Throwing the book at directory scammers: 5 B2B frauds to watch out for
Wily deception. Masters of impersonation. International intrigue. We could be describing PBS’ re-imagining of Sherlock Holmes, but we’re not. We’re talking about a scam that’s been around almost as long as the famous resident of 221B Baker Street – and still leaves small businesses barking like the Hound of the Baskervilles.
The FTC has gone to court to stop four Canada-based telemarketing operations that the agency says have taken companies, churches, nonprofits, and local government offices for millions of dollars by charging them for unwanted listings in online “yellow pages” directories. The lawsuits allege variations on a theme, but here’s how they generally work: The defendants cold-call companies, claiming to be “verifying” a listing in a business directory. The unsuspecting employee who answers the phone confirms the contact information based on the caller’s false implication that this is just a routine follow-up to an existing business relationship.
That sets off an avalanche of invoices for unauthorized services, many of which include the familiar “walking fingers” logo. Many business owners pay just to stop the harassment. Those who balk get threatened with collection actions, hefty interest and penalties, and even legal fees. Some of the telemarketers follow up by impersonating debt collectors. To make matters worse, there’s often no directory at all. In other instances, it’s just a sham compilation.
Like the villains in the new Sherlock Holmes series, the fraudsters have bumped up the technology. It turns out they’ve tape recorded the initial phone call and claim it’s “proof” that an employee authorized the expenditure. But the FTC says what’s on the tape is often just the employee confirming the business’ contact information, based on the caller’s bogus claim that there’s an existing listing. What’s more, many businesses say the tapes sound sliced and diced, doctored to reflect the defendants’ untruthful account of what happened.
The FTC filed one case in federal court in Washington State. Two other cases were filed in Florida in cooperation with the Florida Attorney General. Actions against the dozens of people involved in those operations are pending. The FTC filed a fourth action in Illinois last year. In that case, the Court entered a judgment of more than $15 million against the people running that operation, banned them from the business, and recently issued a permanent injunction.
The FTC has a new brochure, Small Business Scams, outlining the modus operandi of B2B con artists. In addition to The Directory Listing Scam, the publication gives the inside story on other common rip-offs like The Supply Swindle, The URL Hustle, The Charity Con, and The Check Cheat.
Here are steps you can take to protect small business from B2B fraud:
- Share the new brochure with your staff, including receptionists and administrative personnel, to help them spot – and stop – a business scammer.
- Larger companies usually have a purchasing department. But even in small businesses, it's wise to designate a point person for office supplies, directory listings, subscriptions, and other things you buy periodically. Tell your staff that all purchasing calls should go through that person and keep a central file of your usual suppliers.
- Use your company's social networks to educate others about the telltale signs fo a B2B scam.
- Encourage professional associations or local business groups to issue a warning to members.
- Fraudsters often target churches and other nonprofits that depend on volunteers. Take a minute to share this information at your place of worship or with community groups where you donate your time.
Sherlock Holmes was famous for saying to his sidekick, “You know my methods, Watson.” Read Small Business Scams and you’ll know their methods.