Cardiff Legal

The Fed­er­a­tion of Small Busi­nesses stated in their 2009 sur­vey that:

“54% of busi­nesses have been a vic­tim of fraud or online crime and a sig­ni­fic­ant 26% of busi­nesses are deterred from buy­ing and selling online because of the fear and risk of online fraud.”

“Warn­ing: This is a Scam”

Accord­ing to the Depart­ment for Busi­ness, Innov­a­tion and Skills (BIS), there are over 4.8 mil­lion small busi­nesses in the UK, con­trib­ut­ing more than 50% of the UK’s annual turnover. These busi­nesses have become the tar­get for many scams, including:

- Busi­ness Dir­ect­ory; Busi­ness Rates; Unso­li­cited Goods; Fake Invoices; Home Work­ing Scams; PC Virus Pro­tec­tion Scams.

There are also some com­mer­cial prac­tices that are within the ‘Grey areas’ of the law — not strictly illegal but very sharp prac­tice — such as:

- Mobile Phone con­tract renewal terms; Advert­ising con­tract: Auto­matic Renewal; Busi­ness Rates review ser­vice.

This blog art­icle looks at some of these prac­tices in detail.

1. Home Work­ing Scam:

Adverts in the local press, cards in shop win­dows and tele­phone boxes, or posters in pub­lic areas offer­ing the oppor­tun­ity to work from home. The applic­ant is asked to fill out a form and send a regis­tra­tion fee (e.g. £15), only to later receive a list of com­pan­ies offer­ing home work­ing for a fur­ther (greater) fee — or simply receiv­ing noth­ing at all!

In most cases, the other com­pan­ies on the list either offer no guar­an­tee of work or do not exist. There are sev­eral other iter­a­tions of this scheme, but gen­er­ally based on the same idea.

2. Unso­li­cited Goods /​Fake Invoice Scam

This scam works in two ways but is gen­er­ally car­ried out in the same man­ner. First, the scam­mer calls a busi­ness pos­ing as a seller of busi­ness sta­tion­ary or office sup­plies (e.g. Printer Ink). Ordin­ar­ily they will speak to a recep­tion­ist and will seek details of the per­son who usu­ally orders such supplies:

Hi, we are send­ing out a free office sup­plies cata­logue for the year. We want to make sure that the per­son respons­ible for order­ing sup­plies receives the cata­logue. Also, we need to know what type of print­ers you’re using, along with the model num­ber, to ensure that you receive the right cata­logue for your machine.

The make and model num­ber are loc­ated on the front of your machine.

If suc­cess­ful, the scam­mer calls for a second time and, armed with the vital inform­a­tion from the pre­vi­ous call, now pruports to offer a large dis­count for a new order. The employee is assured by the use of the inform­a­tion gained pre­vi­ously (i.e. name of the per­son who orders sup­plies, details of sup­plies ordered pre­vi­ously or make and model of office equip­ment) and may agree to the new order.

The scam­mer assumes the sale and one of two things can hap­pen. Either an invoice is sent for pay­ment, con­tain­ing what looks to be legit­im­ate inform­a­tion. Or, the unso­li­cited sup­plies are sent and pay­ment is later requested.

If the order is quer­ied, the scam­mer alleges that the second call was recor­ded and con­tains the employee’s verbal agree­ment to the con­tract. But in most cases where this scam is suc­cess­ful, the invoice is simply paid without question.

Here is a link to a sample mis­lead­ing Order Form (on the OFT web­site) -  http://​www​.oft​.gov​.uk/​s​h​a​r​e​d​_​o​f​t​/​s​c​a​m​s​/​M​i​s​l​e​a​d​i​n​g​-​o​r​d​e​r​-​f​o​r​m​.​pdf. A simple form of this scam is to send a (fake) recruit­ment invoice claim­ing pay­ment for staff placement.

3. Busi­ness Dir­ect­ory Scam

There are a couple of vari­ation to this scam but the basic method is the scam­mer cold calls the busi­ness offer­ing either online advert­ising, place­ment in a char­ity magazine or pub­li­city in a busi­ness brochure.

Usu­ally, this will be offered at a dis­coun­ted rate or even for free. The scam­mer may make prom­ises of sig­ni­fic­ant pub­li­city or wide­spread read­er­ship of the pub­lic­a­tion and per­suades the recip­i­ent to agree to receive an Order Form to be signed and sent back.

