We have a moral obligation to obey the law. However, you are free to raise objections to what you may find offensive, bogus, predatory, or borderline schemes. Technology and society change so fast, leaving obsolete laws in place.
One person on a popular internet forum pondered, “What ‘legal scam’ is still operating that you can’t believe people are falling for?” Some commented on the forum with insightful answers about everyday legal things that made them uneasy. Here are ‘legal’ scams to avoid.
1. Direct Marketing Companies
Many people questioned the legitimacy of direct marketing companies that targeted their elderly parents with phone calls telling them they were either a finalist or had already won a sizable amount of money, telling them to be at home and expect local media to be present. They would get trinkets instead and be encouraged to pay a monthly subscription to have a chance to win in the future.
Some companies, like PCH (formerly Publishing Clearinghouse), were criticized in the past for hyping the chances that people could win money, resulting in settlements with regulators. Still, many question whether this is a legal scam.
2. Multi-level Marketing (MLM) Schemes
MLMs or pyramid schemes get a lot of attention as a shaky industry. These businesses involve selling products to family and friends through person-to-person sales and recruiting others to become part of their network.
According to the Federal Trade Commission, most people who join legitimate MLMs make little or no money and may even lose money from buying the products from the company. Others may be illegal pyramid schemes that steal everything people invest, leaving them in debt. Many commenters praised Avon as among the more successful examples, contrasting with Herbalife due to its company structure that has been challenged through class action suits.
3. Life Coaches
The label of the “life coach” came up for debate. Those career coaches who received training and accomplished goal-driven professionals provided substantial support. However, some encountered life coaches that were “shallow with few if any qualifications” and had negative experiences with them. They questioned why they were allowed to call themselves life coaches and bilk people and were “idiots who fake it until they make it” types.
4. Motivational Speakers
Like life coaches, some are experts in their field. However, there was heavy criticism for those sharing fake success stories that weren’t motivational lessons but someone who walked around a room with a mic.
One person worked at a nonprofit that hired a motivational speaker who had landed a ridiculous contract and wanted to renew his package for a higher amount. The new CEO said, “No way! How have we kept him on? He isn’t motivating anyone. If anything, people call out sick, so they don’t have to hear him.”
5. Televangelists
Televangelists are either official or self-proclaimed ministers who preach to TV or radio audiences and appeal for money. Many have been embroiled in one controversy, like the jet-setting Kenneth Copeland, who defends his private jets, or others with fancy watches or cars. One said, “They ooze of sickening charisma being used to deceive the masses.”
6. Commercial Ads for Prescription Drugs
A high volume of ads for over-the-counter and prescription meds raised concerns about pharmaceutical companies charging so much for marketing costs. Some blame was thrown at the Sacklers, known for the opioid epidemic, who were aggressive about initiating advertising to higher levels and getting rich, but this resulted in significant overdoses.
7. Get Rich Quick Schemes
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There was significant criticism of influencers who paraded in get-rich-quick schemes that were legal scams. The modern version is people on TikTok and YouTube showing videos of how they got rid of debt in a couple of years and now own expensive cars and homes. One said, “The only way to get all this is to give them money, and they’ll tell you how it’s done.”
Another shared that the earlier version of this is the book Rich Dad, Poor Dad, adding that the author (Robert Kiyosaki) “Didn’t get rich with investments or sound financial advice. He got rich from writing that book.”
8. Payday Loans
Payday loans, sometimes called cash advances, are short-term unsecured loans known for excessively high interest rates bordering on illegal levels. Some jurisdictions outlaw payday lending altogether, while other states have few restrictions.
These loans are predatory, and some see them as taking advantage of the poor, trapping them in a cycle of debt. Some commenters pointed out that people don’t fall for these loans as much as they have few options. One person called it “a vicious @#$%&*( cycle,” and he was finally able to get out from under it.
9. Ticketmaster and Ticket Selling
Ticketmaster has been subject to numerous controversies and lawsuits, widespread criticism of handling pre-sales for Taylor Swift’s tour, high fees, and how fans get sent to other websites for concert tickets only to find out they were sold out.
10. Banking Fees
Someone pondered how banks generate billions of dollars from banking fees and how that can be legal. Beyond the interest they earn from mortgages and other loans, they make a significant portion of their profit on fees charged to customers and non-customers from various sources, including accounts, ATMs, penalties, applications, and overdrafts. So many costs seem hidden or barely understood that many people see these as legal scams, and caution is advised.
11. Charities
Have you ever received an email from a legitimate charity thanking you again for last year’s donation and reminding you it is the holiday season, and can they count on you for the same amount again? I’d agree to it out of embarrassment, only to realize I hadn’t donated to that charity for years because it no longer served my interests. You must give to the charities of your choice, but some are overly aggressive to a fault.
This thread inspired this post.
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This post originally appeared on The Cents of Money.
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With a passion for investing and personal finance, I began The Cents of Money to help and teach others. My experience as an equity analyst, professor, and mom provide me with unique insights about money and wealth creation and a desire to share with you.