If a business opportunity seems too good to be true, it probably is.
The Federal Trade Commission is warning people to be wary of any work-at-home opportunities claiming the potential for big bucks. The warning comes on the heels of the settlement of FTC charges against the operators of a "business-opportunity" scheme that the FTC says defrauded consumers through the sale of a work-at-home program. The "opportunity" purportedly provided them with their own websites that would enable them to earn a significant income by affiliate marketing with websites of well-known companies such as Prada, Sony, Louis Vuitton and Verizon.
However, after buying this "Six Figure Program" for $27, people discovered they then had to pay $100 or more in additional costs just to set up their websites. The settlement bans the company, The Online Entrepreneur, from selling business and work-at-home opportunities. Additionally, the court halted the allegedly deceptive practices, froze the defendants' assets and put the companies behind the scam into receivership pending a court hearing.
The FTC is advising anyone considering a new business opportunity to take time to review the seller's disclosure document, earnings claim statement and proposed contract to ensure they aren't in the crosshairs of a scammer.
The disclosure document identifies the seller, outlines lawsuits or legal action the seller has been in, lets you know if the seller has a cancellation or refund policy, says whether the seller is making an earnings claim and provides a list of references.
If the seller makes a statement about how much money someone can make with their opportunity, they are required by law to provide an earnings claim statement, which must include the specifics of the claim, the start and end date those earnings were achieved, the number and percentage of people who got those results or better and information about those people that may differ from you — for example, the part of the country where they live.
Other steps the FTC recommends include the following:
- Interview current owners of the seller's business opportunity. They should ask the tough questions, like if the information in the disclosure document matches their experience with the company.
- Listen to sales presentations with a critical ear. They are, of course, trying to sell you something.
- Make sure they provide what they are required to. If a seller doesn't give you the information you know they have to provide, walk away.
- Consider getting professional advice. Ask a lawyer, accountant or business adviser to read the paperwork before you sign.
- Investigate the seller. Check with your local consumer protection agency, state attorney general's office and the Better Business Bureau to see if the seller is legitimate. Do a few Internet searches by entering the company's name and "complaint" or "scam." You could get an eyeful. But be wary. Not finding any complaints doesn't necessarily mean the company is legitimate, and scammers have been known to post phony testimonials online.
Those who suspect they are trying to be conned by a business-opportunity seller are encouraged to report the incident to the state attorney general's office, their county or state consumer protection agency, the Better Business Bureau and the FTC.