published Friday, July 4th, 2014

Biz Bulletin: Red flags that signal sweepstake scams

By Jim Winsett

Q: I got a call from someone saying I won an $8,400 government grant. All I had to do was get a Green Dot money card, load $240 on it, give them a call back with the card numbers, and they promised the money would be released to my bank. Sounds a little off, is this a scam?

A: Whether it's by mail, phone or in person, con artists are using the promise of prizes, grants and large cash winnings to steal from honest people. Victims often get an unsolicited phone call, email or letter from someone notifying them that they've won a lot of money or a prize.

Many times the letter or caller will explain that in order to collect the winnings you have to send a small sum of money to pay for processing fees or taxes. Following these instructions, victims wire the money or use a prepaid card, but never get their "winnings."

BBB receives calls every week from consumers who believe they have won the lottery, a government grant or a sweepstakes. Unfortunately, these scams leave many people losing their hard earned money rather than hitting the jackpot, so it's important to educate yourself on the warning signs.

To avoid falling victim to a lottery, grant or sweepstakes scam, BBB advises to be look out for the following five red flags:

• You can't win a contest you didn't enter. You need to buy a ticket or complete an application to participate in a contest or lottery. In the case of a government grant, the process usually involves even a lot more paperwork. Verify that the company offering the prize is a legitimate business by doing research on the company. You can start your search at bbb.org.

• You are offered "too-good-to-be-true" prizes. It is almost always a large sum of money, and we have heard an occasional "awarding" of expensive cars too. But there is always a catch. Scammers attempt to make it sound easy to claim your prize. The reality is it is very unlikely that someone will give away large sums of money, or cars, with no strings attached.

• You have to give personal information. Anytime someone asks for your bank account number, Social Security Number or other sensitive information should be an automatic red flag. There is also no need to access financial information, like a credit card number in response to a sweepstakes promotion.

• You have to pay to win. Don't be blinded by the promise of a large sum of money in the future. If they are asking you to give them money first, that is a red flag. According to Federal Trade Commission, it's illegal to ask you to pay or buy something to enter or increase your odds of winning. Legitimate prizes do not come with processing fees, and taxes are paid directly to the Internal Revenue Service after winnings are collected.

• You have to wire money or use prepaid debit cards. If you are asked to use these transfer methods in order to get a prize or any other large sum of money, that is a major red flag. It's difficult to track these types of transactions, so you will have little to no way of getting your money back.

Jim Winsett is president of the Better Business Bureau of Chattanooga.

about Dave Flessner...

Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...

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