Module 9: Consumer Protection
Avoid scams, predatory lenders, and financial traps
Why are financial traps legal?
Payday loans at 400% APR. MLM schemes. Credit repair scams. They're all legal. Understanding why helps you see the game clearly.
Common Financial Scams
The Golden Rule of Scams
If it sounds too good to be true, it is.
Scammers exploit desperation, greed, and lack of financial knowledge. They promise easy money, guaranteed returns, or solve all your problems quickly.
Reality: Building wealth is slow and boring. Get-rich-quick schemes are designed to make the scammer rich, not you.
The pitch: "Get $500 now, pay back next payday!"
The reality: 300-400% APR. If you can't pay back on time, you're trapped in a debt cycle.
Example: Borrow $500, owe $575 in 2 weeks. Can't pay? Borrow again. Now you owe $1,200 in a month.
Avoid: NEVER use payday loans. Borrow from family, sell stuff, or negotiate bills instead.
The pitch: "Be your own boss! Unlimited income potential!"
The reality: 99% of people lose money. You make money by recruiting, not selling products.
Red flags: Starter kits, recruitment bonuses, income claims
Examples: Herbalife, Amway, LuLaRoe, Mary Kay
The pitch: "Guaranteed 30% returns! No risk!"
The reality: Ponzi scheme. Early investors paid with new investor money until it collapses.
Red flags: Guaranteed returns, pressure to recruit, complex explanations, unregistered with SEC
Example: Bernie Madoff ($65 billion fraud)
The pitch: "We'll fix your credit score in 30 days!"
The reality: They charge $1,000+ to do what you can do for free (dispute errors). Can't remove accurate negative info.
Truth: Only time and good behavior fix credit. Check your free annual credit report yourself.
The pitch: "You owe back taxes. Pay now or face arrest."
The reality: IRS NEVER calls and demands immediate payment via gift cards or wire transfer.
Red flags: Threats of arrest, demands for gift cards, caller ID spoofing
Truth: IRS sends letters first. Hang up and call IRS directly.
The pitch: "Send 1 Bitcoin, get 2 back!" or "New coin guaranteed to 100x!"
The reality: Pump-and-dump schemes, fake exchanges, rug pulls
Red flags: Celebrity endorsements (usually fake), guaranteed returns, "limited time"
Safe approach: Only buy Bitcoin/Ethereum from regulated exchanges. If a coin promises guaranteed gains, it's a scam.
Scam Detector: Test Your Skills
Is This a Scam?
How to Protect Yourself
Free at all 3 bureaus (Experian, Equifax, TransUnion)
Why: Prevents identity thieves from opening accounts in your name
How: Create account at each bureau, freeze online in 5 minutes
Cost: Free. Unfreeze temporarily when you need to apply for credit.
Check your credit report at AnnualCreditReport.com (official, free)
How often: Once every 4 months (rotate between 3 bureaus)
Look for: Accounts you didn't open, inquiries you didn't make, incorrect balances
Dispute errors: File dispute with bureau online (free)
Unique password for EVERY financial account
Tools: Password manager (1Password, Bitwarden)
Enable 2FA: Two-factor authentication on banks, brokerages, crypto exchanges
Never: Reuse passwords. If one site is hacked, all your accounts are compromised.
Someone calls claiming to be from your bank?
Do this: Hang up. Call the number on the back of your card.
Email from "bank": Don't click links. Go directly to bank website.
Investment opportunity: Check SEC.gov to verify registration
🏛️ Protecting yourself means protecting what happens after you're gone
Wills, trusts, and beneficiaries explained in plain English
Your Rights as a Consumer
Fair Credit Reporting Act (FCRA)
You have the right to:
- Free credit report every 12 months from each bureau
- Dispute inaccurate information (bureau must investigate within 30 days)
- Know who accessed your credit report in past 2 years
- Sue for damages if credit bureau violates your rights
Fair Debt Collection Practices Act (FDCPA)
Debt collectors CANNOT:
- Call before 8am or after 9pm
- Harass, threaten, or use profanity
- Contact you at work if you tell them not to
- Contact your employer (except to verify employment)
- Threaten arrest (only court can do this for unpaid debts)
What to do: Request written validation of debt. Send cease-and-desist letter. Report violations to FTC.
Where to Report Fraud
FTC (Federal Trade Commission): ReportFraud.FTC.gov - File complaint for scams, identity theft
CFPB (Consumer Financial Protection Bureau): ConsumerFinance.gov/complaint - Banks, lenders, credit bureaus
SEC (Securities and Exchange Commission): SEC.gov/complaint - Investment fraud
IC3 (Internet Crime Complaint Center): IC3.gov - Online scams, phishing
Scenario: Identity Theft
You check your credit report and see 3 credit cards you didn't open
Total fraudulent charges: $15,000. Your identity has been stolen.
Check Your Understanding
👶 Next Level: Who gets your kids if something happens to you?
Not just for parents — understand how custody decisions work
Module 9 Complete! 🎉
You can now spot scams and protect yourself from financial predators.