and the U.S. Economic Recovery

Settlements In Full: Debt Collection and the U.S. Economic Recovery

Maxwell, Turner & Associates is an industry leader in the financial recovery industry.

For credit grantors, our focus is on optimizing receivables management strategies. This document will provide creditors and service providers with news, information, and analysis on the collection of bad debt. Our daily newsletter, blogs, or executive briefs, all are within reach and free of charge. Read more about Maxwell, Turner & Associates, Inc.  at www.maxwellturner.com.

Maxwell, Turner & Associates, Inc.

438 East Shaw Ave Suite 138

Fresno CA 93710

Settlements In Full: Debt Collection and the U.S. Economic Recovery

The U.S. consumer credit crisis has reshaped the collection and recovery industry in many

ways. As this crisis ends, Settlements in Full (SIFs) comprise one of the most important and

least-discussed issues for the industry in 2010. SIF policies are impacting and will continue to

impact credit issuers, first party servicers, contingency collection agencies, debt buying companies,

and collection law firms alike, for better or for worse.

These policies, adopted by credit issuers and implemented by their service providers, can improve

short-term financial performance for some of these companies, potentially at the expense of others.

In the long run, effective SIF policies also have potential to contribute uniquely to the U.S. economy

as it continues to emerge from recession, while ineffective SIF policies can unintentionally stall

economic growth.

This article examines these policies, what makes them effective, and what they mean to the

economic recovery as a whole.

SIFs DEFINED

When Payments in Full cannot be made by consumers for overdue debts, Maxwell, Turner & Associates, Inc. like credit grantors  set thresholds on the amount they will accept in order to close an overdue account. These Settlements in Full (SIFs) allow Maxwell, Turner & Associates, Inc.’s clients to recover part of the extended credit immediately, while allowing borrowers to repay debts at a discount. SIF policies are typically targeted at consumers who have little or no ability repay their obligations in full, in hopes that a credit issuer will benefit from more repayments at a lower amount than it would from fewer repayments at a higher amount.

Credit issuers not only set different thresholds for settling an account but also set different

thresholds for debtors at various stages of delinquency as well. As a result, a settlement offer to the

same debtor should increase as a charged-off account ages and as recovery efforts become more

challenging.  These thresholds are communicated to the financial recovery institute, so an individual

collector working within a collection agency can resolve a credit card bill for some percentage of

total face value. SIFs are popular with individual collectors because they make commissions easier

to earn.  While this recovery strategy has always been a tool for collection and recovery professionals, it has been utilized more and more as the recession increased the difficulty of traditional recovery efforts.

All Consumer Loans Credit Cards

THE NEED FOR MORE LENIENT SIF POLICIES

The credit and collections industry has been far from immune from the most significant economic

downturn since the Great Depression.  Clients often phone in to Maxwell, Turner & Associates with their praise of being in business as a debt collector in this economy but we are all hurting just the same.

Credit issuers saw liquidation rates drop precipitously since the recession began in December 2007.

By the end of 2009, recovery executives were reporting monthly liquidation performance down as

much as 50 percent or more year-over-year. Figures such as these are remarkable given the baseline

for these comparisons; the 12-month period ending in December of 2009 began when the recession

was at its peak.

Flooded with placements, many contingency collection agencies have seen margins shrink

throughout the recession, with falling liquidation rates and increased costs weighing on the profitability and financial stability of many (but not all) companies in this industry. Some agency owners consider them-selves fortunate to be running their companies with no growth in profits – or no profits at all – in 2009, hoping that an economic recovery will allow them to become more profitable in 2010 or beyond.

A dearth of funding for debt purchasers has also kept many buyers on the sidelines, even as prices

have dropped to near historical lows. With freshly charged-off portfolios selling for as little as 5 cents on the dollar, down from 15 cents or more around 2007, the lack of visibility to better liquidation performance has kept seemingly attractive portfolios from being bought and sold.

For all of these reasons, a glut of charged-off paper is sitting in the offices of recovery executives

and collection agencies throughout the country as the economy emerges from the recession. Given

forecasts for high unemployment rates and weak consumer spending, credit card charge-off rates are

expected to hover between 9 and 11 percent even as the economy rebounds.

Liquidation rates of post-chargeoff consumer debt most closely correlate with the unemployment

rate. A recent survey of economists conducted by the Wall Street Journal suggests that the

unemployment rate will remain well above 9 percent throughout 2010, and is not expected to fall

below 6 percent until 2013. This suggests that collections and recoveries will continue to remain

challenging for some time.

