Boiler Room Schemes

They may not actually use a boiler room but these direct marketing scams bilk people out of millions of dollars every year

Boiler Room is a term that describes a business operation set up as a direct marketing company that will usually use telephone to solicit sales. Some boiler room operations are legitimate and sell a worthwhile and usable product. Whether you paid too much for it or were coerced into buying it will not be addressed here.

These boiler room “employees” are usually sitting in one large building somewhere that was only rented for a few weeks and several and sometimes hundreds of these “salespeople” are making cold calls all day trying to pressure people into purchasing the best stock investment to come along in years.

Penny Stock Swindles

The stock is usually an over-the-counter (OTCBB) stock, sometimes referred to as penny stocks. These stocks are usually worthless but your purchase of them will drive the price up a few pennies and they do this every day for weeks. They will talk the stock up on internet bulletin boards, send out newsletter touting the stock and sell millions of shares for a few pennies each. Of course they own millions more shares and will at one point dump all shares and poof they are gone in the night and so is your money.

Boiler room operations known to pressure consumers into purchasing worthless goods and services. Some examples are:

  • Placing advertisements in non-existent business directories.
  • Discount vacation getaway packages the purchaser never receives.
  • “Graymarket” office supplies. Copier toner and paper are often used.
  • Promotional materials like keychains that, once received, are not the high-quality goods expected.

You can consider all of these a small sampling of what boiler room schemes will try to pressure people into purchasing. If you purchase something from them, they’ll ask for your credit card number for payment. If you don’t want to give that out over the phone, it’s fine with them. They’ll happily send you an invoice through the mail. Once they receive your payment, you’re branded a “Mooch” which means you’ll be getting more of their calls and hearing a lot more sales pitches.

How to avoid boiler room schemes

Protecting yourself from these scams is easier than you might think. Follow these rules and you stand a good chance of thwarting their plans:

  • Never purchase anything from a new supplier until you’ve done some checking to make sure they’re legitimate.
  • Never purchase advertising in directories or publications you’ve never heard of unless you thoroughly investigate them. If a telemarketer is unwilling to give you details about the directory or publication, tell them to forget it.
  • Be skeptical of offers that seem too good to be true. Unbelievable service or insanely low prices, for instance. Popular boiler room ploys include: offers of free gifts, news that a “Customer near you went out of business,” and “You can ignore overdue notice.”
  • Only share information about your office equipment over the phone with vendors known to you. Once that information’s in the hands of a crooked telemarketer you become the target of their boiler room scheme.
  • Request samples of promotional materials before purchasing them.
  • Don’t give out your credit card information over the phone to anyone you don’t know or trust.
  • Create internal controls, send bills and invoices to a single department. Verify authorizations for billing before payment is sent.
  • Never pay an invoice unless you’re certain the goods and/or services were ordered and that they were, in fact, received.

If you, or someone you know, has been victimized by a boiler room operation don’t let it go unreported. You could end up helping someone else down the road or bring the crooks to justice.

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