Call for OFT to protect small businesses

Small businesses will continue to fall victim to fraudsters and con artists until the government extends its protection for consumers to include small firms, according to the Federation of Small Business.

The call came as the Office of Fair Trading launched 'scam awareness month', a campaign to alert the public to deceptive and fraudulent mass marketed scams.

The OFT has the power to serve Stop Now Orders on con artists who swindle consumers. But, according to the FSB, a clause in the 2002 Enterprise Act excludes businesses and the self employed from the protection provided by Stop Now Orders.

The FSB argues that small business owners are as vulnerable to scams as any other individual and often lack specialist knowledge and rarely have time to closely study all of their correspondence.

Recent scams aimed at small business include letters, which appear to come from 'official bodies' demanding money for certain registrations or services; or offers of what appears to be a free inclusion in a guide, but the small print committed the firms to paying for the entries.

Small business

The FSB is calling for the OFT’s definition of consumers to be extended to include small businesses and the self employed.

FSB Trade and Industry Chairman Tina Sommer said: "The aim of 'scam month' is to arm consumers with the knowledge and skills necessary to recognise and report scams - but what about small firms?

"Fraudsters are increasingly aware that small business owners must do two full time jobs - run their firm and also comply with ever increasing regulations and red tape.

"More and more scams are targeted at small businesses, but the OFT is unable to use Stop Now Orders, to protect them from rogue traders.

"We are calling on the government to extend its definition of consumer to include small firms and for the OFT to use all the powers at its disposal to protect small businesses."

Scam month

It estimated that UK consumers lose an estimated £1 billion per year to a variety of scams which exploit low-cost, mass-marketing techniques to target recipients. Many of these scams originate from overseas, making detection and prosecution more difficult.

Scam Month is organised by the OFT and runs for the whole of February. At the launch of a campaign, the OFT identified the top ten scams targeted at UK consumers to alert the public to the swindles that may part them from their money.

They are:

• Telephone lottery scams - encourage people to send money to pay for taxes and processing fees after claiming they have won a 'big prize' in an overseas lottery.
  
• Prize draw, sweepstakes and foreign lottery mailings - notification of a prize in an overseas draw, government payout or lottery in return for administration or registration fees.
  
• Premium rate telephone number notification by post of a win in a sweepstake or a holiday offer includes instructions to ring a premium rate 090 number to claim your prize.
  
• Investment related scams an unsolicited telephone call offering the opportunity to invest in shares, fine wine, gemstones or other soon-to-be rare commodities.
  
• Nigerian advance fee frauds an offer via letter, email or fax to share a huge sum of money in return for using the recipient's bank account to permit the transfer of the money out of the country.
  
• Pyramid schemes offer a return on a financial investment based upon the number of new recruits to the scheme.
  
• Matrix schemes promoted via websites offering expensive hi-tech gadgets as free gifts in return for spending £20 or similar on a low-value product such as a mobile telephone signal booster.
  
• Credit scams another advance fee fraud, offering fast loans regardless of credit history, but an advance fee must be paid.
  
• Property investment schemes - would-be investors attend a free presentation and are persuaded to hand over thousands of pounds to sign up to a course promising to teach them how to make money dealing in property. A variation is a buy-to-let scheme where companies offer to source, renovate and manage properties, claiming good returns from rental income.
  
• Work-at-home and business opportunity scams often work by advertising paid work from home but which require money up-front to pay for materials or investment.