In our next installment, Maxwell, Turner & Associates will discuss Sif rates and outline criteria for effective sif policies.  For more information, please visit us on the web at our new home:  www.maxwellturner.com

The term “collections” typically involves pre-chargeoff paper, while the term “recoveries” generally involves post-chargeoff paper.

The two terms are used interchangeably throughout this paper.

Maxwell, Turner & Associates, Inc. a full service debt collection agency in Fresno California will take a moment to explain consumer rights outlined in the Fair Debt Collection Practices Act.

If you’ve never fallen behind on monthly payments for loans or credit purchases, the term “debt collector” may evoke such imagery as the mustached villains of old melodramas who demanded the surrender of dwelling or decency from innocent heroines. Or you may think of Dickensian landlords who thrived in the times when poverty was considered a crime. But for the millions of Americans who have endured the stress and hardship of delinquent bills, the debt collector is an intimidating reality.

American consumer debt continues to grow at a staggering rate. In 2007, national consumer debt totaled more than $2.5 trillion dollars, an average of almost $8,200 for every U.S. citizen . According to Robert C. Hobbs, deputy director of Boston’s National Consumer Law Center, the overwhelming rise in debt can be attributed to such factors as stagnant personal incomes, rising interest rates, identity theft, Internet fraud and the restrictions imposed by bankruptcy-protection laws passed in 2005 .

One result of increased debt has been a proliferation of debt-collection agencies, which in turn has resulted in an increased number of complaints against such agencies. The Federal Trade Commission reported 70,951 complaints against debt collectors in 2007, nearly six times the number of complaints registered in 1999 .

A positive sign that can be inferred from such statistics is that debtors (or their attorneys) are becoming increasingly familiar with their rights. An increased number of complaints suggests that consumers are aware of the legal guidelines of the Fair Debt Collection Practices Act (FDCPA), which limits the tactics that debt collectors may employ. (You can see a copy of the act at the Federal Trade Commission Web site.)

The FDCPA was prepared by the Federal Trade Commission and enacted in 1977. It covers virtually all personal debts — including credit purchases, mortgages and medical expenses. Unscrupulous debt collectors may be on the rise, but the FDCPA is the debtor’s most powerful safeguard against them.

Specifics of the Fair Debt Collection Practices Act

When you default on credit payments, your creditor — be it a department store, car dealer, or credit-card company — is often the first to contact you. Unlike debt-collection agencies, individual creditors aren’t bound by the restrictions of the Fair Debt Collection Practices Act. They must, however, abide by the guidelines of state regulations. To review the collection laws that apply to your state, check with your states secretary of state website.
Once your creditor has exhausted all means of collecting payment, your account may be placed with a financial recovery entity like Maxwell, Turner & Associates, Inc.

Once your account has been placed with the collection agency, that agency is legally obligated to operate within the guidelines of the FDCPA. Most agencies do. Some, however, follow their own loose interpretation of the guidelines. Knowledge of the FDCPA is essential in order to determine if you’ve been unfairly harassed or threatened by a collection agency.

So here are the rules:

• Collection agencies usually contact debtors via phone or mail, although contact by telegram or fax is also allowed under the FDCPA. The only means of contact not allowed by the act is a postcard. The act doesn’t address contact by e-mail, cell phone or text messaging, although these means are currently prohibited under federal law. In October 2007, however, the debt collection industry appealed to the U.S. government and the Federal Trade Commission to allow for e-mail and cell phone contact. The FTC has yet to make a decision on this issue .
• A debt collector must contact you at a convenient time, specified within the FDCPA as not before 8:00 a.m. or after 9:00 p.m. Collectors aren’t allowed to call you at work if they know your employer disapproves of such calls.
• If you’ve hired an attorney, collectors must deal exclusively with the attorney unless your attorney gives permission for them to contact you. Attorneys are the only third party with whom a collector can discuss your debt. They can contact your friends, employer and family members, but only to obtain such basic information as your address and phone number.
• Debt collectors must be honest with you. They can’t pretend to be lawyers or government employees, nor send you documents disguised to look like legal papers (although they may send you legitimate legal papers if they’ve initiated legal action against you).
• Threats, harassment, insults and obscene or abusive language are prohibited. Collectors can’t accuse you of having committed a crime or threaten to have you arrested. Nor can they threaten to take legal action or garnish your wages if they have no intention of doing so. In addition, they must refrain from harassment by calling you repeatedly (unless you refuse to answer your phone, an ill-advised course of action).
• A debt collector may not collect more than what you owed your original creditor. You aren’t obligated to pay any interest on your debt (unless you agreed to do so in your original purchase agreement), nor to reimburse the debt collector for phone calls and postage.

