Small firms demand scam protection

The Federation of Small Businesses (FSB) said its members would continue to fall victim to scams unless 'Stop Now Orders' could also be used to help smaller businesses and the self-employed.

Stop Now Orders were introduced in 2001 to protect consumers from problems such as misleading advertising, doorstep selling and unfair contract terms. They enable the Office of Fair Trading (OFT) and other 'enforcement partners' to apply for court orders to quickly halt breaches of a wide range of UK consumer protection laws.

However, the FSB said today that a clause in the 2002 Enterprise Act excluded businesses and the self employed from the protection provided by Stop Now Orders.

It argued that small business owners were "as vulnerable to scams as any other individual", that they "often lack specialist knowledge" and rarely had time to "closely study all of their correspondence".

FSB trade and industry chairman Tina Sommer said: "More and more scams are targeted at small businesses, but the OFT is unable to use Stop Now Orders, to protect them from rogue traders.

"We are calling on the government to extend its definition of consumer to include small firms and for the OFT to use all the powers at its disposal to protect small businesses."

The FSB said it had alerted its members to a number of scams aimed at small firms over the past 12 months, including those highlighted by the Health and Safety Executive (HSE) last summer, and again just last week.

Scam campaign

The FSB's calls came as the OFT announced a month long campaign to raise awareness among consumers of frequent scams.

The OFT claimed UK consumers lose around £1 billion per year to a "variety of cons which exploit low-cost, mass-marketing techniques to target recipients." It added that many originated from overseas, making detection and prosecution more difficult.

Among the "top ten scams" highlighted by the OFT as part of its campaign were bogus telephone lotteries originating in Canada and Spain, and numerous prize draws and sweepstakes. Several involve premium rate telephone numbers, while others are investment related scams where callers offer the opportunity to invest in shares, fine wine, gemstones or other "soon-to-be rare" commodities.

Also highlighted were so-called 'Nigerian advance fee frauds' where an offer via letter, email or fax is made to share a huge sum of money in return for using the recipient's bank account to permit the transfer of the money out of the country.

"The perpetrators will either use the information given to empty their victim's bank account, or convince him or her that money is needed up front for bribing officials," said the OFT.

'Matrix schemes'

Consumers would also fall victim to 'pyramid schemes' - offering a return on a financial investment based upon the number of new recruits to the scheme, and 'matrix schemes' - promoted via websites offering expensive hi-tech gadgets as free gifts in return for spending £20 or similar on a low-value product.

Those buying the product join a waiting list to receive their free gift. The person at the top of the list gets their free gift only after a prescribed number - sometimes as high as 100 - of new members join up. "In reality, the majority of those on the list will never receive the expensive item they expect," said the OFT.

Credit scams, property investment schemes, work-at-home and business opportunity scams were also highlighted.

Christine Wade, director of consumer regulation enforcement at the OFT, said: "Scammers are resourceful, enterprising and manipulative. By exploiting the same routes to market as legitimate business, they damage not only individual consumers, but the interests of fair-trading businesses as well."