Ask The Money Coach

Posts Tagged ‘Scams’

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.

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.

Unfortunately, I don’t know of any institutions or organizations that will supply you money in order to pay an “Idea Company” for their services. I have to say that I am very suspect about what this company may be able to do for you. If it is a company that purports to help inventors who have created products or entrepreneurs who would like to bring various ideas to market, I would recommend that you check this business out very thoroughly before turning over any money. It is common for certain less-than-reputable outfits to insist on receiving large upfront payments before they will “help” you get your idea/product off the ground. Check out the website InventorFraud.com for tips for on how to license, patent or profit from your ideas – as well as how to avoid unscrupulous firms that may try to fleece you. InventorFraud.com has a lot of good information from Michael Neustel, a U.S. Registered Patent Attorney and founder of National Inventor Fraud Center Inc. (NIFC).

This is a tough situation – and one that I know seems terribly unfair. That’s why I hate to tell you that, frankly, I don’t know of any way for you to get this information removed from your credit report for two reasons. First, the loan account was already included in your former husband’s bankruptcy filing. That’s a done deal. So even though your ex-spouse filed for bankruptcy without your knowledge, the fact that he went ahead and included in his bankruptcy a loan on which you were a co-signer has dragged you into a messy situation. Additionally, under the law when two people co-sign for a debt, they are each responsible for repaying that debt – even if you have a divorce decree that says he was supposed to pay certain outstanding bills. When joint debts go unpaid, creditors have the legal right to seek repayment from each party, and to report to the credit bureaus that each of those individuals has unpaid debts, or debts in bankruptcy.

Only Time Will Help

Since you said your former husband “is making payments toward the bankruptcy,” I assumed he filed Chapter 13, which is a reorganization plan. Under Chapter 13, you repay some or most of what you owed to creditors over a period of 3 to 5 years. While the bankruptcy is in repayment, that loan and that bankruptcy will continue to show on his credit report, and unfortunately on yours too.  The best thing you can do is to manage other aspects of your credit well. Pay all your bills on time. Keep your credit card debt low. And don’t try to open new credit accounts, because inquiries will further lower your credit score. Since you said you wanted to buy a new car, consider forgoing that purchase, or be prepared to save up money over a year or more to buy a car – or to at least have a very big down-payment, which might make a dealer more willing to offer you financing. Over time, the impact of that bankruptcy filing will do less damage to your credit score.