How the Fair Debt Collection Practices Act Protects You

Here’s a good thing to know: A collection agency like Maxwell, Turner & Associates must stop calling you if you send them a letter requesting that they stop. After that, they’re permitted one additional call or letter to inform you that they will cease contact, or that they are about to initiate legal action. But an end to the calls doesn’t mean an end to your debt.

Usually, at first contact, the collector provides the specifics of your debt, including the amount you owe and the creditor to whom you owe it. If not, he or she must send you a written notice within five days. If you dispute any portion of the debt, or disagree with any of the information provided, you have up to 30 days to request a debt validation. If you don’t do so within 30 days, the collector will consider your debt valid.

It’s often wise to request a validation even if you find no reason to disagree. A validation gives legal proof that the amount of your debt is correct and that the collection agency has been authorized to collect it. Collectors must reply to requests for validation within 30 days.

Your debt may be valid, and the debt collector may be authorized to collect it, but this doesn’t mean that the collector’s information is 100 percent accurate. A collector’s records may state that you owe more debt than you actually do. The collector may lack records of payment. Occasionally, a collector might confuse you with somebody else.

If you dispute your debt, send a letter outlining your dispute to Maxwell, Turner & Associates or the collection agency who made the demand for payment within 30 days.  Once the agency receives your letter, all collection efforts must stop until an investigation is conducted.

The best way to avoid dealing with collection agencies is to pay your bills on time. It’s always possible to work out a fair and reasonable payment arrangement with the collectors at Maxwell, Turner & Associates to place some money back in your creditors pocket.  Remember, they have children too!  We may be beyond the era of poorhouses and debtors’ prisons, but financial hardship is not unique to any era. The Fair Debt Collection Practices Act provides you at least some protection.

For more information about consumer rights and the FDCPA, please visit us on the web at www.maxwellturnerandassociates.com

Still, prices plunged more than 12 percent last year — the sharpest fall since the Great Depression. The price drop for 2009 — to a median of $173,500 — showed the housing market remains too weak to help fuel a sustained economic recovery.

Concerns remain that home sales will weaken after March 31, when the Federal Reserve is set to end its program to buy mortgage securities to keep home loan rates low. Once that program ends, mortgage rates could rise. Adding to the worries, a newly extended homebuyer tax credit is set to run out at the end of April.

Maxwell, Turner & Associates questions whether the housing market can remain stable without the hundreds of billions in government spending now propping it up.

Once the Fed’s mortgage-buying program ends, analysts say rates could rise as high as 6 percent from the current level of around 5 percent for 30-year loans. That’s why some expect the Fed to either extend or expand the program after March, concluding that the housing market remains too fragile.

“You just can’t go from 100 miles an hour to a dead stop and expect it to happen without a big jump in mortgage rates,” said Greg McBride, senior financial analyst at Bankrate.com.

Still, some real estate agents say they feel encouraged. More buyers are shopping around this month than in a typical January, said Kevin O’Shea, an agent with Homes of Westchester Inc. in White Plains, N.Y.

“There are indications that the economy is coming back,” he said. “And that makes buyers feel more secure.”

With median sale prices down 23 percent from their peak in summer 2006, homes have become more affordable in many markets. The tax credit has helped. Many of those active in the housing market these days are first-time buyers or investors looking to gain from the lower prices.

Connie McInturff, 58, and her husband, for example, looked at about 50 properties over 10 months before deciding on a four bedroom foreclosed home in a suburb of Orlando, Fla.

They’re paying $135,000 for a house that’s been vacant for two years, and they plan to spend up to $10,000 to replace missing appliances and install carpeting. They plan to rent it out, with the goal of eventually turning a profit.

The poor December results reported Monday by the National Association of Realtors occurred after Congress extended the tax credit, easing pressure on buyers to act quickly. The credit of up to $8,000 for first-time homeowners had been due to expire Nov. 30. But Congress extended the deadline and expanded it with a new $6,500 credit for existing homeowners who move.

December’s sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the Realtors report said. It was the largest monthly drop in 40-years of record-keeping. Sales had been expected to fall by about 10 percent, according to economists surveyed by Thomson Reuters.

For all of 2009, sales totaled nearly 5.2 million, up about 5 percent from 2008.

The median sales price for December was $178,300, up 1.5 percent from a year earlier and the first yearly gain since August 2007. But some of that increase might be due to a drop-off in purchases from first-time buyers who tend to buy less expensive homes.

