It is a perfect climate for financial vultures, predators and all varieties of scam artists. The U.S. government estimates that right now, nationally, there are more than 800 active cons and frauds. Most of them target older people as well as working, young and single parent families. Many involve high-pressure or deceptive sales pitches. One of the newest is actually a reappearance of a quasi-legitimate scheme involving 401(k) debit cards.
In 1996, then congressman, Senator Charles E. Schumer (D-NY) introduced a bill targeting the debit card tied to an expense account bankrolled by borrowing against a 401(k) account. Customers would be able to draw against their retirement savings at virtually any ATM or business terminal. One could use their retirement savings to make mundane purchases such as a cup of coffee.
Schumer declared that such retirement contribution plans were created to ensure that people would have adequate savings for retirement, not as a source of convenient and casual credit. At that time, Bank One, which was marketing the plan, quickly abandoned the program and the legislation was dropped.
Last week, Schumer and Senator Herb Kohl (D-WI) Chairman of the Senate’s Special Committee on Aging, announced that they are introducing legislation barring companies, particularly Reserve Solutions, from reviving the practice in hopes of capitalizing on consumers facing tightened access to consumer credit. They say the practice appears to be an abuse of the intent of 401(k) and that for every $1,000 pulled from such accounts, translates to about $10,000 in lost retirement income.
Here’s the bite. The debit card companies charge you a set-up, or initiation fee, and interest on your withdrawals. So, while you deplete your retirement savings and lose their earnings, you also get to pay for the privilege of so doing. In January, the interest rate on ReservePlus was about 3% above the prime rate.
Schumer says that in the wake of this revival of the practice he will seek to make certain the bill this time becomes law.
Seniors in particular are subject to such quasi-legal scams because they generally are more trusting, often live alone, susceptible to charm and persuasion and are fearful about inflation and ready access to cash.
Other con games, such as high pressure deceptive sales pitches for living trusts, “low-risk” “high-yield” investment scams and “miracle” arthritis remedies, are specifically aimed at senior citizens. However, seniors also fall prey in large numbers to schemes involving advanced loan fees, home improvements, auto repairs and work-at-home schemes.
Here are a few tips to help you sniff out the con jobs and scams.
If it seems too good to be true, IT IS!
Don’t be rushed, a valid offer is good from one day to the next. Quick decisions are usually very bad decisions.
Get a second opinion. Consult with someone you trust.
Never reveal your “vital numbers” such as credit cards, date of birth, ATM PIN-numbers, or Social Security numbers to verify a contest prize, to “guarantee” a price or rate, low-cost vacation, or other prize offer.
Know who you’re dealing with, or don’t deal.
“Special” deals being offered to only a “select” few.
Be wary of demands for immediate advance payment by certified check.
From identity theft to telemarketing fraud, seniors must be in the know and wary in order to protect themselves. Apprehension and punishment of con artists is a long, frustrating process—it is far, far better to avoid the scam, than to report it. Below you will find several sites that can give you complete and definitive information on how to protect yourself from common fraud schemes.
The Federal Bureau of Investigation