Recession Pyramid Schemes Scam Warning

By: Consumer_Direct

Government advice service Consumer Direct is urging people to avoid falling victim to pyramid schemes which are costing UK consumers an estimated £420 million a year.

Pyramid schemes - often advertised through mailings, the internet, recruitment meetings or through friends and relatives - are clubs which promise, once you've paid a joining fee, that you can earn large amounts of money by recruiting new members.  The schemes always collapse for want of new members, leaving many people significantly out of pocket.

An estimated 480,000 adults fall victim to pyramid schemes every year, with each person losing an average of £930. Often participants recruit family and friends to the scam, resulting in emotional as well as financial harm.

New laws which came into force in May 2008 specifically prohibit people from establishing, operating or promoting pyramid schemes. Breach of the law is an offence punishable by up to two years' imprisonment and/or an unlimited fine.

Last month, the Office of Fair Trading announced it had launched a criminal investigation into a suspected unlawful pyramid scheme in the South West of England which led to the police making a number of arrests.

Michele Shambrook, Operations Manager for Consumer Direct, said: 'In the current climate, the offer of big rewards in return for a modest outlay might seem tempting but don't get drawn in. You may lose your money, risk alienating friends and family, and could be getting involved in an illegal activity.'

Information on avoiding pyramid schemes and other scams is available on the Consumer Direct website at www.consumerdirect.gov.uk People needing individual advice can call the helpline on 08454 04 05 06.

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