WTF is with these Utility Cons?

Posted 2009.07.23 11.05 in Pointless Blather, Work by Stephanie

We’ve all encountered situations like this. Someone shows up at your door, at home or at work, with an official-looking clipboard, an official-looking photo-id badge, and a rehearsed spiel that they are here from an official-sounding company, on behalf of a legitimate company or utility, and they are going to save you some money.

As you know, long distance has been deregulated, and now you can save a lot of money by signing this contract so that your long distance is covered by this new low-cost business. Maybe you’ve heard that natural gas prices are going up and up, and they can save you hundreds of dollars over the next 5 years if you sign a contract to pay a fixed rate? Perhaps you’ve heard that the price of electricity is on the rise, and they can save you a lot of money if you’ll sign a contract to pay a fixed rate over the next few years? And the latest one: We can save you a lot of money over the next few years, because you know the United Nations is pushing to have every country start charging a carbon tax, and if you just sign this contract we can take care of that for you…

No, I’m not talking about the poor shlep who’s been walking around for 8 hours a day – he’s already been victimized, and sadly he probably even believes the bullshit that he’s telling you. I’ll explain momentarily.

You see, these scams – and they are scams – are designed to take advantage of people’s natural eagerness to “get a deal” and “stick it to the man”. Whether “the man” is Ma Bell, the Gas Company, the Electrical company, or lately, the Tax Man — they are large faceless corporations and as such, people naturally don’t feel any particular kinship to them. Further, everyone has at least heard of someone getting screwed by “the man”, or even experienced it themselves. So there is little sense of guilt when the opportunity to save a few dollars comes along. And lets not discount natural human greed – better to keep the money in your pocket than theirs, yes?

So, people are naturally inclined to think a little less about what exactly is happening, and focus more on how they’re going to save a bunch of money. Critical thinking is suppressed, and dollar signs dance around. It is even easier for the con-men to ply their trade during tough economic times – money is harder to come by, and people are more desperate, so they’re more gullible to the lure of saving some cash.

In reality, you will end up paying more. There is no question. It may not be obvious, it may not even happen initially. Maybe you save a penny a month, then after 5 years you discover that there’s a $750.00 cancellation fee that was buried in the fine print. Maybe the price of natural gas is dropping like a rock but you didn’t know that because hey, what are you, a stock broker? And the guy at the door has a photo id badge and lots of official paperwork and stuff, and even has forms that look like they came from the gas-company! If he says natural gas is going up this year, who are you to deny it?

Once you’ve signed that contract, you’re doomed. You’ve signed away your arrangement with whatever business / utility / etc you used to deal with, and handed it over to this unknown company. What’s their address? Phone number? How can you get ahold of them if you have questions? Wait for the next time their guy comes to your door? Uh-huh…

And what about the guy at the door? He’s persuasive, probably honest, and he probably truly believes the bullshit. Why? He’s already been conned.  Here is how it works:

“BS Incorporated” rents a very fancy looking boardroom and an office or two, on a short-term rental. 6 months tops, probably more like 3 months. They run want-ads in the paper, maybe post signs on telephone poles – “Earn up to $1000 / week!” et cetera. They provide all the training! You call, you apply, you are “accepted”, they tell you to report to their very impressive address at 9:00am on Monday morning. You show up, the place looks totally impressive, there’s the boss, a couple “top performers”, the receptionist, the training people. About 40 others like yourself are there. The course is 3 days long, 9:00 to 5:00, with an hour off for lunch. You’re impressed – they wouldn’t put all this effort into it if it was a scam. Just the rent, their time, the equipment… The training consists of an A/V presentation, discussions, they explain the phone/gas/electricity/etc market trends, blah blah blah.

The second day, you start learning how this new company you’re working for can help, how they’ve got some market angle that’s going to make you rich while saving people money. Dollar signs dance in your head, you’re sticking it to The Man, and going to be a hero for saving lots of people money. Though, maybe you notice that out of the original 40, only 35 or so have showed up for today’s training.

Day three it is really time to kick ass. You’re learning how to talk to people, what documentation to ask for, how to allay their concerns, how to represent yourself as professional and trustworthy. At the end of the day you’ll be issued your official photo ID and get your official portfolio and paperwork package. You probably don’t notice that there’s only maybe 29 or 30 here today. As the day winds down, you’re about ready. You’re pumped up, you’ve talked to people who say they are making a ton of money doing this, it’s awesome. You get your official ID badge. The portfolio and official paperwork package is here for you, but these things are expensive… just to cover their costs, they need to charge you for it.

