If you
notice an invoice like this, you should check with the Better Business Bureau
in your area to see if complaints have been filed against the organization that
issued it. If there is, you should store the invoice somewhere safe. You should
never ever agree to pay it.
Most of
these "contracts" are unenforceable. Particularly if they use Yellow
Pages branded icons and names to establish their legitimacy, they were
agreements made under false pretenses. A verbal agreement, even one recorded
over the phone, likely isn't binding, especially if no discussion of price
occurs.
Even if
they were, the litigation to collect the debt would be hopelessly expensive.
Reporting the debt to credit reporting agencies would expose the group doing
the reporting to defamation liability. The bluster surrounding the collection
process is just that.
3)
Inspect, collect, and notify
If you
haven't before, now's a good time to take a look at your accounts payable
processes. Make sure tight controls exist to ensure that invoices are checked
for legitimacy before being paid. Double check to make sure you're only paying
for services you receive.
If you do
get fraudulent invoices, don't throw them away! File them in a safe place. You
may need them to help an investigation of scammers down the line. They may also
be helpful if you need to contest a report with a credit reporting agency.
You
should also notify the FTC immediately. Misrepresentations like these over the
phone, fax or email are a violation of FTC rules regarding advertisement. The
FTC can be reached at 877-FTC-HELP or online at ftc.gov/complaint.
4)
Be proactive
The best
way to stay ahead of this scam is to stay abreast of new promotional
opportunities in your community. Your local chamber of commerce likely
maintains a directory of local businesses, and is an excellent place to start
for help promoting your business. Get involved with local organizations and
charities that represent the values of your business. Don't sit back and wait
for those opportunities to call you up. Get out and take charge of them
yourself!
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