Recession Increasing Pyramid Scheme Offers

The current economic downturn is prompting many Americans to consider starting home-based businesses to replace or supplement their incomes. Unfortunately, the climate has also encouraged pyramid schemers to create an ever-increasing number of scams, including the highly-publicized investment scheme run by Bernard Madoff (pictured below).

A recent survey by the National Consumer League found that many respondents–particularly African-Americans, Hispanics, and those with low incomes–revealed themselves to be at risk of falling for pyramid schemes disguised as legitimate work-from-home opportunities. In addition, lower-income consumers (those with incomes of 35,000 annually or less) were more likely to mistake pyramid schemes for legitimate ways to provide supplemental income. They were also least likely, as compared with all respondents, to correctly identify pyramid schemes as a scam.

Similarly, 46 percent of African-American and 48 percent of Hispanic consumers surveyed were more likely to consider a home-based business than the average yet less able to identify a pyramid scheme as a scam.

(photo credit: Newscom)