Ask The Money Coach

Archive for the ‘Scams’ Category

Q:  A family member did something to my bank account where I owe them
money and I tried calling the bank to set up a payment arrangement
they never called me back and they sent it to a 3rd party collection
agency. What should I do:

A: Here is a response that we recently sent to another subscriber that was scammed by a family member.

bit.ly/9kWSts

Unfortunately, millions of people get caught up in the cycle of payday loans each year — not realizing that many of these loans, when rolled over, carry annual interest rates of about 400%, making them nearly impossible to pay off. I’ve written extensively about the dangers of getting payday loans and alternatives to them. Read this post for some of my tips for raising cash when you’re in a financial pinch.

I also recommend taking a look at an excellent five-part series on payday loans, written in 2010 by a terrific financial reporter, Pallavi Gogoi, for DailyFinance.com, an Aol Money and Finance site. Gogoi examines the growth of payday loans, she explains why even federal regulators haven’t been able to protect the public from payday lenders, and offers some good advice for help and alternatives for people with payday loans. Read that series on payday loans, and it’s sure to be an eye-opener, as well as helpful to your specific predicament.

You should start by taking control of your finances and being honest about what is going on. You are the victim of identity theft, pure and simple. And it’s well past time you started letting others know that you did not authorize or open those utility accounts and that you are not responsible for them, period. End of story. Start monitoring your credit every month to make sure nothing else unexpected pops up there. Put a credit freeze and a credit alert on your credit reports to prevent further damage from this person who has blatantly taken advantage of you.

Lastly, you need to confront this person directly. It doesn’t matter if that person is a “close” family member. I don’t care if it’s your sister, a cousin – or even your mother. Let this individual know that they have totally crossed the line and damaged your finances and credit rating in a way that is completely unfair, disrespectful to you, and that has long-lasting implications. Tell the person that they have exactly 1 week to contact every creditor in which they used your name to cut off service in your name — and put it in their name.

If that person’s credit is bad (which I suspect it is) and they can’t get a phone, electric service or cable in their own name, that’s their issue to deal with; not yours. A week’s time is plenty of notice for them to take action. Tell them that if they don’t handle it in a week, you will be forced to contact those utilities directly and advise them of the situation. Hopefully, you will be stern and straight-forward enough in your approach to this person that he/she will know that you mean business. I’m not saying that you have to turn the person in (although they do deserve it). But neither should you be held continually responsible for someone else’s financial mess.

If the person doesn’t act quickly, and follow through as you’ve told them to do, don’t hesitate to get those services cut off. If push comes to shove, and you “have to” tell who the culprit is, I would go ahead and do it. Why would you go through unwarranted financial stress for this person when clearly they’ve shown you absolutely no personal or financial consideration whatsoever?

You’re not the first person to ask me about investing in Genius Funds – though you are the first person to write me from Pakistan! Proceed with caution before you invest any money, and be sure to read this detailed post about what I found when I did some quick research on Genius Funds.

Before now, honestly, I had never heard of Genius Funds. As I am not a registered investment adviser, I do not offer specific stock picks or mutual fund recommendations. What I do try to provide, however, are investing insights and information that will help you make better investing decisions. I did a bit of homework and can share with you what I learned. In summary, I can tell you that if I personally were approached with the opportunity to invest with Genius Funds, I would decline to do so. Read on for more details.

Short Track Record is Strike #1

First, I discovered that Genius Funds (www.geniusfunds.com) manages two investment funds, both focused on emerging markets. One is a stock fund (the Emerging Markets Growth Fund); the other is a bond fund (the World Bond Market Fund). You did not state which fund you bought. In either case, neither fund appears to have an extensive track record as the company just began operation in 2006. Both funds appear to be about two years old, apparently having launched in 2008. That’s Strike #1 for me. You should know a fund’s short, medium and long-term track record. In my view, a longer track record (10 years or more) is better because then you can evaluate a fund’s performance throughout various market cycles (i.e. in up and down markets).

Be Cautious About Promises of Big Returns

Even a routine Internet search to learn about Genius Funds will reveal that there is considerable chatter and debate online about whether or not Genius Funds represent a legitimate investment opportunity – or an outright scam. For me, that’s Strike #2. In fact, some observers have flat out called Genius Funds a “scam” or a “ponzi scheme.” See this article for more details.
ponzischemealert.com/blog/genius-funds-scam-long-term-hyip-scam-and-ponzi-scheme-on-the-verge-of-collapse-exponential-growth-factors-catch-up-to-genius-funds-operations/comment-page-1 This is one reason I always advise investors to do their homework and to carefully investigate any investment opportunity before making a purchase decision. Fees and expenses are also important to know, as are a fund’s objectives. The fund’s objectives should match your own. For example if you are investing for aggressive growth, most of your money should not be in a conservative bond fund.

Finally, how a firm is marketed also matters. Genius promises investors outsized returns or “profits” of 1% to 1.9% daily or 6% to 9% weekly. In my opinion, promises of turbo-charged returns are often major red flags when it comes to investments. That’s Strike #3 for me.

Limit Investment Risk with Research

The fact that you have invested what you described as a “small” amount of money into Genius Funds limits your risk and exposure. Only time will tell whether your investment will pay off. For your sake, I wish you the best. In any event, two great resources in the future for fund information – before you buy – are Lipper (www.lipperweb.com) and Morningstar (www.morningstar.com) Either of these research firms can give you great information and ratings about mutual funds in which you may be interested.

By the way, neither Lipper nor Morningstar had any information about Genius Funds; Apparently, Genius Funds are known as HYIPs, or High Yield Investment Programs. Many financial advisers recommend that investors steer clear from investing money with HYIPs. These are much different than traditional high-yield investments sold on Wall Street, which could be one reason that Genius Funds are not tracked by the major fund research companies. In fact, the Securities and Exchange Commission has said of HYIPs: “These fraudulent schemes involve the purported issuance, trading or use of so-called ‘prime’ bank, ‘prime’ European bank or ‘prime’ world bank financial instruments, or other ‘high yield investment programs.’ The fraud artists…seek to mislead investors by suggesting that well regarded and financially sound institutions participate in these bogus programs.” For more information on the SEC’s warnings about HYIPs, see this link: www.sec.gov/divisions/enforce/primebank.shtml.