Fraud in the Economic Downturn

The ongoing economic downturn is proving to be a boom for one energetic group of entrepreneurs: fraudsters who offer financial services, collect upfront payments for them and then don't deliver. So-called "advance fee" fraud has been around for decades.
But in recent months, a number of regulatory agencies and watchdog groups, including units of the Better Business Bureau, have issued fresh warnings and shut down questionable Web sites. The reason: Financially desperate persons and even companies are considered more vulnerable to the fraudsters' e-mail and telephone pitches.

While there are many variations, the new emerging common pattern is this: An offer of financial assistance is made--a mortgage loan, assistance in debt consolidation, help in getting federal stimulus money and so on. But the customer first has to make a payment, often in the thousands of dollars, that is variously called a "due diligence fee," a finder's fee. The promised assistance doesn't materialize because the offerer collecting the fees never had any intention of providing it.Not every service that asks for an upfront application fee is bogus.

Knowing the warning signs is important, because often a victim finds out he's been had only after trying unsuccessfully, and often repeatedly, to get the agreed-on service or loan. It's not just the economy that's helping the advance fee business to boom. The Internet, plus telephone forwarding services, have made it much easier for scamsters to hide their true identities and even locations. These days, it's not unusual for a victim to discover the fee ended up being sent to a foreign country where there is little effective recourse.