Consumer fraud: the telemarketing hoax.

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If you've ever called that number, you've probably entered into one of the nation's biggest schemes: telemarketing fraud. Each year, American consumers lose approximately $40 billion due to fraudulent sales via the telephone. And although telemarketing is a legitimate sales technique, approximately 14,000, or 10%, of the 140,000 telemarketing firms in the United States may be fraudulent, says Cleo Manuel, vice president of public affairs at the National Consumers League in Washington, D.C.

In the past, illegal telemarketers made the initial contact with their targets. "Our advice was, don't accept or make any offer if you didn't initiate the call," says Manuel. "But a couple of years ago, con artists began to get around that by prompting consumers to make the call, either through placing clever advertisements or sending postcards telling them they'd won a prize."

These illegal operations are typically run out of boiler-rooms, or low-rent offices and motel rooms where salespeople call prospects. Once consumers succumb to a fraudulent offer, their names are put on a mooch list so that telemarketers can "reload," or target them again. "They hit you up for $100 and then three months later, hit you up for a couple of thousand," explains Tim Healy, an FBI supervisory special agent for economic crime and telemarketing fraud.

Schemes to beware of include prize offers or free vacations, business opportunities, credit cards, magazine sales and solicitations for charitable donations. "It doesn't matter what the product is," Healy once heard a con man testify. "I could sell dirt. As long as I leave them with the impression they're going to make more than they invest, I can get them."

You don't have to be one of those victims. By knowing a few of the following common schemes, you can stay one step ahead of con artists and beat them at their own game.

* Beware of the free vacation offers. Like the example described, fraudulent promoters may say you've won a free trip. To qualify, however, you're required to attend a sales promotion or buy a travel club membership. The promoters may insist that you book a discounted trip or provide a credit card number and pay immediately--all telltale signs of fraud. "Be skeptical," warns Healy. "If they're asking for money up front, don't do it."

* Be leery of dialing additional numbers. You may be asked to dial a number with an 809 area code that is answered by a voice mail system prompting you to stay on the line. Instead of being billed a standard rate, you'll be charged $5-$7 per minute.

You could also be asked to dial a toll-free number, but when you press numbers for more information, you are actually activating fees. "Consumers think they've won a free prize, but all they're getting is a very expensive phone bill," says Manuel.

What's more, phony telephone company technicians who say they need to test your phone line will direct you to press some numbers, such as 90 and the pound (#) sign. But when you do, you are unwittingly authorizing long-distance charges.

(Make sure that you call your local telephone company and ask for a "pick freeze" that prohibits the local provider from allowing any change in your long-distance service without your written authorization.)

* Be suspicious of magazine sales. Some cons offer subscription rates at low prices or promise gifts with a purchase. Often these unscrupulous marketers will misrepresent the name of the publisher and the cost of the magazines and may never deliver.

* Watch out for illegal telefundraisers who seek donations for nonprofit organizations that fight disease, or support police officers or the disabled. They use familiar sounding monikers, such as the National Lung Association, similar to the legitimate American Lung Association. Some may be raising funds for a charitable cause, but falsely state how much of your donation will actually go to that cause. Call your local attorney general's office for names of approved charities.

* Keep alert for more subtle business-to-business scams. By falsely representing an once supplier, "paper pirates" can get an employee to reveal information about your copier, for example, and then send a fake bill for the toner you use. "Companies will pay those bills, wrongly assuming they've received the goods," says Healy. "They lose hundreds of thousands of dollars that way each year."

* Avoid claims that you've won one of multiple prizes. In this scenario, the caller will list such items as a car, $5,000, a gold diamond watch or five ounces of gold. What's the catch? It will cost you $500 to participate. Since there are only a handful of winners, cons often succeed in convincing consumers that they have a one-in-five chance of winning the grand prize. You could end up with the inferior "gimme gift" of a watch or worse'.

Note that these criminals are constantly seeking new ways to enter your home or office. Increasingly, they are taking consumers for a ride on the information superhighway, adds Healy. These scams include e-mail chain letters and investment and pyramid schemes.

RELATED ARTICLE: Breaking the phone chain

So what happens if you find yourself in the middle of one of these schemes? The process of getting your money back becomes difficult after you've made a purchase, but experts believe that awareness will help ensure your protection. Here's what they suggest:

Never give out your bank account, credit card or Social Security numbers, not even your birth date. Telemarketers will often call with partial information about you. "Every bit of information is part of a puzzle, and that may be the only missing piece," Manuel charges.

Do business only with people you know and trust. If an unfamiliar company representatives calls you, ask for detailed information in writing. When (or if) you receive it, read the fine print for hidden costs. Note that if someone offers you a free prize but asks for some sort of fee, you really haven't won anything. Ask for a number where you can call the rep back. If a con artist is calling, he or she will hang up. Resist high-pressure sales tactics. If the caller insists, hang up.

Ask these companies to put you on their "do not call" list. If a company disregards your request, you can bring action against it in small claims court under the Telephone Consumer Protection Act of 1991 and the Federal Trade Commission's Telemarketing Scales Rule.

Stop sales calls from national marketers by sending your name, address and phone number to: Direct Marketing Association, Telephone Preference Service P.O. Box 9014, Farmingdale, NY 11735-9014.

If you have bee scammed, report the crime to your local Better Business Bureau, your attorney general or FBI field office. File a written complaint with the FTC, which helps law enforcement agencies identify patterns of possible violations. Read the following informational texts on the Internet for more help: "Telemarketing Fraud: Spread the World" at www.ftc.gov/ telemarketing/business.htm, "Telemarketing Fraud: How to Spot It, How to Avoid It" at www.consumerlawpage.com/ brochure/88.shtm and "Telemarketing Scam Hits the Area" at www.bosbbb.org/ warning/warnaud.htm.