Directory Scams are Costing Small Business
Millions of Dollars

by Carl Hampton

Published on this site: October 7th, 2006 - See more articles from this month

Are you tired of getting charged or invoiced for a directory listing you never placed? What about those purchase orders for supplies you never even ordered. Well guess what? You are not alone.

The Federal Trade Commission (FTC), the nation's consumer protection agency, says that businesses,churches, fraternal and charitable organizations are losing millions of dollars a year to bogus firms that mislead them into paying for unordered and unwanted directory listings.

According to the FTC, con artists trick an organization's employees into providing a name and address so a deceptive seller can bill the organization for an unordered and often useless business directory listing. These scammers often pretend to verify or renew a company's "existing" directory listing. Employees often provide the information, because the scammers claim they've done so in the past. The scammer then send as many urgent invoices as it takes to get paid, sometimes including a useless "directory," sometimes not. They create confusion and count on an organization paying to avoid their hounding.

If and when this happens to you refuse to pay, the scam sellers may try to use high-pressure tactics, like threatening you with legal action. They will offer you a phony discount and claim that it's a deal. If you received a directory they may allow you to return it (if you pay the shipping costs) but insist that you pay for the "listing". These directories are usually worthless and are rarely distributed as promised. In any case if you pay for the "listing," you will then receive additional invoices from the same scam artists or from others who have bought your organization's contact information.

Do some research if you are considering a listing in a legitimate business directory. Call the Better Business Bureau in your community or the publisher. Ask the company for a previous edition of the directory (or the websited for the online directory) and for documentation about distribution. It is okay to ask advertisers in previous editions about their experiences with the directory. Finally, close the gaps in your purchasing procedures and alert your staff to these scams.

Train your staff in different ways to respond to telemarketers. Remind your employees that they cannot make the decisions to order supplies. They should say something along these lines, "I'm not authorized to place orders. If you're interested in selling us something, you must speak to so-and-so and obtain a purchase order."

There should be two teams established:

1. One that includes the employees who buy and receive merchandise;
   
   
2. The second team pays the bills, and develops buying procedures.

You should be skeptical of unsolicited calls. Let your staff know to say no to sellers who use high-pressure tactics. If you are mildly interested, ask the suppliers to send a catalog.

If you receive merchandise verify that the merchandise matches the shipper's bill of lading and your purchase order. Pay special attention to brands and quantity, and refuse any merchandise that doesn't match up. If everything is in order, send a copy of the bill to the accounts payable department. Don't pay any supplier unless the invoice has the correct purchase order number, and the information on the invoice matches the purchase order.

The FTC suggests some steps to cease paying for services you didn't ordered. When ordering services, make sure that purchase orders are electronic or in written form, or both. The suppliers name should be on the purchase order and there should be a P.O. number on the invoice. You can request for the buyer to send a copy of every purchase order to the accounts payable department.

Finally, you should know that you do have rights. If you receive supplies or services you didn't order, you should not have to pay but don't return unordered merchandise either. Treat any unordered merchandise as a gift because it is illegal for companies to ask you to send back the merchandise even if they offer to pay for shipping. It could be possible that the seller made a mistake, but that is usually not the case. It is also illegal for a seller to send you bills or notices for merchandise you didn't order.

When it comes to certain kinds of business-to-business merchandise sales there is protection. The FTC's Telemarketing Sales Rule regulates phone sales of non-durable office or cleaning supplies to businesses. Non-durable supplies are those that you routinely order, for instance, copier toner, or maintenance supplies. According to the FTC, telemarketers must tell you it's a sales call as well as who's doing the selling before they make their pitch. By law they must tell you the cost of each item and then a total of the order. They mustr also tell you if there are restrictions, and if a sale is final or non-refundable.

Carl Hampton: http://www.CarlHampton.com
http://www.fcdtcm.com