Nearly a third of Americans say they’re more likely to consider a home-based business offer because of the recession-increasing concerns among consumer advocates about possible fraud and scams.  According to a just released survey sponsored by the National Consumers League (NCL), many consumers are at risk of losing money to fraudulent pyramid schemes disguised as legitimate business opportunities.

Pyramid and Ponzi schemes made headlines recently because of Bernard Madoff’s allegedly fraudulent investment scams.  But the scheme demonstrated that even sophisticated consumers are vulnerable to business opportunity scams.

In a phone survey of Americans ages 18 or older earlier this month, the NCL found many respondents could potentially fall for pyramid schemes disguised as legitimate work-from-home opportunities. Consumers with annual income of less than $35,000 are more likely to mistake pyramid schemes and the least likely to correctly identify pyramid schemes as scams.

Pyramid schemes have existed for more than a century in a bewildering array of guises, the NCL reports. And while specifics differ, all the schemes tend to share common elements, such as a focus on recruitment of new members, promises of unrealistic or guaranteed returns and, most importantly, the inevitable threat of collapse. More recently, pyramid scheme operators have cloaked their scams as multi-level marketing (MLM) opportunities through the sale of dubious products or services with little or no established market, the NCL noted.

Legitimate MLM businesses, also known as networking marketing, operate legally and offer goods and services through independent distributors. In legal MLMs, the focus of the business is on sales of products, not the recruitment of new members into the business.

The survey found an alarming number of respondents have been invited to join some type of fraudulent pyramid scheme including chain letters (33 percent), general pyramid schemes (21 percent), gifting clubs (12 percent), and Ponzi schemes (7 percent).

“In a time like this, when many are struggling to make ends meet, some consumers may lower their guard and find themselves considering offers that - under other circumstances - they would rightfully identify as sketchy and high-risk,” said Sally Greenberg, NCL Executive Director. She said consumers should “keep a level head, even when times are tough.”

NCL maintains a Fraud Center, which tracks consumers’ reports of suspected and confirmed telemarketing and Internet fraud and forwards reports to law enforcement in the United States and Canada. In response to concerns about pyramid scheme, it just launched a new page at www.fraud.org/pyramids offering tools to distinguish legitimate business opportunities from scams, including checklists for evaluating home-based-business offers, information about common types of pyramid schemes and warning signs.

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