If it looks too good to be true, it probably is

If you own a mobile phone or have an email address, chances are you’ve received the marvellous news that you’ve inherited a fortune from an unknown relative, won the lottery (without buying a lottery ticket), can buy brand-new goods for almost next to nothing, or make millions working from home for a mere two hours a day.

With economic policy uncertainty and the economy flagging following the country’s recent downgrade to junk status, many consumers are under pressure and perhaps more easily tempted to see a promise of extra cash or big savings as a lucky break-to their detriment.

At the recent launch of its “Easy come. Easy go” campaign, which warns South Africans against get-rich-quick schemes, the South African Reserve Bank (SARB) pointed out that there’s no such thing as money for nothing.

"Easy come. Easy go" draws on the old adage that if a deal sounds too good to be true, it probably is,” said SARB Governor Lesetja Kganyago.

This is one of the best pieces of advice consumers can use to guard against confidence tricksters and their scams, which have proliferated in the past few years. The SARB says it investigated 41 illegal deposit-taking schemes (also known as pyramid schemes) in 2015 alone, consisting of 13 new schemes and 28 carried over from previous years. Currently, it is investigating 19 suspected illegal deposit-taking schemes.

Tough times, healthy scepticism

The proliferation of get-rich-quick scams comes against the backdrop of tough economic times and indications that conditions will worsen in the months to come.

This is all the more reason why South Africans should take promises of overnight riches with a generous pinch of salt. This healthy scepticism should be exercised in the case of advance-fee schemes: where people are persuaded to hand over their hard-earned cash so that they can claim their “lottery winnings,” for example, or secure a place on a company job or training programme-a tactic that is becoming more and more common as con artists exploit job-seekers’ hopes and fears.

People fall victim to these schemes because fraudsters often pose as the representatives of big, trusted companies to give their schemes a veneer of plausibility. The reality is that reputable companies do not run lotteries and other money-making schemes, nor do they make job-seekers pay for a place on a company training or job plan.

Loan sharks lurk

As for illegal money-lenders-loan sharks-t’s likely that the worsening economic climate will bring them out in full force. Unscrupulous micro-lending thrives when people are over-indebted or struggling to make ends meet, making those more inclined to grab at any straw that offers a chance of keeping heads above water.

Concerned about over-indebtedness, government is exploring new ways of protecting consumers. Parliament held hearings in late November inviting comment from all stakeholders on what can be done to safeguard consumer financial health.  One way that consumers can protect themselves is to ensure that they are dealing with established, financial advisors who are registered with or licensed by the Financial Services Board (FSB).

If a consumer needs to borrow money, it must be from a company that is registered as an accredited financial services provider and deposit taking institution in terms of the Banks Act. To check whether you are giving your money to an accredited services provider, contact the Financial Services Board Fraud and Ethics Hotline on 0800 313626 or visit the SARB website on www.resbank.co.za for more information.

Protection against abuse

Borrowing from properly registered providers protects consumers from abusive practices such as the unlawful confiscation of pension and bank cards, or reckless lending. It also ensures that, should a provider overstep the mark, they can be held accountable.

Registered providers such as banks are committed to acting correctly and treating customers fairly. We take every opportunity to entrench the requirements of the National Credit Act (NCA) in all our lending requirements and, where this is called for, cooperate fully with the National Credit Regulator to resolve any concerns.

Consumers, too, must be vigilant and cautious so they do not get taken by less-than-scrupulous operators of get-rich-quick schemes and dodgy money-lenders.

Here are a few points to keep in mind when confronted with what looks like a bargain or lifeline but might be anything but:

• Never share your person details with anyone who cannot prove their identity. For example, if someone calls you claiming to be from a company you do business with, verify their identity by asking them for your personal information. If they are legitimate, they will already have your identity number, address and bank details on their system.
• Do your homework. Check that a financial service provider or investment company is registered. If you are being promised incredible returns on an investment, or made promises that will make you wealthy in a very short period, don’t believe it without doing the necessary checking and ensure all your questions are answered satisfactorily.
• Be wary when offered a business opportunity where you have to recruit others in order to be paid or receive a benefit. Also beware of a “secret investment formula” that will only be shared with a select group of investors.
• Don’t give in to pressure to make a snap decision to invest your money.
• Don’t believe “first-hand stories and anecdotes” of successful investors; they are most probably being paid by the company.
• Look out for spelling or grammatical errors in email or text messages from anyone contacting you with an offer that sounds too good to be true. Unprofessional communication, such as long, rambling messages, is also a sign that all may not be what it seems.

Above all, realise there is no quick buck or a magic fix to poverty. Use your common sense and good judgment when such promises are being made to you-and remember that old adage about money-making offers that look too good to be true. It probably is.