Trading Standards warning over 'pyramid' schemes

PUBLISHED: 14:40 04 December 2008 | UPDATED: 16:43 14 April 2010

DEVON Residents are being warned that a number of Chain gifting or Pyramid schemes have reached the county and are advising people not to take part as they risk losing substantial amounts of money.

DEVON Residents are being warned that a number of 'Chain gifting' or 'Pyramid' schemes have reached the county and are advising people not to take part as they risk losing substantial amounts of money.

The schemes work by inviting people to send money, in the latest example to hit Devon, around £1000 - £3000 to a person at the top of a list, with in excess of £15,000 being offered as an eventual reward or "win".

The reality is that people who invest are not only unlikely to see any return on their cash, but by inviting other people to sign up to the scheme, could be breaching the Consumer Protection from Unfair Trading Regulations 2008, which bans such practices.

Devon County Council Trading Standards Service have become aware that a growing number of people, particularly women, are currently being targeted. The recent complaints received by the Trading Standards Service from Devon residents could be the tip of of a very large iceburg.

The Leader of Devon County Council, Cllr Brian Greenslade, said "The way these schemes are promoted, by word of mouth and from person to person, means that small local communities can be badly affected when people lose their investment. Local promoters may find they are responsible for friends and family losing thousands of pounds just as the effects of the economic downturn are starting to be felt".

Stephen Gardiner, Special Investigations Manager for Devon Trading Standards warns "The potential to communicate rapidly be e-mail or other electronic means seems to have given these schemes fresh impetus. The latest variation specifically targets women. They invite people to send money to the person on the top of a mailing list. They are then added to the list, and must invite others to join, which, in theory, results in them being moved higher up the list, such schemes are always unsustainable, with only the original scam operators ever likely to hit it rich. We strongly advise people to resist joining these or similar schemes."

Some promoters suggest that by making charitable donations or gifts to schools the scheme becomes legal. Mr Gardiner emphasized "There is no such loophole; when the scheme relies on a reward being passed on from the introduction of other consumers into the scheme, rather than the sale of products, the scheme is clearly illegal".

Clive Kenyon, Centre Manager Consumer Direct South West feels the credit crunch may add to the problem "Unfortunately in the present financial climate there may be a temptation to join this type of scheme. The sad reality however is that only very few will ever see a return on their investment and to canvas for additional investors will potentially be illegal as well. We therefore applaud our colleagues in Devon Trading Standards in highlighting this problem and strongly endorse the advice not to join any scheme of this sort"

Consumer Direct South west has produced a guidance note on pyramid schemes, which can be found on their website www.consumerdirect.gov.uk. If you are concerned about a pyramid scheme in your area and you would like advice please call Consumer Direct on 08454 040506. You can report illegal trading activity to Devon Trading Standards Service, anonymously if you wish, via our confidential phone line 'Trading Standards Confidential' on 01392 381380.

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