“Make $50,000 in less than 90 days working from home!”
If you see a job offer or business opportunity that looks too good to be true, it probably is. Learn how to identify and guard against work and business scams.
Scam 1. Work at home, make huge profits
Most of us love the idea of earning extra income or quitting our full-time jobs altogether and working from home. But unfortunately the vast majority of these offers are work-at-home scams.
These offers can come in many forms—online, in the newspaper, in the mail, or on a poster on a telephone pole. They typically promise huge demand, big profits, and big earnings for part-time work. Often, they involve repetitive tasks such as stuffing envelopes, assembling handicrafts, or posting messages to websites and online forums.
These work-at-home scams often demand that you buy a "start-up kit" of supplies you’ll need to use for the work (for example, special software or tools). Or they insist you have to enrol in a costly training or certification program.
Once you buy the supplies or complete the training, you never hear from them again.
In reality, the Better Business Bureau has found no evidence of work-at-home schemes producing the promised income.
Under BC law, an employer cannot ask a person looking for work to pay a fee to find a job. An employer can’t charge you for giving you a job or for providing you with information about possible work opportunities.
An employment agency can charge you for services that are not associated with finding a specific job. For example, they can charge you for teaching you interviewing skills or helping you prepare your resume. But you cannot be required to use these services if you’re looking for work.
Work-at-home scams generally have one thing in common. They require you to buy something before you can begin work. If you respond to a work-at-home offer, you will probably wind up spending money instead of earning it.
Scam 2. Mystery shopper scams
You may have seen newspaper and online ads that give the impression there are lucrative “mystery shopper” jobs available with legitimate companies. A mystery shopper poses as an ordinary customer to secretly evaluate a business.
Typically, you are directed to a website where you can "register" to become a mystery shopper. But first you have to pay a fee for a certification program or a directory of companies to evaluate.
This is a type of mystery shopper scam. In another version of this scam, you are hired to "secret shop" a wire transfer service. You are sent a cheque and told to deposit it in your account. You get to keep a small percentage of the money as your wage and then you wire the rest to the party who hired you, and fill out a survey on your experience with the wire transfer service.
After you have done this, you find out the original cheque was a fake. You are out of pocket for the money you wired.
Scam 3. Bogus franchises
A franchise is a business opportunity where a party buys the right to sell a company's goods or services. For example, in buying a fast food franchise, you buy the right to sell a specific brand of fast food at a specific location, in exchange for paying fees to the franchise owner.
Some franchises are legitimate business opportunities. Others are bogus franchises. In these scams, the franchise seller doesn’t deliver the supplies or support services promised in a sales pitch.
Warning signs that a franchise opportunity is a scam include:
- Promises of extraordinary profits with little risk. These are usually too good to be true. For example, if the offer says: “No experience required. No selling. Earn $5,000+ per month.”
- High pressure sales tactics. If you are pressured to sign immediately because "prices will go up tomorrow", or "another buyer wants this deal", do not sign.
- Evasive answers to your questions. If a seller won't agree to put verbal promises in writing, avoid this seller and look for a legitimate company.
- Excessively high start-up fees.
Never commit to anything at a high-pressure meeting or seminar. Research any offer being made and seek independent advice before making a decision.
Scam 4. Pyramid schemes
You are pressured by a friend to pay a large “membership fee” to participate in a new business opportunity. You have to buy a large quantity of “products”. But there’s no real market for the products. The only real way for you to make any money is to convince other people to join the network, for similarly large membership fees.
This is a pyramid scheme.
Although pyramid schemes are often cleverly disguised, they make money by recruiting people rather than by selling a legitimate product or providing a service.
In reality, only the people at the top of the pyramid make any money. Most of the people who invest money in pyramid schemes lose all of it. Pyramid schemes inevitably collapse.
In Canada, it is a crime to promote a pyramid scheme or even to participate in one.
Pyramid schemes can look a lot like "multi-level marketing", which is legal in Canada. Under "multi-level marketing", people sell consumer products, usually in customers' homes. The products are supplied by a multi-level marketing company. While a pyramid scheme focuses on recruiting more people, multi-level marketing focuses on selling products or services.
|Multi-level marketing||Pyramid scheme|
“Make huge profits being a Lipstick Lady! As a distributor for Lipstick Lady, you will sell our premium cosmetics door-to-door. You keep a percentage of each sale you make of Lipstick Lady products.”
“Make huge profits being a Lipstick Lady! When you become a distributor for Lipstick Lady, you sign up other sales people and are guaranteed to make at least $5,000 a month!”
Family members and people you trust might invite you to participate in a pyramid scheme. They might not know the scheme is illegal or that they are involved in a scam. Ask yourself: “If I am not selling a genuine product or service, is participation in this activity legal?”
1. Research the company
With a work or business opportunity, learn as much as you can about the company, product and market potential.
Check with the Better Business Bureau to see what they know about the company.
See what other people are saying about the company by searching online for their name and the word “reviews” or “complaints”. Complaints from others can tip you off to "catches" that might come with an offer that seems enticing.
If you’re considering a business opportunity, be wary if the seller provides recommendations from people but never gives you a way to contact those people yourself.
If you’re considering a franchise opportunity, carefully read the material the seller must disclose under the law about the opportunity. This material includes a list of current and former franchisees. Call these people. Talk to other people who have franchises. Compare franchises with other business opportunities.
2. Get everything in writing
If you’re considering a work opportunity, get a complete description of the work involved. You should never have to pay for a job description.
If you’re considering a business opportunity, get the seller's promises in writing. If the seller says one thing but the written contract says nothing about it or says something different, the written contract is what counts.
Sales claims about successful areas of business—"Be a part of our five billion dollar industry”, for example—may have no bearing on your likelihood of success. Once you buy the business, you may be competing with business people with more experience.
3. Make sure you understand the offer
Before you sign anything, make sure you read it and understand it.
For a business opportunity in particular, consider getting professional advice from a lawyer, accountant or business advisor.