Sweepstakes Scams – Reloading Schemes

A sweepstake scam often begins with a letter sent in the mail stating something to the effect that the recipient could “be a winner already” or that they could have “made it into the final round.” Millions of Americans receive these sweepstakes in the mail each year, whether from the famous Publishers Clearing House or another contest.

These companies are hoping that the recipient will purchase whatever type of product they are offering, which may include, but is not limited to:

• Literature;
• Novelty items;
• Clothing; and
• Other items.

These companies, however, often do not try to sell the products directly. Instead, they try to sell the chance of winning large amounts of money.

By doing this, some of these types of companies have crossed the line between lawful sales practices and consumer fraud. The following are examples of the various illegal methods that companies use to get consumers to participate in the sweepstakes and, in the process, spend money on their products:

• Purchasing the product increases chances of winning: Some companies that offer sweepstakes have said or implied that the consumer has a better chance of winning the contest if they spend money purchasing the products;
• Fabricating warnings of claiming a prize: Companies state that a customer should respond quickly to the sweepstakes offer so that someone else does not claim that customer’s prize. The problem is that this gives a consumer the false impression they have already won the prize, which, of course, they have not;
• Created the impression of a select group: Some companies have made consumers believe they were one of a few customers eligible for the prize and that one of them would get it. In actuality, almost everyone is eligible, and the possibility that an individual will receive any prize is remote at best; and
• Endorsement by the government: Some companies have falsely claimed their contests were endorsed or sponsored by the state or federal government. Unless it is the state lottery, do not ever believe this claim.

What Are Reloading Schemes?

A reloading scheme is used to try and squeeze more money out of victims who have already fallen victim to other telemarketing and mailing schemes. Typically, it will come in the form of a promotion or upgrade for a product that the individual had previously purchased from the same company.

For example, if an individual purchased discount vitamins from a company, they may try a reload scheme in which they claim that since the buyer spent a certain amount of money, they are entitled to a special prize for a small fee.

In some cases, the telemarketer or mailed offer will state that the individual can recoup their expenses from their first purchase and any new expenses from the current fees they must pay to claim their price. These fees typically take the form of taxes or handling fees for the prize.

The prizes may include things that seem too good to be true, such as:

• Vehicles;
• Paid vacations; and
• Other large prizes.

What is the Catch?

The catch with these schemes is that the prize offer is typically too good to be true. As previously noted, this is another scheme to extract more money from a victim.

A telemarketer may persuade a victim to send in money to receive their prize. These fees are typically small when compared to the alleged prize value.

Once the con artist obtains the individual’s money, the company may disappear or may continue to attempt to scam the victim. Even in the rare instance where the scammer provides the prizes to the winners, the prizes turn out to have some defect or be of such poor quality that they are virtually worthless.

How Can I Avoid Sweepstakes Scams?

There are certain standard guidelines that an individual can follow in order to avoid being taken in by these types of sweepstakes scams. The first thing an individual should do is, as soon as they receive an offer in the mail or over the phone to enter some sweepstakes or pay money for some prize, make sure they know the following information:

• Who: Research the company making the offer. Just because they have a legitimate-sounding name does not mean they are necessarily on the up-and-up. Many scammers will use company names that are very similar to actual legitimate companies that offer sweepstakes, such as Publishers Clearing House;
• What: If the offer sounds too good to be true, it likely is. If a stranger over the phone or through the mail is offering a whole lot for very little or nothing in return, an individual should immediately be skeptical about the deal and either disregard it or do some investigating; and
• How: What is the procedure for getting the money or prize being offered? If an individual has to pay any money ahead of time, they should immediately be suspicious;
  • It is also important to remember never to give out any confidential financial information over the phone, such as credit card or bank account numbers.

There are also a couple of other rules that an individual should follow to avoid being scammed, including:

• Not paying money to increase the chances of winning. Buying products offered by a contest holder will never increase an individual’s chances of winning; and
• An individual may receive a telemarketer call saying they have won a large sum of money. They may even claim to represent a legitimate company, such as Publishers Clearing House. However, if the company claims they cannot provide the money until the individual pays them for the federal taxes on the money, hang up the phone;
  • It is important to remember that federal taxes are only paid to the IRS and only after an individual receives the taxed money.

How Can I Report a Scam?

If someone has lost money because they fell prey to one of these scams, they can contact local law enforcement authorities. Individuals can also file a complaint about the scam with the Federal Trade Commission (FTC).

The FTC is the agency that oversees deceptive advertising. It can bring an action against the defrauders. In addition, if an individual was contacted through the mail about a scam, they should file a complaint with the United States Postal Inspection Service, and they will investigate the potential mail fraud.

An individual’s state of residence may also have agencies that deal with consumer fraud. An individual can also file a complaint with the Better Business Bureau to help alert other potential victims.

What Action has been Taken Against These Companies?

In past years, lawsuits and class action lawsuits have been filed against:

• Publishers Clearing House;
• Reader’s Digest Association;
• United States Purchasing Exchange; and
• Time, Inc.

Some of these lawsuits have been settled with payouts to consumers of millions of dollars.

Should I Hire an Attorney if I have been Defrauded by a Reloading Scam?

You should consult a consumer lawyer if you believe you have been the victim of a sweepstakes scam. Your lawyer can advise you of your options and help you decide what action to take next, including the possibility of obtaining compensation through a lawsuit against the scammer who took your money.