Avoiding Office Supply Scams Could your organization be a
victim of an office supply scam? If you dont have adequate purchasing controls,
probably so. Businesses, churches, and fraternal and charitable organizations are being
bilked out of millions of dollars by bogus office supply firms. You can protect yourself
by learning to recognize the scams and understanding your rights.
The typical office supply scam involves goods or services that you routinely
order: copier paper, toner and maintenance supplies, equipment maintenance contracts, or
classified advertising. When fraudulent telemarketers call, they often lie to get you to
pay for items you didnt order, or to get you to pay more than you agreed to. How?
The caller may falsely claim to be your "regular supplier" or to tell you that
the offer is "special" or "good for a limited time only." Con artists
take advantage of holes in your organizations purchasing procedures or of
unsuspecting employees who may not be aware of office practices. Whats worse, the
office supplies peddled by these bogus firms often are overpriced and of poor quality; the
services usually are worthless.
The Scams
Office supply scam artists generally use three ways to take your money the
phony-invoice, the pretender, and the gift-horse.
Phony-invoice Scams
The goal of the phony-invoice scam is to get the name and address of an employee so your
organization can be shipped and billed for unordered goods or services. The invoice
includes the employees name as the "authorized" buyer. Scam operators use
various ploys to get an employees name: They may call asking for help completing an
order, claiming that "the accounting department lost the name of the person we should
send these supplies to," or they may ask for the name of the person in charge of your
Yellow Pages advertising.
Once the con artist has an employees name and address, hell ship the
unordered merchandise. The phony invoice arrives a week or so after for two
reasons: First, the inflated price as much as 10 times what youd pay for the
same goods from a legitimate supplier is less obvious if the invoice arrives after
the merchandise has been received and stocked. Second, the chances are good that
youve used the merchandise before the invoice arrives. Many organizations mistakenly
believe that they must return unordered merchandise or pay for unordered merchandise if
theyve used it.
A twist on this approach may have the fraudulent seller timing a phony invoice to match
your purchase of legitimate services from another vendor. For example, the seller sends
you a bill for unordered classified advertising soon after your ad runs in a legitimate
publication. The scam operator hopes youll be confused and pay his bill instead of,
or in addition to, the one from the legitimate company.
The Pretender Scam
In the pretender scam, the caller may pretend to be your regular or previous supplier, a
replacement, or an "authorized" supplier. By convincing you that the goods or
services and prices offered are the same as before, the caller hopes you wont bring
up prices, quantities, and brands. Even if you do, the seller may try to brush you off by
saying, "Weve supplied you in the past, but its been a while," or
"The price is the same as last time." If you insist on a price quote, the seller
may give a price that sounds reasonable for one carton but is actually for a single unit,
such as "$19.95 in a carton of 10." Translation: the carton price is 10 times
$19.95 or $199.50.
In one variation on this scam, the caller misrepresents the quality, quantity, type,
price, or brand name. For example, the ribbons for your IBM typewriters may not be IBM
brand ribbons, or the toner for your Xerox copier may not be Xerox brand toner. Some scam
artists try to duplicate brand name packaging; others sell half a carton of merchandise at
the full-carton price. Similarly, sellers of Yellow Pages advertising may actually
represent fly-by-night outfits that distribute few, if any, telephone directories.
In another twist, the caller uses high
pressure tactics to rush your purchase decision and dodge questions about
price, quantity and brand names. The seller may falsely claim that prices
are going up soon, someone was forced out of business, a warehouse is
overstocked, or a limited inventory of government surplus is available. Or
that a computer glitch delayed notification of a price increase, but, as a
courtesy, an order has been reserved for you at the "regular" or "old"
price.
Or, the seller may misrepresent the purpose of the call, saying that hes calling
to send you a promotional item such as a cordless screwdriver, free samples, or a catalog
so youll "think of him next time you order." Or the seller may claim that
hes conducting a survey of office equipment or updating company records, leading you
to believe that hes the regular or previous supplier. Before hanging up, the caller
may mention in passing actual merchandise. "Ill send that
screwdriver to you right away ... and while Im at it, Ill throw in a few
deodorant blocks." Soon, a shipment arrives, followed by the bill.
The Gift-Horse Scam
The gift-horse scam tries to create mistrust within an organization. The scheme starts
when the caller tricks an employee into accepting a gift a free promotional item
with a passing reference to merchandise or services. You receive overpriced
unordered merchandise, followed by an invoice with the employees name. When the
organization questions the employee, the fraudulent seller is betting that the employee
will be nervous about the gift when he denies placing the order. The hope is that the
organization will doubt the employee. When this scheme works, the organization believes
that the employee blundered into ordering something that must be paid for.