Don’t worry though, you’ll earn that back the first day. See, there’s no hourly pay, no base salary. You’re paid cash for every signed contract you turn in. The harder you work, the more you can make! If you’re dedicated and committed, you’ll be cashing in like crazy!  (The pay is usually about $30.00 per contract.)

When you’re making that much money, what’s $40 or $50 for the official company folio and all those glossy colour charts? It’s not huge and come on, they’ve already invested 3 days in your training. Sure money’s tight but you’re totally pumped. This time next week you’ll be making big bucks. You give them the money, get your binder, and you’re on your way!

Yet… if 30 people stayed all 3 days and bought the binder, at $40 each they’ve just pulled in $1,200.00.  Don’t you think that will cover their costs for the “training”? They buy those binders in bulk you know, and the contents. It’s costing them maybe $10 per unit. So ok, that’s $900.00 profit. And they’re running these classes every week. That works out to about $3,900 per month. Enough to cover the rent on the office, the rent on the AV equipment, and pay themselves a bit too.

In other words, they make money by “training” hapless desperate unemployed people – training them to work a different scam on other hapless desperate people.

But, what about the accounting overhead for hiring all these people? Well there isn’t any. They don’t “hire” anyone. You aren’t an employee, you’re self employed, working for cash. They don’t deduct taxes, don’t cover your CPP, UIC, or health. They have no responsibilities towards you at all. And unless you already know something about being self employed, you won’t know enough to ask about these things, or enough to realize what a precarious position it puts you in. Did you know that if you’re self-employed, you do not qualify for unemployment benefits if you lose your ‘job’? There’s no maternity leave either. Most people have probably never thought about that, unless they are already self employed.

Turnover among these ’employees’ is about 90% to 95%. Within 2 weeks, virtually all 30 in your group has quit, but by then, 60 new people have been “hired” to replace you.

Eventually the scam starts to wind down, they close up the ‘training office’, terminate the rent and phone numbers, and vanish — to start up again with a new address, new company name, and a brand new scam. And all those people who signed contracts to ‘save money’? Those contracts aren’t with the front-company that hires the shmucks to walk the beat, the contracts are with a totally different company that goes on collecting the dollars for the duration of the contract.

Why is this not illegal? Ultimately nobody forces anyone to sign a contract, and nobody forces anyone to fork out $40 for a $10 folio. It might be highly immoral and questionable, but as long as they fulfill their side of the contract (charging you whatever money you agreed to pay to deliver utilities you were already receiving) then it’s not illegal. It all boils down to the fact that there are people out there who simply don’t give a shit about their fellow human beings – to them, if they can pull one over on you, then they win.

And for all of us – the poor ‘sales rep’ walking the street, and the ‘customer’ they are trying to ‘help’ –

If it sounds too good to be true, it probably is!

Before you sign any contract that a total stranger has brought unannounced to your door, really really read the fineprint. Ask if you can think it over for a day or two, and see what they say. How can you contact them if you have questions? Is it ok with them if you talk to your current utility provider to make sure this is all on the level?

Finally, in case you are wondering: How do I know all this? Once upon a time, I was unemployed, in debt, and desperate for work. I followed a want-ad that promised big money to hard working self-motivated individuals. I sat through three days of (very convincing) “training”. Fortunately for me, the ‘spell’ was broken when they asked me to buy an overpriced binder. I told them I had lots of very fancy leather folios already so I didn’t need to buy one. They got pushy and upset with me. I refused to cough up the money. They grudgingly “permitted” me to go out on the job using my own portfolio, but by then I already knew what was happening. By this point I knew, or strongly suspected, that the whole thing was a scam and had decided to stay on to observe what was really going on.

At least half of the group I was in had left before the end of the first day on the job. The ‘company’ doesn’t care, they have your money. If you manage to sign one or two ‘customers’ a week, you’re doing well, and earning $1.50 per hour (working 8 hours a day for a week to earn $60.00 if you sign two people) while the ‘company’ makes who knows how much over the course of the contract.

So I’ll say it one more time: If it sounds too good to be true, it probably is!

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