These scams are waiting to swallow your retrenchment package
The Financial Services Conduct Authority, as well as the National Consumer Commission, has been warning consumers against various scams such as pyramid schemes.
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Scams designed to lure consumers with promises of high returns and low risk did not take a break during lockdown. Now these scammers are waiting for the next opportunity to defraud unwary consumers of their retrenchment packages.
Thousands of people are being retrenched in the aftermath of the lockdown. Many of them will (thankfully) be paid retrenchment packages and that is what the scammers are waiting for: to rob you of your hard-earned money. These scams are most often circulated on social media.
According to article 43 of the CPA, a “participant” is someone who is admitted to a scheme for “consideration”. However, it is illegal for consumers to directly or indirectly promote, knowingly join, enter or participate in a multiplication scheme, pyramid scheme, chain letter scheme or any other scheme or to encourage other people to join.
In a multiplication scheme, someone offers, promises or guarantees to pay participants an effective annual interest rate of at least 20% above the repo rate determined by the South African Reserve Bank.
An arrangement, agreement, practice or scheme is a pyramid scheme if participants receive compensation primarily derived from recruiting other people as participants, rather than selling goods or services.
A chain letter scheme has various levels of participation, with existing participants required to canvass and recruit new participants or newly recruited participants required to pay an amount which is distributed to other participants. New participants start at the lowest level and as they recruit new members who pay to join, move up to the higher levels of the scheme.
None of these schemes is viable, because there are simply not enough people who join to keep it ticking over. Consumers should also remember that all members are investigated when the authorities start looking into a scheme and you will have to pay back the money you “earned” when the scheme was still going.
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