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Infomercial Scams
I often stay up late till 3AM working and have the TV on for background noise. Almost every channel is for some infomercial. I then googled some of the real estate and home business ones. I found many hits detailing user experiences about how they are all scams. Of course I always knew that, but it was interesting to read how they all share bait and switch tactics, false advertising , and outright lies.
My question is how these companies protect themselves from a class action suit? There are so many cheated customers that it would be easy to do ? I suppose in pre-internet days there was no way for such cheated customers to contact each other.
Learning about these real estate schemes and infomercial schemes is one of my hobbies. I have a fairly large library of these schemes that I have obtained from folks who have bought them from the TV shows.
What I find is that most legitimate schemes, and it is possible to use the information to do what they claim. In fact, if you look hard enough, you can probably find one person who has made some money on their scheme. The problem is that the type of work that is required is beyond what most people are willing to do.
For example, the no money down real estate is the classic. You may be able to find one of the deals that they tell you to look for. But it many required 250 to 500 phone calls. Very few every day people are comfortable on the telephone, and very few people will make more than 5 or 10 phone calls before giving up.
This is the same reason that most MLM plans fail. Someone who is willing to call perfect strangers might make the plan work. But average people are not. Once they sign up the 3 people that they know, they are tapped out, and will not make the 200 cold calls that it takes to get to the next level, so they drop out. That covers about 97% of people who get into MLM.
There is an ethical question of if you should sign up someone and take their money knowing that there is a 97% chance of drop out. But that isn't a legal problem. After all, there is a 3% chance that they will do well.
Insurance is a game very much like this. For a life insurance sales person to be successful, they have to make hundreds of cold calls every day, and always be selling. Most people who get in to the business fail. And commissions are often larger than the first year sale. Yet we don't think of that as a scam.
Insurance, real estate sales, and others like them, I refer as Chief-n-Indian games where the objective is to hire, on straight commission, as many warm bodies as you can manage and see who succeeds. These situations are at least supported by advertising.
The "no money-down real estate" business has produced several criminal convictions for defrauding federally insured financial institutions. This generally occurs when individuals learn that even the densest of people will not give you their assets and wait for you to pay them. So they turn to inflating sales prices to make it appear they have put up 5% to 20% of the equity in the home. When they can't resell the home or their tenant skips, they default.