Sales are now up 21 percent from the bottom a year ago. But they’re down 25 percent from the peak more than four years ago.

Last year, first-time buyers were the main driver of the housing market. But their role is shrinking. They accounted for 43 percent of purchases in December, down from about half in November, the Realtors group said.

The inventory of unsold homes on the market fell about 7 percent to 3.3 million. That’s a 7.2 month supply at the current sales pace, close to a healthy level of about six months.

Many analysts project that home prices, which had begun to rise last summer, will fall again as spring approaches. That’s because foreclosures make up a larger proportion of sales during winter, when fewer sellers choose to put their homes on the market.

And foreclosures are still rising. The Obama administration’s program to aid homeowners has been a disappointment, with only 66,500 borrowers, or 7 percent of those who signed up, completing the program as of December.

The Treasury Department plans later this week to announce a streamlined process designed to get more borrowers to complete the loan modification program, a spokeswoman said. The program reduces mortgage rates to as low as 2 percent for five years.

Last week, Richard Neiman, New York’s top banking regulator, warned that 450,000 homeowners risk falling out of the program by the end of the month because they haven’t returned the necessary paperwork. The program, he said, is “simply being drowned by a fierce flood of foreclosures.”

Here’s how it works: Letters (or, nowadays, e-mail messages) postmarked from Nigeria (or Sierra Leone, or the Ivory Coast, or almost any other foreign nation) are sent to addresses taken from large mailing lists. The letters promise rich rewards for helping officials of that government (or bank, or quasi-government agency or sometimes just members of a particular family) out of an embarrassment or a legal
problem. Typically, the pitch includes mention of multi-million dollar sums, with the open promise that you will be permitted to keep a startling percentage of the funds you’re going to aid in squirreling away for these disadvantaged foreigners.
If you’re not saying “scam” by now, you should be. Should you agree to participate in this international bail-out, something will go wrong. Paperwork will be delayed. Questions will be asked. Officials will need to be bribed. Money from you — an insignificant sum, really, in light of the windfall about to land in your lap — will be required to get things back on track. You pay, you wait for the transfer . . . and all you’ll get in return are more excuses about why the funds are being held up and assurances that everything can be straightened out if you’ll just send a bit more cash to help the process along. Once your bank account has been sucked dry or you start making threats, you’ll never hear from these Nigerians again. As for the money you’ve thrown at this, it’s gone forever.
In a nutshell, the con works by blinding the victim with promises of an unimaginable fortune. Once the sucker is sufficiently glittery-eyed over the prospect of becoming fabulously rich, he is squeezed for however much money he has. This he parts with willingly, thinking “What’s $5,000 here or $10,000 there when I’m going to end up with $2 million when this is all done?” He fails to realize during the sting that he’s never going to get the promised fortune; all of this messing around is designed to part him from his money.
In another form taken by the Nigerian scam, a church or religious organization is contacted by a wealthy foreigner who says he desires nothing more than to leave his considerable fortune to that particular group. Maybe he says he’s led a life of sin and is now trying to make good, or maybe he claims that as a devout Christian he heard about their good works and wants to leave his money to help continue them, but whatever the backstory, it’s just a tale. Once again, there will be delays, each of them necessitating the “beneficiary” to spend a few thousand here and a few thousand there in an effort to collect money that never materializes.
In a 2002 version of the con, the victim is informed he has just won an important prize in a foreign lottery he doesn’t remember entering. Only when he tries to collect the money is he approached for payment of facilitation fees to get his winnings to him. It’s the same con, with just a few elements unimportant to the execution of the thievery changed about.
The scam is known as the Nigerian scam, but many countries are routinely named as the homelands the appeals originate from. Likewise, the backstory, the tale that supposedly explains how these people came into possession of this incredible sum and why they now need help getting it out of wherever, changes from one e-mail to the next. There are hundreds of versions in existence, each naming different people, describing different situations, and coming from a myriad of far-flung countries. Forget about matching one backstory to another or being suspicious of e-mails from Nigerians but not applying the same caution to approaches from folks from other places — grasp instead the general principle of the scam: Someone from someplace far away wants to give you (or your church) millions of dollars but needs your help in moving the money from there to here. It doesn’t matter if the letter says it came from Sri Lanka and the “funds” that need moving are gold bricks or uncut diamonds — it’s the Nigerian scam. Don’t let the naming blind you to that.
Once the scam is explained, it seems so obvious a con that you’d wonder who would fall for it. Yet fall for it people do because they’re mesmerized by the wealth that will soon be theirs. They also fail to realize there’s a hook hanging just out of sight; at first all they see is that someone wants to give them something, thus they’re ill-prepared to mentally shift gears when that person turns the tables. Because the premise of “I’m going to get millions of dollars” is wholeheartedly swallowed early on, it’s not at a later point questioned when things begin to go wrong with the transaction and the dupes who have been targeted are asked to dig up some funds to help move things along.
