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When Does a Company Cross the Fraud Line?

by J_Pratt

Reader “Mary P.” shared her story with us in the hopes of helping others avoid her mistake.

On July 29, 2012, Mary’s family was rocked by tragedy when her 21 year old nephew, a student at a college in Pennsylvania, was accidentally electrocuted.  Although they were grief stricken, the family wanted to do something positive to remember Nathan by starting a scholarship in his name.  On the evening of August 2, 2012, Mary sat down at her laptop to start by obtaining an Employer Identification Number (EIN).

While “Googling” how to get an EIN, she found a website that offered a service to acquire one for her.  While reading the information on the site, Mary came to believe that the process of obtaining an EIN from the IRS was difficult and the alternative of using a lawyer would cost much more than what this company would charge.  She was also led to believe it would take several days to receive the EIN and was therefore willing to pay $50 more for their extra service to get it to her within an hour. She gave them her credit card number, they charged her $247.00 and they provided her the EIN number in less than one hour.

When she couldn’t get to sleep that night, Mary did some additional searching on the web, found an IRS website and realized that she could have gotten an EIN in less than an hour through the IRS – for free!

When she sent an e-mail to the company, they did not respond.  When she called the company, the woman who answered was rude: “Tough luck, you should have done your homework.”

In Mary’s mind, this company defrauded her. But did they? The company owner might say “Caveat Emptor” – let the buyer beware.

It’s not always easy to tell if an offering is fraud or just a clever but legitimate business opportunity. At its root, fraud refers to getting something of value through deceit. Are companies offering services obligated to tell you when you can get the same result for less or (even for free) at another website? Are they obligated to refund your money once you learn that fact?

Good questions to ask and ones we don’t have the answers to. That’s why we must all watch out for those questionable situations and attempt to avoid them:

• Do your research. Compare several websites offering the same services; don’t just take the first one you see. Read the sites carefully for what they say – and what they don’t say. Verify the claims they make through other sources.
• Request a refund. If the company doesn’t respond, notify your payment processor (e.g., bank, credit card company, PayPal) about the situation; there are a number of instances in which they may be able to help you with a refund. Be prepared; they may feel that the situation does not qualify as fraud and not pay the claim.
• File with the appropriate law enforcement agencies. First file a report to the police department (which you will need to file a claim for a refund). If the situation involves the internet, also file a report with the FBI Task Force (I3C).
• File with government and consumer reporting agencies. Also file a report with the Federal Trade Commission (FTC), the Better Business Bureau (BBB) and you state District Attorney’s Office.

Often the question of “is it fraud?” can only be answered in a court of law. Add your reports to those filed by others and help identify companies and business practices that need to be corrected.

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FPF2A co-founder & FraudAvengers Director of Business Development Jodi Pratt is a 35-year veteran of the financial services industry. A pioneer in the area of fraud management, Jodi has spent the last 20 years creating, developing and implementing fraud solutions. She currently provides consulting and expert witness services to businesses via Jodi Pratt and Associates.