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10/12/11

How to Avoid Becoming a Financial Scam Victim

1. Do Your Research
Before forking over any money, look into who you would be giving it to. "These scams are very, very believable," says the FTC's Steven Baker. "People think these scams are rare, that they only target dim people, that they'd never get them, and none of that's true. The scams are very well thought out." So if the scammers are savvy, you need to be even savvier. Go online to see what other people are saying about a company. Ask that caller on the other end of the phone -- the one who says they are your relative -- a few questions that only your family can answer as a way to confirm their identity.

2. Make Sure That Your Lawyer is a Lawyer
Due diligence is especially important when working with someone who says they are a lawyer, as they may not be. "Make sure the lawyer is licensed in your state," advices the FTC's Reilly Dolan. He also stresses the important of confirming that you will actually be working with a lawyer. "You want to make sure the person representing you is entering into an 'attorney client relationship,' as opposed to just saying 'we have a lawyer on staff.' That's a good question to put to them directly. If the person is refusing to commit to that relationship, then that is definitely a red flag." You should also check your state bar association to confirm that the lawyer is not in any trouble.

3. Protect Your Personal Information
Think of how frequently you give out your name, date of birth, and/or social security number to confirm your identity. That, and your bank information, is sacred and you have to be very careful not to let unseemly characters get their hands on it. "be very, very guarded with your information," suggests the FTC's Monica Vaca. "You have to do the same type of analysis when giving out this information as you would with your credit card details. Ask yourself how much you trust this website? What else could someone else do with your bank information if that have your name and address? Even if a transaction looks like it's low risk, even if it looks like it's free to apply, or you just pay shipping, once you hand over that information, you're vulnerable."

4. Use a Certified Housing Counselor
If you are having trouble making your mortgage payment and need assistance, use a certified housing counselor who usually charges only a minimal fee or, in many cases, are even free. "A lot of people think going to a lawyer will be better," says Yolanda McGill of the Lawyers Committee for Civil Rights Under Law. "They have a bias, that a lawyer is more professional, like, 'how can a free service be good?' There's this thinking that if it's free it can't be better, that the guy you pay is going to get you some results. But the most efficient service you're going to get, counterintuitively, is free. Go to a counselor. Talk to a service. They are the best situated, the best connected to the services." It's best to look for a counselor certified by the Department of Housing and Urban Development (HUD). You can find one in your state by searching here.

5. If You Do Fall Victim, File a Complaint
The only way to stop scammers is to make the problem known. Just ask Teresa Yeast, a mom to two disabled children who lost $500 when she replied to an ad to make crafts from home. Her letter to the FTC helped the agency to launch a national campaign against internet fraud. "Consumer complaints are how we know what's going on in the marketplace," explains Vaca. "Those complaints help us target, to know where to put our resources for next law enforcement action." You can file a complaint with the FTC, the Better Business Bureau, the FBI, the Internet Crime Complaint Center or your state's attorney general's office. For scams related to mortgage loans, you can also contact the nonprofit Lawyers' Committee for Civil Rights Under Law.

To view the full DailyFinance article, click here.