The Nigerian scam is hugely successful. According to a 1997 newspaper article:”We have confirmed losses just in the United States of over $100 million in the last 15 months,” said Special Agent James Caldwell, of the Secret Service financial crimes division. “And that’s just the ones we know of. We figure a lot of people don’t report them.”But this is a new scam, right? People are falling for it because they’ve yet to catch on?
Wrong. Very, very wrong.
The Nigerian Scam has been emptying the pockets of victims for decades — first through letters, then with faxes, and now via e-mail. In its earliest incarnation — which dates to the 1920s — it was known as ‘The Spanish Prisoner’ con. In that long-ago version, businessmen were contacted by someone trying to smuggle the scion of a wealthy family out of a prison in Spain. But of course the wealthy family would shower with riches those who helped secure the release of the boy. Those who were suckered into this paid for one failed rescue attempt after another, with the fictitious prisoner continuing to languish in his non-existent dungeon, always just one more bribe, one more scheme, one more try, away from being released.
These days it’s trapped funds not errant sons of well-to-do families that are the objects of these global wild goose chases, but the con is the same. The undisputed headquarters of the scam is Nigeria, with some of the cons progressing so far as to have the victims fly to that country to meet with the “officials” they are purportedly assisting. Things got so out of hand, in fact, that in 1991 the Nigerian government felt compelled to issue a statement disavowing its participation in this scheme:The Central Bank of Nigeria (CBN) said on Thursday that swindlers using Nigerian names had extorted millions of dollars from people in the United States, Asia and Europe under the guise of transferring cash abroad.
The elaborate fraud involves fake official approval to transfer up to 15 million dollars in excess claims on bogus Nigerian contracts as well as pledges to cut the claims amount for help in the use of offshore bank accounts.
A CBN statement warned foreign companies and businessmen not to fall for the confidence trick, saying that the bank had been surprised and embarrassed by enquiries relating to the fraud. “The bank has no knowledge or record whatsoever of the purported claims or transfers, or even the related alleged contracts,” it said.Ah, but is it the same scheme? You tell me:British companies are being warned against a get-rich-quick scam involving thousands of letters sent from firms based in Nigeria.
The letters ask UK firms to assist in the transfer of funds from Nigeria to Britain — by sending signed headed paper, invoices and bank account details — in return for a cut of the sum transferred. Instead of transferring sums, the UK firm’s money is removed by the fraudsters. Scotland Yard says that some companies have lost thousands of pounds in this way. About 25,000 letters are circulating in the UK. But the scale of the losses – which could run to many millions according to the Confederation of British Industry – is masked because some victims are ashamed to admit that they took part in such schemes in the first place.The real Central Bank of Nigeria tries to warn people about this scam, but it’s a case of the guy with the broom following the elephant — the elephant always gets there first. They even placed a half-page ad explaining the scam and warning off those who might be tempted to fall for it in major U.S. newspapers, such as the 27 October 1998 issue of the Los Angeles Times. That ad mentioned some new variations on the old scheme:A recent variation of the scam directed primarily at charitable organisations and religious bodies overseas involves bogus inheritance under a will. Again the sole aim is to collect the ‘advance fees’ already described above. A new strategy that has also been used to defraud the ‘victims’ is to offer to use chemicals to transform ordinary paper into United States dollar bills, which would be subsequently shared by the parties.Should you have occasion to feel something’s not quite right about a deal being offered, drop by the websites of both the Better Business Bureau and the National Fraud Information Center.
Salon.com editor Douglas Cruickshank also penned “I crave your distinguished indulgence (and all your cash),” a wonderful textual analysis of Nigerian fraud messages.
The Secret Service asks if you have been victimized by the Nigerian scam to forward appropriate written documentation to the United States Secret Service, Financial Crimes Division, 950 H Street, NW, Washington, D.C. 20223, or telephone (202) 406-5850, or contact by e-mail. Per their automated response system, they no longer want faxed copies of the various Nigerian scams.
However, it needs be pointed out there is only so much the Secret Service or any law enforcement agency can do if the perpetrators of the scam are not within their jurisdiction. Your local police department cannot send officers to Nigeria to arrest the fellows who are attempting to con you out of your life savings any more than Nigerian police could show up on your doorstep to put the handcuffs on you.
Folks angered by Nigerian scam come-ons often want to see justice done and done quickly, yet often there is little that can be done because those behind the thefts are in other parts of the world. Ergo, the best protection is an awareness that the laws of your country are not always enforceable in other lands, so it behooves to you always proceed with caution when dealing with people or business entities in foreign locales.