After the
Invoice Arrives
Scam artists spend significant time and energy on collection efforts. They send as
many invoices as it takes to get your money. Invoices often are stamped "Past
Due." In extreme cases, theyll resort to real or bogus collection agencies and
threats of legal action.
An organization that pays for unordered goods or services also may be targeted for
additional scams. This practice is called "reloading." For example, the seller
may send a second shipment of "back ordered" merchandise and another bill, or
bills for service upgrades. Additional invoices follow as long as you continue to pay. The
con artist also may sell your organizations name to other scam operators, or move to
another bogus operation and target you with a new scheme.
The Brush-Off
When organizations complain that they didnt order the merchandise or services
or that the price is too high, the scam seller reacts in some predictable ways:
- Bullying. The seller argues if you express any uncertainty about whether
the supplies or services were ever ordered: "They were ordered. We have a
recording of Mr. Jones. If you dont pay, we can take you to court."
- Negotiating. Here, the seller agrees to accept a lower price. After all,
the goods and services are so grossly overpriced that almost anything the seller gets is
profit. If you complain about price, the seller may say, "You were charged what? They
must not have given you the discount for ...." The seller then tries to negotiate
"a better deal." Sometimes, the seller appeals for sympathy: "We really
need the business. Ill let you have it for...."
- Charging for returned merchandise. The seller claims you can return
merchandise if you pay a "restocking fee." In fact, the fee is often more than
the goods are worth. Similarly, the seller may try to get you to pay shipping charges to
return the items.
Protect Your
Organization
You can protect your organization from paying for unordered goods and services.
Heres how:
1. Know your rights. If you receive supplies or bills for services you
didnt order, dont pay, and dont return the unordered merchandise.
You may treat unordered merchandise as a gift. By law, its illegal for a seller to
send you bills or dunning notices for unordered merchandise, or ask you to return it
even if the seller offers to pay for shipping. Further, if the seller sends you
items that differ from your order in brand name, type, quantity, size, or quality
without your prior express agreement you may treat the substitutions as unordered
merchandise. Unordered services are treated the same way. However, first consider the
possibility that the seller made an honest mistake.
The FTCs Telemarketing Sales Rule offers additional protections in
business-to-business sales of non-durable office or cleaning supplies and most sales of
goods or services to individuals, groups, or associations. The Rule requires telemarketers
to tell you its a sales call and whos doing the selling before
they make their pitch. They must tell you the total cost of the products or services
theyre offering, any restrictions on getting or using them, and that a sale is final
or non-refundable before you pay. Its illegal for telemarketers to
misrepresent any information, including facts about the goods or services being offered.
2. Assign designated buyers and document your purchases. For each order, the
designated employee should issue a purchase order electronic or written to
the supplier with an authorized signature and a purchase order number. The order form
should instruct the supplier to note the purchase order number on the invoice and bill of
lading. The buyer should send a copy of every purchase order to your accounts payable
department. Keep blank order forms secure.
3. Check your documentation before paying bills. When merchandise arrives, the
receiving employee should verify that it matches the shippers bill of lading
paying special attention to brands and quantity and your purchase order. Refuse
merchandise that doesnt. If everythings in order, the employee should send a
copy of the bill of lading to your accounts payable department. Bills for services should
be reconciled the same way. A supplier should not be paid unless the invoice has the
correct purchase order number and the information on the invoice, the purchase order and
the bill of lading match.
4. Train your staff. Train everyone in how to respond to telemarketers. Advise
employees who are not authorized to order supplies and services to say, "Im not
authorized to place orders. If you want to sell us something, you must speak to
______________ and get a purchase order."
Buy from people you know and trust. Authorized employees should be skeptical of
"cold" or unsolicited calls and feel comfortable saying "no" to high
pressure sales tactics. Legitimate companies dont pressure you to make a snap
decision. Finally, consider asking new suppliers to send a catalog first.
Where to Complain
Report office supply scams to the Federal Trade Commission, your state Attorney
General, local consumer protection office, or Better Business Bureau. In addition, you may
want to share your experiences with other businesses to help them avoid a rip-off.
The National Small Business Ombudsman and 10
Regional Fairness Boards collect comments from small businesses about
federal compliance and enforcement activities. Each year, the Ombudsman
evaluates the conduct of these activities and rates each agency's
responsiveness to small businesses. Small businesses can comment to the
Ombudsman without fear of reprisal. To comment, call toll-free
1-888-REGFAIR (1-888-734-3247) or go to
www.sba.gov/ombudsman. The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
www.ftc.gov or
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
complaints into
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
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FEDERAL TRADE COMMISSION |
FOR THE CONSUMER |
1-877-FTC-HELP |
www.ftc.gov |
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March 2000 |