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
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:
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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.
Financial Scams & Schemes
IDENTIFYING
PREDATORY LENDING
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:
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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
Financial Scams & Schemes
TEN WARNING SIGNS OF
PREDATORY MORTGAGES
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Unreasonably high interest rates
Multiple refinancing
Unnecessary debt consolidation
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Balloon payment
Negative amortization
Door-to-door solicitation
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
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Advance fee schemes
The prize that will cost you
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Online auctions
Fraud jobs
Moneymaking schemes
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Bogus charities
Scam schools
Financial Scams & Schemes
HOW DO THIEVES WORK?
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Skimming
Dumpster Diving
Computer Spyware
Account Redirection
Phishing
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Pharming
Wireless Hacking
Stealing
Shoulder Surfing
Financial Scams & Schemes
TOP STRATEGIES TO AVOID SCAMS
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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.
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
(3824357); 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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