Many waste management firms are small. Coincidentally, an increasingly popular target for scam artists are small businesses. Law enforcement officials say those who prey on small businesses are succeeding - more so now than ever.
One reason scam artists are successful, officials say, is because many business owners lack the experience to recognize fraudulent schemes.
Classic scams live on, thanks to a new generation of unsuspecting entrepreneurs. "Old wine in new bottles," says Elaine Kolish, an enforcement official at the Federal Trade Commission (FTC), of scam artists' techniques. Even if the packaging changes over the years, she says, the product largely stays the same.
Federal and state consumer protection agencies don't have a complete picture of the scope and number of frauds against small businesses. One thing is for sure: Better Business Bureaus are receiving a growing number of complaints about promotions that typically target small businesses.
Between 1990 and 1996, these complaints more than doubled. Moreover, the number of complaints increased at more than twice the rate as general business inquiries to the bureaus, according to data from the Council of Better Business Bureaus, an umbrella organization based in Arlington, Va.
Small business owners who are victimized by scam artists have less protection than do consumers because state consumer protection laws often don't cover businesses. However, according to Herschel Elkins, who heads the consumer law division in the California Attorney General's office, the situation there will change if the State Assembly acts on a pending bill.
For now, without effective laws on the books, small business owners must act on their own - in particular, by educating themselves on how to avoid scams.
One of the most popular frauds involves overpriced or undelivered office supplies. Typically, a business receives a call from someone who claims to work for the vendor that regularly furnishes the business with copier machine paper and toner. These callers have their best luck with businesses that have a high turnover in the accounts payable department.
For example, the office manager of a California waste firm received a first-time offer of a service contract on certain office equipment. However, the invoice was marked "renewal" in the hope that an unsuspecting accounting clerk would think the business previously had ordered the service. The company wisely ignored the invoice and purchased the services elsewhere.
Last year, the FTC filed suit in a Los Angeles federal district court against several companies and individuals in an alleged computer service scam that cheated thousands of small businesses around the country out of more than $8 million. Companies that paid invoices, often marked "discounted renewal" or "upgrade," seldom got any service. The defendants, who reached a settlement with the agency but did not admit any fault or liability, paid fines and are now under court-ordered supervision.
A new breed of loan shark also is preying upon unwary business owners. Known as an "advance-fee loan scam," the ploy involves someone posing as a sophisticated broker who "guarantees" or promises a "high likelihood of success" in arranging a loan for a struggling business - regardless of the company's or the owner's credit history.
These scams differ from legitimate credit offers in a key way: The broker or arranger insists on an up-front payment even before the lender is identified and the application is completed.
Of course, legitimate lenders require applicants to pay processing, credit report and appraisal fees. However, the borrower customarily pays these fees only after learning who the lender will be and after submitting a credit application. Moreover, a check for such fees ordinarily would be made payable to the lender - not to the broker or arranger of the supposed "guaranteed" loan.
Finally, a legitimate lender will not promise a loan or extension of credit before evaluating an applicant's creditworthiness.
A cash-starved small hauler in a Western state was hooked by an advertisement in the classified section of a local newspaper. He answered using a "900" number, which produced an immediate charge on his phone bill.
Compounding matters, he then furnished his credit card number over the telephone to cover the $950 advance fee. Sad to say, he never received an application form, never heard from any lender and never was able to recontact the arranger.
The FTC gives three ways to avoid advance-fee loan sharks:
* Don't pay for a promise. Companies that do business by phone legally cannot promise a loan and ask for payment before they deliver.
* Ignore any ad - and hang up on any caller - that guarantees a loan in exchange for payment in advance.
* Never give credit card or bank account numbers over the telephone unless you know the party at the other end and know why the information is necessary.
Victims of advance-fee loan scams can contact their local consumer protection agency, Better Business Bureau or state attorney general. For its part, the FTC receives complaints at: Consumer Response Center, Federal Trade Commission, Washington, D.C. 20580. Website: www.ftc.gov