Iowa State University Extension

Problem:
Schemes involving an unknown company, offering eye-popping returns from plausible-sounding, but vaguely described business activities are spread by word of mouth through local groups. They prey upon senior citizens, the disabled, low income and those with few job skills. The schemes eventually collapse when there are not enough new investors to maintain the payments – leaving most of the participants with a financial loss. 40 households of the deaf community in Iowa bought into the ClubFreedom pyramid scheme.

Response:
ISU Extension Family Resource Management Field Specialist informed members at the monthly meeting of the deaf community about the hazards of pyramid schemes, providing information and publications warning:

•   Avoid any plan that offers commissions for recruiting additional distributors;
•   Beware of plans that ask new distributors to spend money on high-price inventory;
•   Be cautious of plans that claim you'll make money through continued growth of your ‘down line' recruits; instead of sales;
•   Beware of plans that promise enormous earnings or claim to sell miracle products;
•   Beware of shills – decoy references used to promote the plans.

Impact:
As a result of the timely presentation to ten local deaf club members, one individual who bought into the scheme for 7 others who did not have access to a credit card was able to cancel the credit card purchase, recovering $1400. Others who were planning to buy in chose not to. Individuals participating in the meetings report sharing their learnings with other deaf individuals who are unable to attend as well as others state wide.

Contact:
Brenda Schmitt
Iowa State University - Family Resource Management
2023 S. Federal Ave.
Mason City, IA 50401
641-423-0844
FAX: 641-423-2642