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Financial Scams & Schemes
Scams & Schemes
Financial Scams & Schemes
Scam
• Fraudulent or deceptive schemes
Financial Scams & Schemes
Pyramid Scheme
• A type of financial fraud in which people pay to join an organization in exchange for the right to sell memberships to other people.
Financial Scams & Schemes
Ponzi Scheme
• Closely related to a pyramid scheme but the promoter generally has no product to sell and pays no commission to investors who recruit new members.
Financial Scams & Schemes
Affinity Fraud
• A name for a type of scam that targets members of a specific demographic. Perpetrators may attempt to relate to or exploit characteristics common to the demographic. Targeted groups can include the elderly, ethnic groups, and religions.
Financial Scams & Schemes
Predatory Lending
Overview•Characteristics and warning signs of predatory lending.
•The key targets of predatory lending.•Common abuses and scams.•Nonprofit organizations that can help consumers plagued by predatory lending.
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Financial Scams & Schemes
PREDATORY LENDING
• Sell properties for much more than they are worth, using false appraisals.
• Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
• Knowingly lend more money than a borrower can afford to repay.
• And many other scams.7
In communities across America, people are losing their homes and their investments because of predatory lenders, corrupt appraisers, mortgage brokers, and home improvement contractors who:
Financial Scams & Schemes
IDENTIFYING PREDATORY LENDING
• Packaging a loan with single-premium credit insurance products
• Repeatedly refinancing a loan in a short period of time
• Charging excessive rates and fees to a borrower who qualifies for lower rates and fees
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Predatory lending is not defined by federal law except to the extent that a loan is a high-cost loan and contains one of a fixed list of terms or conditions. Predatory or abusive lending practices can include:
Financial Scams & Schemes
TEN WARNING SIGNS OF PREDATORY MORTGAGES
1. Unreasonably high interest rates
2. Multiple refinancing
3. Unnecessary debt consolidation
4. Balloon payment
5. Negative amortization
6. Door-to-door solicitation
7. Back-dating of documents
8. Large loan broker fees
9. Kickbacks between lender and broker
10. Single-premium credit life insurance
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Financial Scams & Schemes
COMMON SCAMS
• Advance fee schemes
• The prize that will cost you
• Online auctions
• Fraud jobs
• Moneymaking schemes
• Bogus charities
• Scam schools
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Financial Scams & Schemes
HOW DO THIEVES WORK?
• Skimming• Dumpster Diving• Computer Spyware• Account Redirection• Phishing
• Pharming• Wireless Hacking• Stealing• Shoulder Surfing
Financial Scams & Schemes
TOP STRATEGIES TO AVOID SCAMS
• Don’t become a victim.
• Investigate strangers who have deals too good to be true.
• Always stay in charge of your money.
• Don’t be fooled by appearances.
• Watch out for salespeople who prey on fears.
• Monitor your investments.
• Report fraud or abuse.
• Do your homework.
• Be wary of door-to-door solicitations.12
Financial Scams & Schemes
ADDITIONAL RESOURCES• Department of Housing and Urban Development (HUD) —
Office of Consumer and Regulatory Affairs, Interstate Land Sales/RESPA Division. (202) 708-4560; www.hud.gov/complaints/landsales.cfm.
• Federal Deposit Insurance Corporation (FDIC) — Consumer Affairs Division. (877) ASK-FDIC (925-4618); www.fdic.gov.
• Federal Trade Commission (For federal lending violations involving mortgage and consumer finance companies.) (877) FTC-HELP (382-4357); TTY (202) 326-2502; www.ftc.gov.
• Federal Reserve Board of Governors of the Federal Reserve System — Division of Consumer Affairs. (202) 452-3693; www.federalreserve.gov/pubs/complaints.
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