/ Money

When is a scam not a scam?

Cake made to look like a field

None of us like poor value products, but that doesn’t mean you’ve been scammed. The banks might offer you rubbish interest rates on your savings, but this isn’t illegal. Scams are a whole ‘nother kettle of fish.

We’ve received dozens of emails and letters recently in relation to our card surcharges campaign and our research for this month’s Which? report on land investments.

Most of these messages contained a selection of the words ‘scam’, ‘con’ and ‘rip-off’, often used interchangeably. But they’re not the same thing.

Take as an example a land banking company that promises you vast returns on a piece of land when it gets planning permission. If the land is in a protected greenbelt, chances are the investment is a scam, but you’ll never be able to get planning permission on this land.

The same goes for companies that cold call you out of the blue to offer discounted shares that later prove to be worthless, unsellable or non-existent. The Financial Services Authority (FSA) and police can investigate and close down these so-called boiler rooms.

When it’s not a scam

In other cases, the position is less clear-cut. If a firm offers to sell you land for £10,000 but makes no claims about its true value, you may feel conned when you find it’s worth £100. But the trade isn’t necessarily illegal.

Similarly, if your bank has been paying you 0.1% on your savings for 20 years, costing you thousands of pounds in lost interest compared with the best-paying accounts, is that a scam?

Complain to the bank and you’ll be told that you should have monitored your accounts more closely. To some degree, your bank is right, but we think it’s a shoddy way to treat customers, and too many banks make it difficult to know what rate you’re earning. Still, it’s not a scam.

Vote with your feet

When a bank sells us a poor-value product, it may be poor practice but it’s not illegal. The FSA and Financial Ombudsman Service (FOS) can protect us against firms that want to run off with our cash or misadvise us.

But for poor value, it’s up to us to research the market and reward poor value with desertion, or take independent financial advice from a company that can look across the whole market and recommend the best value products.

Providers won’t voluntarily decide to give us higher returns unless we threaten to take our money elsewhere. For true scams, there’s the police. For rip-offs, the Office of Fair Trading, FSA and organisations like Which? – each have a role to play in exposing poor practice and reforming the market. For simple poor value, we need to vote with our feet.

Sophie Gilbert says:
7 April 2011

I guess the words ‘scam’, ‘con’ and ‘rip-off’ are often used interchangeably because the end result feels exactly the same to the victims. We may be very well aware that such treatment or another was illegal or merely shoddy, but we feel angry and cheated exactly the same. Otherwise, OK, afterwards we should turn to the correct organisation to complain, and we will thanks to your good selves.

On another subject, if land is in a protected greenbelt, saying you’ll never, as in never, be able to get planning permission on this land sounds optimistic to me…

I’d agree with Sophie. If you feel you’ve been “turned over” be it legal or not it still feels like and I would call it a scam.
Ironically one of the worst for “turning us over” is the very Government we elected. After all they make the laws defining scam or legal but bad deal.
Don’t even get me started about the way banks treat their customers. If some of their antics arn’t scams what are?

Steve Fual says:
11 April 2011

A problem with land banking is that what is said and what us written down are different. The salesperson will say they expect the land to convert in less than 3 years. The contract will say no commitment . Plot based land banking is a business model which theoretically has positive returns for investors, but in practise has delivered no returns ever. A few people have got refunds the rest have lost most or all of their money.
Always require a sales person to put any significant statement in writing and get at least two independent references. Beware of paid referrers and sponsored articles.
Based on all available data Land Banking plots are an awful investment.

Dan James says:
21 April 2011

When is a scam not a scam—-Only when it is done by the bankers it then becomes a mis-judgement.