Direct selling scams are on the rise this year.
In the first 6 months of 2008, the Consumer Council has received 22 complaint cases related to direct selling, compared with 33 cases for the whole of 2007. There were 46 cases in 2006.
Complainants were allegedly lured into joining direct selling schemes that promised quick monetary return.
Typically, they would be persuaded into investing on merchandise of dubious market value, and then into forging documents in order to secure loan for the purchase.
Consumers should be wary and be able to differentiate in the market between well-established direct selling companies with quality products and those which rely almost solely on recruiting newcomers as a source of earnings.
In one of the 3 cases highlighted in CHOICE, the complainant was persuaded by his supervisor to apply for a bank loan for the purchase of a bulk quantity of direct selling products.
With the aid of the supervisor, he managed to successfully apply for a loan by producing forged documents as proof of his employment and salary income.
The complainant later found the products he bought to be of a low quality and hardly any market value; he was also suspected to have supplied false information to the bank, which reported the matter to the Police.
The complainant was subsequently bound over by the court and his supervisor sentenced to imprisonment.
In another almost identical case, the complainant was first befriended by a company staff, who later persuaded him to join a direct selling training course at a fee of $5,000. The fee was later bargained down to $3,000.
He was then suggested to set up a new company to operate his direct selling business, and to also use forged documents under the name of the company to apply for a loan to pay for the course expenses.
Fortunately, the complainant became suspicious and pulled out of the deal, and reported the matter to the Council.
In the third case, the complainant was detained for hours as staff of a company bombarded her with persuasion to join a direct selling training course.
She finally managed to retrieve her Identity Card, and was released shortly before midnight but not without having paid a total of $6,600 - $6,000 for membership fee and $600 for course expenses.
Consumers are warned to be on the alert of unscrupulous sales and recruitment tactics adopted by direct selling operators bordering on those prohibited under the Pyramid Selling Prohibition Ordinance (Cap. 355).
In particular, they should be wary of any illegal deceptive schemes and any demands for exorbitant amount of fee for training or membership, or the purchase in large quantity of merchandise of dubious market value.
Consumers contemplating to join any direct selling schemes are advised to refer to the report in this August issue of CHOICE for guidance.
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