Scams Infiltrate Phone Lines CONSUMER FRAUD - Government Agencies Try to Crack Down on 'Boiler-Room' Telemarketing Operations

By David Holmstrom, writer of the Christian Science Monitor | The Christian Science Monitor, March 2, 1992 | Go to article overview

Scams Infiltrate Phone Lines CONSUMER FRAUD - Government Agencies Try to Crack Down on 'Boiler-Room' Telemarketing Operations


David Holmstrom, writer of the Christian Science Monitor, The Christian Science Monitor


UP to $15 billion a year is being swindled from the pockets of uninformed consumers by the growing number of illicit "boiler-room" operations around the United States and the world.

According to a recent two-year congressional study of telemarketing fraud, the problem is growing because federal and state law enforcement agencies have limited funds and manpower devoted to stopping fraud.

Nor have agencies coordinated prosecution efforts on a continuing basis. "The problems are complex and, like the drug problem, almost out of control," said a state government official from California.

One of the recommendations in the study is for Congress to establish a federal telemarketing clearinghouse for information on fraud cases and require all agencies to cooperate. The lure of the grand prize

At the heart of the problem are uninformed consumers. Swindlers often target the elderly, who are swayed by high pressure tactics over the phone and promised quick wealth or prizes.

In an economic recession, the lure is often hard to resist. While legitimate telemarketing companies will allow time to consider products or offers, swindlers promise the moon and badger consumers to act quickly.

"This is an age of lotteries and grand prizes," said Cleo Manuel, a spokesperson for the Alliance Against Fraud in Telemarketing in Washington, D.C., "and people want to believe it can happen to them. Everybody wants the magic bullet that is going to solve all their woes. They want to think they have been picked. But we tell consumers to cool off; if the offer sounds too good to be true, it usually is."

Operating in offices known as "boiler rooms," salespeople have computer lists of names to call to offer investments and goods. Boiler-room operations are heavily concentrated in Sun Belt states such as California, Arizona, Florida, and Texas.

Dozens of scams exist. One in use now is the "advance fee loan" scam. People respond to ads in the paper offering low interest loans regardless of credit history. They pay a "processing" fee of $200 or $300, then told several days later they didn't qualify, or they are sent standard bank loan application forms.

According to Alliance Against Fraud in Telemarketing, the Better Business Bureau in Phoenix, Ariz., received over 1,000 complaints in one month last year about advance fee loans.

Another scam is misuse of 900 numbers. A company in New Jersey recently collected over $650,000 in three months when consumers called one of several 900 numbers taken from a green postcard disclosing that an undelivered package was waiting for them. The cards looked like US Post Office cards. Those who called paid anywhere from $9.95 to $28 for a call of a few minutes.

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