The U.S. State Department states that the Nigerian E-Mail Scam first surfaced in the mid-1980′s, around the time when world oil prices collapsed. Oil exports represent 20% of Nigeria’s Gross Domestic Product (GDP), 95% of its foreign exchange earnings, and about 65% of its budgetary revenues. This sudden loss of income and jobs throughout the region caused many university-educated, English-speaking professionals to turn to a life of crime. One ingenius Con Artist endeavored to put this Con on paper and send letters out to certain businesses and professionals in the hopes of getting a response. Obviously, it worked. The U.K. postal service soon became overwhelmed with letters carrying this scam to its residents and businesses, which it attempted to legally withdraw before reaching a prospective Mark (78,000 having been withdrawn in the London area alone). The scammers later began sending their letters in larger envelopes and even boxes to circumvent the watchful eyes of postal inspectors. With the advent of the facsimile machine, the scam immediately began to flood fax machines worldwide. Enter the Internet. With the millions of people having and using e-mail on a daily basis, the scam naturally transformed itself to e-mail which now makes up its bulk. Lists of e-mail addresses are bought, sold and traded everyday. Your banking institution, your magazine subscription, your Internet provider or hosting company, and any other company that has politely asked you for an e-mail address – all may be selling or renting your e-mail address unless you have specifically asked them not to. Still many require this request to be in writing (opt out), mostly because they know few will take the actual time to write and mail such a request. Even though many states have adopted strict anti-spam laws this, however, doesn’t seem to deter the spammers and scammers. It certainly wouldn’t deter someone in Nigeria who is immune from our laws. Sending this Con via e-mail is far cheaper than sending via the post office or by fax, which makes it ideal for a Grifter.

While the use of Nigeria is relatively new (circa 1980) as compared to the overall life of the Advance Fee Fraud scam, it is said to be a replacement of that certain lucrative turn of the century Con known as the “Spanish Prisoner.” The Spanish Prisoner Con (circa 1920) is based, in part, upon actual historical events. In medieval times (circa 1100-1400), royal family members and important members of society were often captured in battle or kidnapped outright. While not kept in dark, damp, dungeons as we all have been lead to believe, prisioners were actually treated like kings and often had the run of the castle. Honor and pride keeping them prisioner instead. The prisioner would remain in captivity until such time as their kingdom or family paid the demanded ransom. Sometimes this tooks several years to accomplish. In the Spanish Prisoner Con, theMark, usually a wealthy businessmen, would be contacted by a Grifter who would explain that he has been contacted by, or informed of, a wealthy Spanish family who has had their dear relative imprisioned in a foreign land. Not wanting to create an international incident, this wealthy Spanish family has a standing offer of millions of dollars to anyone who can help secure the release of their dear relative. The Grifter explains that he has negotiated a bribe with a certain high ranking prison official who, upon receiving payment, would allow the imprisoned relative to freely escape. Unfortunately, the Grifter has no money to pay the bribe and cannot cash in on the reward himself without financial assistance from a partner. That’s right! The Mark has been selected, among millions of people, to be the Grifter’s new partner. The Mark is promised a share of the reward if he comes up with the bribe money. The Mark pays the bribe money to the Grifter but the Grifter is unable to secure the freedom of the prisoner due to an over-greedy prision official, who now wants more money. The Grifter will continue to milk the Mark for money with excuses of greed, failed prison rescue attempts, fees for travel documents for the prisoner, etc. Once the Mark is taken in by the scam, the next payment always seems one step away from the millions of dollars that await which is what keeps the Mark from walking away. Change Spain to Nigeria, and the prisioner for over-paid millions on a government contract, and you have the Nigeria E-Mail Scam.

Nigeria spent most of the 1980′s and 1990′s under military rule with corruption and crime running rampant, everywhere from the capital to the inner city streets. With 60% of its citizens living below the poverty level and its 28% unemployment rate, it’s little wonder why Nigerians resorted to crime – and resort they did. Conservative estimates are that an astounding 30-40% of all heroine that is trafficked throughout the world is either moved directly, or its movement is stricly controlled, by Nigerian crime syndicates. With democracy in Nigeria restored and a formal Constitution adopted in 1999, the crime syndicates have been forced to return to the darkend cracks of the country. Almost all of them participate in some sort of 419 or Nigeria E-Mail Scam, as there is no travel involved, no product to move and the rewards can be substantial.

