William Campanale wanted to help his 18-year-old daughter earn some extra money. When an e-mail popped up in his inbox offering an opportunity to make money stuffing envelopes at home, he thought he might not have much to lose by paying $65 for a start-up kit.
Campanale sent his checking account information to a company in Florida. The envelopes showed up at his Worcester, Mass., home quickly. But the instructions for the project stated he should put his Social Security number on each envelope. And, he said, the company began deducting $65 every month from his checking account.
Warning Signs of a Fraudulent Business|
The Federal Trade Commission suggests the following tips for consumers who are considering investing in any new business venture or work-at-home opportunity:
Does the ad promise big money for little effort? Be wary of phrases such as "fast cash," "minimal work," "no risk" or "be your own boss."
Before promoters can accept money from potential investors, federal law requires that they give investors disclosure documents. If the promoter does not make the document available, find another opportunity.
Talk to current investors, but beware of paid shills. Visit other business sites in person.
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Campanale threw the envelopes out, canceled the payment on his checking account and notified the Federal Trade Commission about what he realized was a scam.
"I was lucky. I didn't lose as much as a lot of people," he said. "It makes me think twice now about responding to things online."
As the Internet has made working from home easier for more people, it has also led to thousands of people falling prey to work-at-home schemes that can rake in millions for the companies running them, according to federal and state regulators.
"If you are home because you are raising children or you're disabled or you're retired, there's a real allure," said Michael Davis, a Federal Trade Commission lawyer.
Often if it sounds almost too good to be true, it is. In one venture, according to the FTC, a California company received about $30 million from consumers hoping to work at home by operating a surplus goods business over the Internet. Would-be workers paid $4,000 to $7,900 to buy the business venture, including a list of 200 customers, according to the regulators. Most received very little in return.
The FTC, Justice Department, U.S. Postal Inspection Service and law enforcement agencies from 14 states recently announced that they have taken action against more than 200 work-at-home and business opportunities companies as part of a national crackdown.
Officials estimate these ventures collectively have cost tens of thousands of people more than $100 million. But they admit they have no idea how many scams are out there.
"The scammers see the potential of the Internet and adapt to it, while we try our best to keep up with it," said Davis, who coordinated the actions for the FTC. "We have had complaints from as far away as the United Kingdom. The power of the Internet is that there is a quick, relatively cheap way to perpetrate these schemes anywhere in the world."
He said that the actions taken by the FTC and other enforcement agencies have resulted in some cases in injunctions against operating and a freeze of the companies' assets.
The Maryland attorney general's office is among the state agencies that have filed actions against work-at-home companies. For instance, according to Maryland regulators, one firm used eBay to entice would-be entrepreneurs to buy adult Web sites that they could then charge others to visit. But the 22-year-old running the operation never delivered the goods. He has since been barred from doing business in Maryland.
"People have always wanted the freedom to work from home. The Internet is just another hook to find them," said Dale Cantone, the deputy securities commissioner with the Maryland attorney general's office.
Although there are legitimate work-at-home opportunities, Cantone cautions that they aren't likely to be those that fall unsolicited into your e-mail inbox. He advised that companies with a bricks-and-mortar office with a street address are likelier to have bona fide jobs that can be done at home.
Maryland and Virginia have business opportunity laws that help regulate the industry. The District does not have a similar law. Cantone advised checking with the attorney general's office in the state in which the company is located to see whether any complaints have been filed. Consumers can also check with the Better Business Bureau for complaints.