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Telemarketing Scams Expected to Get Slicker : Fraud: A consumer coalition warns that the use of new technologies by con artists will cost victims more than $10 billion a year in the 1990s.

January 25, 1990|BRUCE HOROVITZ | TIMES STAFF WRITER

Dialing for dollars will take on a whole new meaning in the 1990s.

Ultra-sophisticated phone scams will cost consumers more than $10 billion a year--or more than $1 million an hour--during this decade. And some phone scams of the 1990s will make the those of the 1980s look like child's play.

That, at least, is the conclusion of a study to be released today in Washington by the Alliance Against Fraud in Telemarketing, a coalition of 60 consumer groups nationwide. The study was coordinated by the National Consumers League.

"Scam artists never cease trying to put their old, sour wine in new bottles," said James H. McIlhenny, president of the Council of Better Business Bureaus. "While their basic scams change little over the years, they continually update their schemes to exploit new technologies."

Tops among the telemarketing scams of the '90s will be "abusive '900' phone numbers," the coalition forecasts. And increasingly, the study predicts, children will be the focus of "900" phone swindles.

Look for a growing number of TV commercials that try to persuade children to dial these 900 numbers--offering information on everything from health tips to world weather forecasts--which charge for each minute a person remains on the phone. The study predicts that some rip-off specialists may even attempt to use a sophisticated "automatic dialing technology" which, when set off by a special TV signal, can automatically dial a 900 phone number when a child simply holds a telephone receiver up to a TV set.

And those "boiler room" con artists, who jetted from Florida to Southern California in the 1970s and 1980s, have found a new roost for the 1990s: foreign countries. The decline in international long-distance rates now makes it economically feasible for boiler rooms to operate in foreign safe havens "beyond the long arm of the law," the report suggests. Consumers may now be telephoned from as far away as Costa Rica, the Bahamas, Liberia and even South Africa, the alliance warns. Among the products these swindlers are expected to push: precious metals and low-priced "penny stocks."

The telemarketing crooks are also very well versed on the public's growing concern with health and nutrition. So they're not just selling baldness remedies over the phone anymore. In the 1990s, they will be increasingly involved in selling nutritional schemes that, in some cases, may do more harm than good, the alliance warns.

In Southern California, the fastest-growing telemarketing scam is still "bank-financed" precious metals, the alliance says. Buyers who purchase gold or silver over the phone are promised huge profits, but in fact, they often lose money.

"Telemarketing fraud has reached epidemic proportions," said Doug Mays, president of the alliance. "No one is immune from the actions of these not-so-common criminals."

PHONE SCAMS

The following fraudulent telemarketing schemes have the greatest potential to do damage to consumer pocketbooks during the 1990s, according to the Alliance Against Fraud in Telemarketing.

* Abusive "900" numbers, including those that fail to make known the charges and those aimed at children

* Overseas boiler room operations offering precious metals, off-exchange commodity futures, currency rate speculation and "penny stocks"

* Bogus health-care promotions for such products as arthritis remedies, weight-loss plans, sexual aids and baldness remedies

* Bank-financed precious metals sales in which buyers are promised huge profits (The bank is usually unaware of the scheme.)

* "Blind pool" penny stocks sold with fantastic claims, such as the firm is on the verge of revealing a cure for AIDS

* Look-alike official envelope promotions that trick consumers into contacting 800 numbers

* Accelerated mortgage scalpers offering early payment plans that can cost consumers thousands of dollars in hidden fees

* "One-shot" credit cards with high annual fees that are only good for a specific store or catalogue

* "Guaranteed" time-share resales that charge up-front fees of up to $400

* Phony foreign banking schemes offering high-interest CDs or other investments (In most cases, the money is never invested.)

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