While a majority of these scams seemingly come from exiled Nigerian government digitaries or Nigerian corporate board members who need your assistance in transferring millions of dollars, the Grifters have developed newer techniques to get your money. One new form of this scam includes the Grifter representing they are an foreign attorney/barrister and the Mark has become heir to someone with the same sir name and no other heirs can be found abroad and, thus, the Mark stands to inherit the entire estate (always in the millions of dollars). This inheiretence scam specifically refers the Mark to by name in the e-mail or letter, which makes it sound more legitimate. Other forms of this scam include bogus winning lottery tickets, real estate ventures, stock futures, precious metals or jewels, and crude oil investments. The list is endless.

Here’s how it works: Letters (or, nowadays, e-mail messages) postmarked from Nigeria (or Sierra Leone, or the Ivory Coast, or almost any other foreign nation) are sent to addresses taken from large mailing lists. The letters promise rich rewards for helping officials of that government (or bank, or quasi-government agency or sometimes just members of a particular family) out of an embarrassment or a legalproblem. Typically, the pitch includes mention of multi-million dollar sums, with the open promise that you will be permitted to keep a startling percentage of the funds you’re going to aid in squirreling away for these disadvantaged foreigners.If you’re not saying “scam” by now, you should be. Should you agree to participate in this international bail-out, something will go wrong. Paperwork will be delayed. Questions will be asked. Officials will need to be bribed. Money from you — an insignificant sum, really, in light of the windfall about to land in your lap — will be required to get things back on track. You pay, you wait for the transfer . . . and all you’ll get in return are more excuses about why the funds are being held up and assurances that everything can be straightened out if you’ll just send a bit more cash to help the process along. Once your bank account has been sucked dry or you start making threats, you’ll never hear from these Nigerians again. As for the money you’ve thrown at this, it’s gone forever.In a nutshell, the con works by blinding the victim with promises of an unimaginable fortune. Once the sucker is sufficiently glittery-eyed over the prospect of becoming fabulously rich, he is squeezed for however much money he has. This he parts with willingly, thinking “What’s $5,000 here or $10,000 there when I’m going to end up with $2 million when this is all done?” He fails to realize during the sting that he’s never going to get the promised fortune; all of this messing around is designed to part him from his money.In another form taken by the Nigerian scam, a church or religious organization is contacted by a wealthy foreigner who says he desires nothing more than to leave his considerable fortune to that particular group. Maybe he says he’s led a life of sin and is now trying to make good, or maybe he claims that as a devout Christian he heard about their good works and wants to leave his money to help continue them, but whatever the backstory, it’s just a tale. Once again, there will be delays, each of them necessitating the “beneficiary” to spend a few thousand here and a few thousand there in an effort to collect money that never materializes.In a 2002 version of the con, the victim is informed he has just won an important prize in a foreign lottery he doesn’t remember entering. Only when he tries to collect the money is he approached for payment of facilitation fees to get his winnings to him. It’s the same con, with just a few elements unimportant to the execution of the thievery changed about.The scam is known as the Nigerian scam, but many countries are routinely named as the homelands the appeals originate from. Likewise, the backstory, the tale that supposedly explains how these people came into possession of this incredible sum and why they now need help getting it out of wherever, changes from one e-mail to the next. There are hundreds of versions in existence, each naming different people, describing different situations, and coming from a myriad of far-flung countries. Forget about matching one backstory to another or being suspicious of e-mails from Nigerians but not applying the same caution to approaches from folks from other places — grasp instead the general principle of the scam: Someone from someplace far away wants to give you (or your church) millions of dollars but needs your help in moving the money from there to here. It doesn’t matter if the letter says it came from Sri Lanka and the “funds” that need moving are gold bricks or uncut diamonds — it’s the Nigerian scam. Don’t let the naming blind you to that.Once the scam is explained, it seems so obvious a con that you’d wonder who would fall for it. Yet fall for it people do because they’re mesmerized by the wealth that will soon be theirs. They also fail to realize there’s a hook hanging just out of sight; at first all they see is that someone wants to give them something, thus they’re ill-prepared to mentally shift gears when that person turns the tables. Because the premise of “I’m going to get millions of dollars” is wholeheartedly swallowed early on, it’s not at a later point questioned when things begin to go wrong with the transaction and the dupes who have been targeted are asked to dig up some funds to help move things along.The Nigerian scam is hugely successful. According