As promised last week, I’ll continue the work-at-home alert concerning pyramid schemes. The recession brings out all kinds of wolves in sheeps’ clothing who love to create pyramid schemes because of the ease in which victims are reeled in.

Millions of dollars are lost to this particular type of scam from the pockets of Americans who truly believe they’re starting their own businesses. Whether it’s a “simple” pyramid scheme (i.e. chain letters) to more advanced and costly conspiracies, consumers must learn to recognize illegal ventures so as not to be lured into the Big Bad Wolf’s lair.

Let me begin by reassuring folks that multilevel marketing or direct selling companies are normally on the up-and-up. Avon, Mary Kay, Longaberger, and the like — while demanding an initial product investment — want to make money with you as you build your business (and theirs) by selling consumer products, usually face-to-face. The initial cost is usually fairly small to stock an inventory for your sales, plus most companies normally buy back leftover items if you decide to quit.

On the other hand, if you’re promised fantastic wealth in commissions once you’ve brought in your friends and family and their friends and family and so forth, then run for the hills!

A pyramid scheme in the guise of a legitimate business can (and often does) bankrupt an innocent victim. Let’s say I join Crooked Co. and fork over several hundred or even thousand dollars, as well as, perhaps, affix my signature to a contract I haven’t carefully scrutinized. My “sponsor” also urges me to buy informative CDs, computer programs, literature and products to guide me on the road to riches.

While I’m unnerved counting up just how much money I’ve spent in a very short period, Sammy Sponsor indoctrinates me into signing up new recruits — the more who buy into the program (both literally and figuratively), the more affluent I’ll become. We’re all promised untold riches as our “pyramid” grows; after all, we’ll earn commissions through continued growth of our downlines — the number of distributors we recruit — whose numbers are unlimited.

Whoa!

“Unlimited … endless … countless” — are all immediately suspicious terms and a cornerstone of illegal schemes. For everyone to profit in a pyramid scheme, we’d have to have a never-ending supply of potential (and willing) participants. Obviously, this isn’t the case. When the supply of people runs out (and it will), the pyramid collapses and most of us lose our investment.

Therefore, it’s imperative we understand the warning signs to recognize and avoid these scammers. Investigate thoroughly before you hand over that first penny.

In fact, immediately contact the attorney general in your state and the state where the company supposedly exists.

The following concern only the most obvious of frauds.

— Pressure to sign a contract quickly and agree to pay a large sum of money before sales claims can be investigated or legal advice obtained

— Promises of extraordinarily high or guaranteed profits, especially if the assurance necessitates bringing in other people

— Claims that profits can be achieved easily with minimal or no effort on your part

— A required initial fee which greatly exceeds the fair market value of any products, kits or training

— A large fee payable before you receive anything in return

— Evasive answers by the salesperson or unwillingness to give disclosure documents required by law

tiny card charges scam

As of this month, consumers are warned about a new credit card scam. Small, unexpected credit card charges, usually 25 cents to a few dollars, are showing up on thousands of credit card statements.

The scamsters believe most people won’t notice tiny discrepancies and, by stealing only small amounts from a great many card holders, the bandits pocket oodles of money. Of course, wise consumers know to carefully check monthly charges against receipts and dispute any amount — no matter how inconsequential — to the issuing bank.)

Ellen Phillips is a retired English teacher who has written two consumer-oriented books. Her Consumer Watch column appears on Saturdays in the Business section of the paper. An expanded version is at www.timesfreepress.com under Local Business. E-mail her at consumerwatch@timesfreepress.com