Consumer Agency Issues Pyramid Scheme Warning

Friday, 01 October 2010 11:21

Written by Katrina Doyle

The National Consumer Agency is calling on consumers to be very wary of any get-rich-quick schemes, particularly involving pyramid selling.

The Agency is warning that these schemes are likely to become more commonplace with unemployment rates on the rise and many people looking for ways to make ends meet during the economic downturn.

John Shine, Director of Commercial Practices commented, "Pyramid schemes come in many different forms but are based on recruiting others into a network.

"These schemes are not usually openly advertised but are promoted 'under the radar' with people invited to meetings by relatives or friends, or hearing of meetings by word of mouth. They promise that once you've paid a joining fee, you can earn large amounts of money by recruiting new members.

"The schemes always collapse due to lack of a sufficient number of new members, leaving the majority of people significantly out of pocket."
Penalties

All types of pyramid schemes are banned in Ireland under the Consumer Protection Act 2007. The Act provides for a fine of up to €150,000 or up to five years' imprisonment or both in respect of a person convicted of involvement in a pyramid promotional scheme.

"With the tough economic climate, vulnerable consumers might be tempted by the offer of big rewards in return for a relatively modest outlay but don't get drawn in.

"Participation in such schemes will result in losing most, if not all, of the money, ruining friendships and family bonds, and is also an illegal activity with very serious consequences for those who may be convicted of operating or participating in such schemes.

"Remember that the age-old advice still holds true today - if it seems too good to be true, it probably is," John Shine added.

"Consumers should also be cautious when considering involvement in multi-level marketing schemes (also known as 'network' or 'matrix' marketing). These are a means of selling products or services through a network of distributors, but which also offer incentives for the recruitment of others into the scheme.

"While some such schemes may be perfectly legitimate, there are others which stray into (or very close to) what could be considered pyramid selling," he warned.
How to spot a pyramid scheme - five easy tips

Here are five warning signs that consumers should look out for:
1. The income is primarily from introducing other people to the scheme rather the sale or supply of a product
2. You are notified of the meeting about the scheme by word of mouth or personal invitation rather than it being openly advertised
3. There is a "hard sell" by the promoters, emphasising how much can be made
4. The main focus is on introducing others rather than on an actual product / service
5. Most information is provided on the night, but there is little, if any, material that can be taken home and studied

Further information on pyramid schemes is available on our ConsumerConnect.ie website. If you are invited to join, or have already joined, any kind of pyramid scheme you should contact the Gardaí, or call the NCA on 1890 432 432.