Dealing with Salesmen, Cheats and Lairs
Consumer protection laws are passed and administered to protect you and I from predatory business practices. Some of these laws and regulations target specific industries that are prone to unscrupulous business practices such as credit collection agencies, timeshares and vacation clubs and gyms (I previously wrote about gym memberships). The industries are not corrupt per se; however, they tend to have enough members who engage in sharp practice, or outright fraud, that the government has to step in and regulate the entire industry. For example, Ellen Roseman seems to have touched a particular nerve discussing the door- to-door sales tactics of energy marketers. As far as I know though, there seems to be little or no regulation dealing with the sales practices of some members of this industry.
The issue with regulation is that it is usually backward looking. In the field of consumer protection, most of the regulations tend to be introduced after some shocking incident has been committed or public outrage expressed (and, at times, the regulation is overly burdensome and fails to address the root cause of the issue). The damage being done, all the regulation does is win hallow political points. The more practical problem is that many modern governments enact laws but do not have the resources to enforce them (a prime example being franchise law; in some jurisdictions, there is a lot of regulation but no franchise cops to enforce them).
What can we do to protect ourselves?
I have seen and heard many a crazy thing when I practiced law and I would summarize the best way to protect yourself from salesmen, cheats and lairs as follows:
A GOOD CON HAPPENS QUICKLY- ASK A CON TO BE PATIENT AND THEY WILL USUALLY DISAPPEAR
Cons need to occur fast before you have the ability to think through what is actually happening and what the offer is. They are usually in the guise of “take this offer now, it will expire by the end of day!” Unethical door to door sales-people tend to create double urgency (“listen, I am only in the neighborhood for a day…”). If the offer is so good and there isn’t a finite supply of product, why are you rushing me?
If there is a finite supply of product and its going fast, why would you sell to someone who needed to think about it because you could sell it for more down the street? Maybe someone is trying to sell you a white elephant!
Ask them to come back later. Tell them you will think about it. Cons work on a smash and grab mentality. If they can’t do it quickly, they will find their next mark.
A lot of cons happen at trade shows because there is a real sense of urgency- not to mention the fact that a con can do a fly by night and never be seen again with your money. If you want to be really safe, leave the credit card at home and ask an exhibitor if they can give you the show special afterwards. Someone who really wants your business and is legitimate will accept this offer.
“WELL, THE PAPERWORK ISN’T FINISHED…”
I was given an offer to buy into a gold mine in Southern Africa last month. I could buy in for pennies a share and the offering price was going to be $4-$5 (they think, see below). Here’s the long and short of my conversation (answers in bold and italics).
Can I see the IPO? Sorry, it is being drafted.
What is going to be the IPO price? We don’t know yet. Maybe $4-$5.
When is the IPO going to be? We don’t know yet but we are thinking June-July
(This is where I got really weirded out- IPO season is May or Oct-Nov and they want to hold on to my money for 5-6 months and I have no paperwork to ask for my money back?)
Is this deal being underwritten and, if so, by whom? Yes and I don’t know.
They gave me a flimsy business plan and then an insert from Sprott Asset Management on why people should invest in gold (Sprott is widely acknowledged as one of the best investment houses for commodities). To be clear- it was why you should buy gold NOT why you should buy this gold company.
The offering could be legitimate and I could lose a huge opportunity to make money but there wasn’t enough paperwork to make me comfortable. A company is offering an IPO and has nothing but a 4 page business plan to go on?
Always demand paper- it levels the playing field because it is much harder to misconstrue paper than the spoken word. The other thing to watch out for is people who want your signature without giving you the opportunity to read the paper (Ellen tells the story of a salesperson who covered up the text in the link above)- having the opportunity but ignoring the terms and conditions is another matter- or won’t give you the paper to read and ponder (although car dealerships are notorious for this).
Finally, always ask for a copy of what you signed. Its hard to argue when you don’t know what you have signed.
BE EMBARRASSED RATHER THAN BROKE
Cheats and lairs play on our egos. No one wants to feel stupid. They pick on the vulnerable because no one wants to admit they are ignorant, don’t understand the language that well or what is being said. I use to get a lot of “well, you are a lawyer. You, obviously, understand this…” Actually no.
As soon as someone rushes you and starts playing on our vanity, watch out.
THE GOVERNMENT IS TOO BROKE TO FIND YOU EVERYWHERE (OR THEY LIKE TAKING OUR MONEY FROM OUR PAY CHEQUE)
This one gets used a lot on new immigrants. Someone solicits you with some official sounding government-esque name like the “Minister of Industrial Development” of “the Office of the Superintendent of Record Keeping” (these are made up) and tries to get someone to pay money as some type of levy or special tax.
For example, what happens a lot is that anyone who registers for a trademark receives some mailing from the Office of the Registrar of Trademarks (I can’t remember the exact name but it sounds derivative of the Trademark Office) soliciting some service and requesting a modest sum of money (its cleaver because the money is never outrageous enough to investigate fully). There’s a seal on the top of the letter that makes it look very official. In tiny print, the letter states that the organization is not affiliated with government at all and there is no obligation to pay them. Most people miss this (my assistant once came in and said we were late on the bill!).
In most jurisdictions, it is a crime to impersonate a government official. It the solicitation is in person, you can ask outright if they are part of the government. If they lie, it is usually a criminal offense. Where the solicitation is in writing, look for the fine print or call your local representative or consumer protection department to verify whether the solicitation is actually from a government entity if you have never heard of the department before.
The tourist version of this scam occurs in Thailand where you get jumped when you exit your flight by someone from some Ministry asking you to pay a visitor’s tax. The Ministry doesn’t exist and there is no tax (of course, I once thought this of an official and kept walking almost to be tackled 30 seconds later). A good tourist book should tell you of the local scams.
YOU GIVE UP YOUR POWER WHEN YOU HAND OVER YOUR MONEY. IF IN DOUBT, KEEP YOUR WALLET IN YOUR PANTS.
Anyone else want to share a tip? Four Pillars has a series on avoiding scams if you want to read further on the subject.
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