Thanks to efforts by California and Nevada authorities to regulate telephone marketing operations by requiring them to be registered and bonded, telemarketing scams are moving into Utah.
"Faced with such restrictions, these companies have headed out in search of greener pastures lucky us!" said Bill Beadle, president of the Salt Lake Better Business Bureau..Beadle said at least two such companies are calling prospects more accurately "suckers," he says from Utah and are using Las Vegas mail drops to keep them going.
Here's how it works: You get a call from XXX Company and are told "Congratulations, you have won . . ." But before you can receive the marvelous prize they are holding for you, you first must "avoid gift taxes" (or some other such doubletalk) by purchasing a year's supply of vitamins or whatever.
Businesses are usually required to buy something like ball point pens with their company name imprinted on them.
Explained this way, it's hard to imagine how anyone would fall for it, but "these people (telemarketers) are slick," says Beadle. Inevitably, a certain percentage of the thousands of people called will give the callers their credit card number, assuming the "prize" is worth buying the product. It never is.
These "boiler room" operations thus acquire thousands of credit card vouchers, complete with number and expiration date, that have been taken over the phone from their "lucky winners." Now they have to turn those vouchers into cash.
In the past, that has been simple. They would turn them in to their bank just as any legitimate business does. But some local governments, such as Clark County (Las Vegas), Nev., have been passing ordinances that make life hard for telemarketers. These ordinances include banning prizes as sales incentives and requiring a cancellation/refund period for the consumer.
Also, said Beadle, some Las Vegas banks have refused to accept credit card (usually Visa or MasterCard) vouchers taken from telephone sales. One Las Vegas bank reportedly lost $1.8 million through three accounts when disgruntled consumers began exercising their 180-day right to charge back such charges when the prize and/or goods ordered were not as specified (such as "executive pens" turning out to be cheap plastic ball-points.)
"In most cases," said Beadle, "a consumer has the right to charge back any purchase up to six months. If you have a problem with your Visa bill, for instance, you call and say, `Hey, they lied to me; they deceived and defrauded me.' The bank will usually kick it back to the bank that handles the merchant's account."
This means, said Beadle, that as many as nine months can go by with consumers making protests on charges the bank has long since paid off to the telemarketer. The bank that did business with the operator ends having to credit the consumer even though the telemarketer's account is depleted or closed.
Beadle said he knows of at least one Utah bank that was "stung" in such an operation a gasoline additive telemarketing scam set up here by a shell company.
The increasing resistance of banks to do business with these companies has created a new twist: factoring of credit card vouchers. In this scenario, the scam operator uses a legitimate business to dump his vouchers, offering to sell a businessman $10,000 worth of vouchers for, say, $7,000. The legitimate businessman then turns the vouchers in to his bank for payment.
But that can backfire as well when the bank refuses to accept the factored vouchers. Beadle said he has been informed by a local banker of a Salt Lake dentist who showed up at his bank with 500 credit card vouchers that had nothing to do with dental care. The bank refused to accept them, leaving the dentist out the money he had paid the telemarketer.
Beadle said the bureau is working with local banking and law enforcement officials to try and stem the flow of such schemes into Utah.