Promotional Folder Advertising Scam

The FTC is warning small businesses about a new scam involving advertising on promotional folders. Get the details and learn how to protect your business from such scams in the future.

Local businesses are always looking for innovative ways to get their names out to potential customers. Unfortunately, that can make them easy prey for scams.

Among the latest reported by the Federal Trade Commission (FTC) is a promotional folder scam. The FTC found that two Oregon-based businesses were making misleading claims to get small businesses to buy advertising space in promotional folders. According to the FTC claims, some telemarketers for the scam told the businesses they had agreements with local real estate offices to use the folders to distribute documents related to the purchase of a home. Part of the sales pitch was that folders featuring the business’s ads would be the only folders those offices would use for that purpose. In other instances, telemarketers said local schools would use those folders – and only those folders – to send papers and homework home to parents. In either case, they represented that the folders were going to print soon and that by buying advertising space, small businesses could promote their services to hundreds, and perhaps thousands, of prospective customers for one year.

According to the FTC, the scam bilked small businesses of millions of dollars.

If businesses were concerned that folders might include ads for competitors – for example, another home inspection service or dentist in the area – the defendants’ telemarketers were ready with a rejoinder. Salespeople were instructed to ask, “Would your decision be based on whether or not you are exclusive?” If the business said yes, the scripted response was “Great, let’s get you signed up, that’s definitely something I can do for you.” The FTC says operators also created a sense of urgency by telling businesses there were only a few spaces left in the folder and that a particular folder was about to be printed in time for the next school year or once the last advertisement was sold. A quick turnaround was important to many businesses eager to get their ads out there ASAP.

The FTC says the defendants used a “reservation form” to impose new material conditions and disclaim their own salespeople’s oral representations, but it boiled down to this. Only after giving the defendants their credit card numbers did small businesses learn that printing might not happen for months, ad exclusivity wasn’t guaranteed, and they couldn’t cancel or get a refund. The lawsuit alleges that in numerous instances, the promised ads never appeared or were printed only after businesses complained to the BBB, consumer protection agencies, or their credit card issuers. What’s more, the company solicited under different names over the years and later incorporated a new company in a different state under another different name.

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Be wary of solicitations

Not all advertising pitches are fraudulent, of course. But whether it’s you or an office manager that handles inquires about advertising and other business purchases, you should always exercise caution in responding to cold calls. Before agreeing to any purchase or handing over a credit card, keep these tips in mind:

Investigate the caller. Are they known in your community? Are other businesses in your community using their services and have they had good results? If you search the Internet are there references to scams related to what they are promoting?
Don’t be rushed into making a decision on the spot, the FTC warns. Dishonest companies want you to act quickly before you have time to think or ask a colleague or partner what they think.
Get details in writing. If the salesperson promises you something that’s important to you, ask for specific details in writing.
Read the contract or other paperwork carefully before giving out any payment information. Be sure the paperwork matches what you were told on the phone or by a salesperson.

Whether the offer involves office supplies, ad space, or anything else your business buys, educate your staff to exercise caution and investigate thoroughly before responding to cold calls. The FTC has an excellent publication online called Scams and Your Small Business that will help you understand the tricks scammers use. You and key employees should take the time to read it.