The Order Form will con­tain terms and con­di­tions writ­ten on the back which may be in very small or almost illegible text. Within these terms will be clauses relat­ing to pay­ment or renewal of the con­tract. The charge is nor­mally in excess of what was agreed or the terms will be onerous.

Once the form is returned, the scam­mer will claim pay­ment and rely on the fact that the form has been signed. Usu­ally, legal action will be threatened and the charge is even­tu­ally paid.

Here are a few examples of Sharp Prac­tice — Schemes which are not illegal but are poten­tially unfair

i. Busi­ness Rates

There has been an increase in busi­nesses offer­ing to reduce Busi­ness Rates for other busi­ness. Most of these busi­nesses seem plaus­ible because a lack of re-​rating of com­mer­cial premises by many Local Author­it­ies have led to small busi­nesses pay­ing more in Busi­ness Rates than they should.

But, there is already a mech­an­ism to review busi­ness rates. And the pro­cess is free! How­ever, Rate Assess­ment Busi­nesses seek to exploit this lack of know­ledge by char­ging for the privilege.

Whilst not illegal it can be mis­lead­ing and, in the worst case scen­ario, may end up cost­ing the local busi­ness if a re-​assessment res­ults in their rates being adjus­ted upwards.

ii. Busi­ness Mobile Phone Con­tracts — Misselling

Inde­pend­ent agents obtain the con­tract details of local busi­nesses and cold-​call offer­ing upgrades or new con­tracts. Offer­ring a new con­tract is per­fectly legal. How­ever, agents have been known to secure agree­ments by mak­ing false promises.

For instance, they may prom­ise to pay the can­cel­la­tion charge the cli­ent would incur for exit­ing their exist­ing con­tract or they may say that tthis charge would not apply if the con­tract is ‘upgraded’. In real­ity, once the paper­work is signed and they recieve their com­mis­sion, the cli­ent may be stuck with two contracts.

The Net­work won’t allow can­cel­la­tion as they were not privy to the ini­tial dis­cuss­sions with the agent. Even if legal action is threatened, the busi­ness will still be liable for the cost of both con­tracts and may incur legal costs.

iii. Renewal Clauses

Many con­tracts con­tain renewal clauses, from Insur­ance to Mobile phone and Advert­ising con­tracts. Most com­mer­cial con­tracts are agreed on the stand­ards terms of one party. In the worst case scen­ario these terms will con­tain ‘lock-​in’ clauses — a clause which seeks to per­petu­ally renew a fixed term contract.

For example, an advert­ising con­tract may have the fol­low­ing clause:

This con­tract will last for a period of 12 months. You must provide notice in writ­ing 3 months prior to the end of the con­tract. If we do not receive the required notice, the con­tract will be renewed for a fur­ther 12 months and pay­ment will be taken in accord­ance with the cur­rent terms and conditions.

The Unfair Terms in Con­sumer Con­tract Reg­u­la­tions 1999 say that such a term is unfair in Con­sumer con­tracts, but there is cur­rently a debate as to whether the same applies to Com­mer­cial Con­tracts. How­ever, such a term is extremely oner­ous as it does not provide a suf­fi­cient period in which to can­cel — 9 months into a 12 month con­tract may be too soon — and the con­sequences are par­tic­u­larly costly.

So, what to do?

It goes without say­ing that if faced with any of the cir­cum­stances described above, you should always seek inde­pend­ent legal advice. But there are also some simple steps that will help to avoid most scams:

- Always con­firm agree­ments in writ­ing, even with someone you trust;

- Always review writ­ten terms before agree­ing to a contract;

- Do some research. The inter­net is a wealth of use­ful information;

- Never pay in advance unless you are cer­tain of what you are agree­ing to;

- Don’t be intim­id­ated by legal threats. Seek advice as, in most cases, these are empty threats.

Let us know about your exper­i­ence if you’ve been the vic­tim of a scam. Altern­at­ively, you can con­tact Action­fraud to report your exper­i­ence as crime. The Action­fraud web­site is also a use­ful resource for any­one seek­ing inform­a­tion on Scam pre­ven­tion and gen­eral guidance.

Cardiff Legal