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Consumer
Advisories
Avoid
Pyramid Schemes
Pyramids
schemes are illegal -- and are destined to fail.
Here are some pitches that often herald illegal pyramid schemes:
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"Make good money quickly and easily!"
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"Get
in on the ground floor of an opportunity that's sure to
snowball and make you rich."
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"I'm
sure you can recruit others to get involved!"
Those
pitches should ring warning bells. The attraction of quick and
easy money -- and lots of it -- is hard to resist, but people
who get pulled into pyramids typically find themselves lighter
in the pocketbook than when they started. And sometimes they
are in trouble with the law.
Scores
of illegal pyramid schemes ripple across Iowa every year.
Pyramid schemes promise that if you pay in some money and
then recruit others to join, you will receive an attractive
pay-out in short order. As long as new people keep entering,
others will make money (especially those at the top!), but,
by definition, the pyramid can't go on forever and newcomers
who toss in their money ultimately will lose out.
Promoters
of illegal pyramids often try to get around consumer protection
laws by claiming they are really selling a product.
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are questions to help you decide if a multi-level selling
plan is really an illegal pyramid:
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Do
presentations emphasize money-making and recruiting new
participants, rather than selling a product?
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Is
the product simply treated as a ticket to participate in
the money-making scheme, with little interest in the product
for its own sake?
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Is
the product substantially overpriced, so others higher up
the recruitment chain will get more money?
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Is
anyone buying the product outside the pyramid network?
Pyramids
may be disguised as games, motivational courses, buying clubs,
mail order operations, chain letters, or multilevel marketing
businesses. There are countless variations, but disappointment
and loss is the rule for most participants.
Pyramids typically violate federal, state and local laws, both
criminal and civil. Steer clear of pyramids. If you join the
rush for cash, your money isn't the only thing you put at risk.
You also risk your reputation and your relationships with the
unhappy recruits who look to you when the scheme collapses --
as all pyramids eventually do.
For more
information or to file a complaint, contact the Consumer Protection
Division, Hoover Building, Des Moines, IA 50319. Phone 515-281-5926.
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