www.net-cymru.co.uk Consumer Issues

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Items on this page in natural order:

What is a Scam?
Pyramid Schemes
"You've won a prize!" Watch out!

Scams to Avoid


What is a Scam?

The word scam is not a formal English word, but is widely used to describe an offer of apparently amazing value which turns out to be false.

Be wary of putting up money unless it is clear what goods or services you will receive and how they will be provided.

As a general rule: If something appears to good to be true, then the chances are that it isn't true.


Pyramid Schemes

The Welsh language program Byd ar Pedwar (25.6.01) reported that considerable numbers of women in Wales had put up to £3000 each into a Pyramid Scheme of American orgin called Hearts Club.

Pyramid schemes involve getting participants to put money into the scheme and to recruit others to do likewise. The pattern of recruitment is recorded in the form of diagrams, and at a given point the person at the top receives money from those below.

Before becoming involved in such schemes, consider the following:

• No goods are being produced and no services are being offered in return for the money put in.
• The only source of money is from recruiting people into the scheme, hence if some people win, others must lose.
• The people who organise the scheme will be at the top and win every time. The vast majority of those recruited into the scheme lose their money.

In order to bring rewards the scheme has to go on indefinitely. In practice it can, because the number of people who need to be recruited becomes astronomically large.

In the case of the Hearts Club scheme every member was required to recruit eight others into the scheme. So for the first generation recruited there were 8 members, the second generation 64 members. Continuing:

• 3rd generation: 512 members
• 4th generation: 4096 members
• 5th generation: 32768 members
• 6th generation: 262144 members

By the 7th generation, the system requires more than two million members. There is simply not enough people available, let alone having enough willing to invest their money in such a scheme.

Pyramid schemes inevitably collapse. Those at the top take away their gains. The rest are left to contemplate their losses.

The amounts of money women were asked to put into the Hearts Club scheme was considerable and it is difficult to contemplate the sorrow that it must have brought to many women and their families.


"You've won a prize!" Watch out!

Many scams start by gaining the confidence their intended victims by offering a prize.

In order to collect the prize something additional has to be bought - and as a "lucky winner" you are made to feel ungrateful if you don't accept. Usually the victim parts with more money than the prize was worth.

Another trick (reported in the Western Mail (30.6.01) is to ask the "winner" to give credit card details over the phone and then use the information to make withdrawls from the victim's account.

Great caution should be exercised when giving credit card details over the phone. You should make absolutely sure that you know who you are talking to. Never give credit card details to companies who call you when you have not dealt with previously.

Are our credit card details safe? Whatever assurances have been given, there are serious concerns about the security surrounding the transfer of credic card details via the Internet. For the story of how a teenager in Carmarthenshire, West Wales, beat security systems in three countries, see Welsh Teenager Faces Jail after cracking Credit Card Security

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This page was last updated on 9 July 2001 __________ Back to:net-cymru Home Page