to a 1997 newspaper article:”We have confirmed losses just in the United States of over $100 million in the last 15 months,” said Special Agent James Caldwell, of the Secret Service financial crimes division. “And that’s just the ones we know of. We figure a lot of people don’t report them.”But this is a new scam, right? People are falling for it because they’ve yet to catch on?Wrong. Very, very wrong.The Nigerian Scam has been emptying the pockets of victims for decades — first through letters, then with faxes, and now via e-mail. In its earliest incarnation — which dates to the 1920s — it was known as ‘The Spanish Prisoner’ con. In that long-ago version, businessmen were contacted by someone trying to smuggle the scion of a wealthy family out of a prison in Spain. But of course the wealthy family would shower with riches those who helped secure the release of the boy. Those who were suckered into this paid for one failed rescue attempt after another, with the fictitious prisoner continuing to languish in his non-existent dungeon, always just one more bribe, one more scheme, one more try, away from being released.These days it’s trapped funds not errant sons of well-to-do families that are the objects of these global wild goose chases, but the con is the same. The undisputed headquarters of the scam is Nigeria, with some of the cons progressing so far as to have the victims fly to that country to meet with the “officials” they are purportedly assisting. Things got so out of hand, in fact, that in 1991 the Nigerian government felt compelled to issue a statement disavowing its participation in this scheme:The Central Bank of Nigeria (CBN) said on Thursday that swindlers using Nigerian names had extorted millions of dollars from people in the United States, Asia and Europe under the guise of transferring cash abroad.The elaborate fraud involves fake official approval to transfer up to 15 million dollars in excess claims on bogus Nigerian contracts as well as pledges to cut the claims amount for help in the use of offshore bank accounts.A CBN statement warned foreign companies and businessmen not to fall for the confidence trick, saying that the bank had been surprised and embarrassed by enquiries relating to the fraud. “The bank has no knowledge or record whatsoever of the purported claims or transfers, or even the related alleged contracts,” it said.Ah, but is it the same scheme? You tell me:British companies are being warned against a get-rich-quick scam involving thousands of letters sent from firms based in Nigeria.The letters ask UK firms to assist in the transfer of funds from Nigeria to Britain — by sending signed headed paper, invoices and bank account details — in return for a cut of the sum transferred. Instead of transferring sums, the UK firm’s money is removed by the fraudsters. Scotland Yard says that some companies have lost thousands of pounds in this way. About 25,000 letters are circulating in the UK. But the scale of the losses – which could run to many millions according to the Confederation of British Industry – is masked because some victims are ashamed to admit that they took part in such schemes in the first place.The real Central Bank of Nigeria tries to warn people about this scam, but it’s a case of the guy with the broom following the elephant — the elephant always gets there first. They even placed a half-page ad explaining the scam and warning off those who might be tempted to fall for it in major U.S. newspapers, such as the 27 October 1998 issue of the Los Angeles Times. That ad mentioned some new variations on the old scheme:A recent variation of the scam directed primarily at charitable organisations and religious bodies overseas involves bogus inheritance under a will. Again the sole aim is to collect the ‘advance fees’ already described above. A new strategy that has also been used to defraud the ‘victims’ is to offer to use chemicals to transform ordinary paper into United States dollar bills, which would be subsequently shared by the parties.Should you have occasion to feel something’s not quite right about a deal being offered, drop by the websites of both the Better Business Bureau and the National Fraud Information Center.Salon.com editor Douglas Cruickshank also penned “I crave your distinguished indulgence (and all your cash),” a wonderful textual analysis of Nigerian fraud messages.The Secret Service asks if you have been victimized by the Nigerian scam to forward appropriate written documentation to the United States Secret Service, Financial Crimes Division, 950 H Street, NW, Washington, D.C. 20223, or telephone (202) 406-5850, or contact by e-mail. Per their automated response system, they no longer want faxed copies of the various Nigerian scams.However, it needs be pointed out there is only so much the Secret Service or any law enforcement agency can do if the perpetrators of the scam are not within their jurisdiction. Your local police department cannot send officers to Nigeria to arrest the fellows who are attempting to con you out of your life savings any more than Nigerian police could show up on your doorstep to put the handcuffs on you.Folks angered by Nigerian scam come-ons often want to see justice done and done quickly, yet often there is little that can be done because those behind the thefts are in other parts of the world. Ergo, the best protection is an awareness that the laws of your country are not always enforceable in other lands, so it behooves to you always proceed with caution when dealing with people or business entities in foreign locales.