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Avoid work-at-home scams

For a parent, it sounds like the best of both worlds: working from home so you can make money AND spend more time with your kids.

The lure of work-at-home companies is especially enticing at a time when many moms can't afford not to work any more and some may even need a second source of income.

The so-called opportunities scream out from all over: ads promising you'll rake in big bucks by stuffing envelopes or being a "mystery shopper,'' or by hosting parties to hock cosmetics, cookware, jewelry, even sex toys.

But how do you know what's legitimate and what's a scam?

In a National Consumers League study released this year, 31 percent of Americans surveyed said they are more likely to look at work-at-home opportunities because of the economic downturn.

And more scammers than ever are out there looking to take advantage.

"Work-at-home opportunities are attractive to scammers because scammers have easy access to the Internet, job postings, even the classifieds in newspapers,'' said John Breyault, vice president of public policy for the National Consumers League. "There are a lot of pyramid schemes out there masquerading as multi-level marketing.''

The big difference between the two, he said, is while multi-level marketing companies such as Amway and Mary Kay offer legitimate products for sale, pyramid schemes offer nothing but promised compensation for recruiting others.

Take the old envelope-stuffing scheme that has been around for ages, Breyault said. Recruits are encouraged to place ads to lure others to pay a fee and in turn, place their own ads. No products are ever sold.

Neil Offen, president of the Direct Selling Association, a national trade association based in Washington D.C., said there are two questions you should ask before venturing into business with a direct-sales company:

1. Do you risk financial loss by being involved with the company? "If you have to buy anything, ask, 'Will you buy this back, and at what price?' ''

2. Is the money you're making coming from the sale of a product or from recruiting people?

"If it's from recruiting people, it's a scam,'' Offen said.

The Direct Selling Association boasts high-profile members such as Avon, Pampered Chef, Mary Kay, Amway and Herbalife. It has a strict code of ethics that member companies must follow, Offen said. One of its key edicts is its buyback program. If an individual quits, the company must buy back any inventory purchased in the prior 12 months for 90 percent of its value.

Offen said direct selling is a growing trend globally, especially with

more people being laid off or having their hours cut.

"There are 15 million people in the U.S. involved in direct selling,'' he said. "It is growing very rapidly. We're looking at a major surge of people going into the business.''

About 90 percent of the direct sales force is made up of women and about 77 percent are married. More than half have attended college.

Offen said home-party type businesses are generally a safer bet when considering a direct-selling venture because a bonafide product is sold.

New trends in home party businesses include making confections with Dove Chocolate Discoveries or planning home decor with Southern Living at Home.

Upscale companies such as Swarovski crystal and Silpada, which sells sterling silver jewelry, also are on the rise. Even Jockey is getting in on the act, selling underwear and athletic wear through home parties.

The key is to thoroughly evaluate any opportunity. And if it sounds too good to be true, it probably is. Experts say with unemployment and foreclosures on the rise, many families are grasping at opportunities they wouldn't consider in other financial times.

"If people weren't so desperate to make money and pay their house note, they wouldn't be so likely to fall for these schemes,'' Breyault said.

IS IT LEGIT?

When checking out a work-at-home business: 
  • Get everything in writing.


  • Make sure any materials or supplies you purchase can be returned for at least 90 percent of its purchase price.


  • Check references, and not just the ones they give you. Find people you know who work for the company.


  • Check with your local Better Business Bureau to see if there have been any complaints.


  • Make sure you are aware of any local regulations about operating a business out of your home.


  • Look at where the promised compensation is coming from. Is it from the sale of products or for recruiting others?


  • Look for red flags such as high start-up costs for training kits or membership fees.


  • Examine the support system. It should be low pressure and helpful. If it is high-pressure to perform, this is a red flag.


  • If you want to get out of the business, it should be easy.


  • If you go to a meeting for the company, check to see if everyone is from the same group, such as a church or school. Sometimes scammers target groups to take advantage of social pressure.


  • Stay with a company you have heard of, or check with agencies such as the Direct Selling Association, the U.S. Postal Inspection Service or the Federal Trade Commission to see if it's a legitimate business.


  • Report scams to your local police department, as well as national fraud centers such as http://www.fraud.org/.

COMMON SCAMS

Advance-fee:

An ad touts how easy it is to start a home-based business. You invest a few hundred dollars in inventory, set-up and training materials. Of course, if and when the materials do come, they are worthless … and you're stuck with the bill.•

Mystery shopper:

You're sent a hefty check to cover your costs to shop and check out the service of local merchants. Then you're told there was an error: You were sent the wrong amount and need to send a portion back. After you do this, you learn the initial check was phony and you're on the hook for the counterfeit check.•

Pyramid schemes:

You're hired as a "distributor'' and shell out big bucks for promotional materials and product inventories with little value (like get-rich quick pamphlets). You're promised money for recruiting more distributors, so you talk friends and family into participating. The scheme grows exponentially but then falls apart … the only ones who make a profit are the criminals who started it.



Unknowing involvement

in criminal activity: Criminals -- often located overseas -- use unwitting victims to steal and launder money and maintain anonymity. For example, they may "hire'' you as a U.S.-based agent to receive and re-ship checks, merchandise and solicitations to other potential victims … without your realizing it's all a ruse that leaves no trail back to the crooks.



SOURCE: Federal Bureau of Investigation

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