National Consumers League

Economic Misery Increases Vulnerability to Pyramid Schemes


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By John Breyault, Vice President of Public Policy, Telecommunications and Fraud Millions of Americans are out of work and millions more worried about making ends meet. In the face of this troubled economy, consumers are giving home-based business opportunities more consideration as a way to make additional money. Unfortunately, scam artists often mask their fraudulent schemes as legitimate home-based business “opportunities.” The confluence of bad economic conditions and the proliferation of such scams could be putting many more consumers at risk of falling victim to these fraudulent pyramid schemes.Who wouldn't want to make These are the conclusions of a new survey released today by the National Consumers League, produced in partnership with Opinion Research Corporation. Some of the worrying findings of the survey include:

  • 31% of survey respondents said that they are more likely to consider a home-based business due to the current economic environment.
  • One third of survey respondents couldn’t identify a pyramid scheme as a scam when one was described to them.
  • Low-income Americans could be especially vulnerable to pyramid schemes. Among respondents reporting annual incomes below $35,000, 39% were unable to identify a pyramid scheme as a scam, the lowest percentage among income groups surveyed. Low-income respondents were also the most likely (42%) to consider a pyramid scheme as a good source of supplemental income when it was described to them.
  • Chain letters were the most common kind of pyramid scheme that respondents reported being approached to join (33%), followed by general pyramid schemes (21%), gifting clubs (12%), and Ponzi scheme (7%).
For more highlights from the survey, click here. To help address the growing threat of pyramid schemes, NCL has launched a new section on our Fraud.org Web site to help consumers identify and avoid falling victim to pyramid schemes, particularly the many scams masquerading a legitimate multi-level marketing plans. We’ve included a scam-spotting checklist that consumers can take with them to the often high-pressure sales “seminars” that are frequently used to lure victims into pyramid schemes, a handy chart comparing pyramid schemes and legitimate multi-level marketing plans, and links to additional information about pyramid schemes. Consumers who have been approached to join a pyramid scheme or those who may have already fallen victim to one should definitely report the scam via our Online Fraud Complaint Form. These reports are incredibly important to helping federal, state, and local law enforcement and consumer protection agencies take action to help bring scam artists to justice. If you’ve been a victim, don’t be afraid to report it. You are not alone! In addition to Fraud.org, there are several great forums online, including Scam Victims United and Scamwarners, where victims can network, share their stories, and hopefully avoid becoming repeat victims.