Why Pinoys fall prey to quick money schemes

By ROUCHELLE R. DINGLASAN, GMA News

Published August 11, 2014 4:44pm

Despite the measures to protect the public from pyramiding under the Consumer Code of the Philippines, many Filipinos fall prey to quick-money scams.

Apart from investment schemes, many also fall for network marketing strategies that task recruits to buy and sell overpriced products.

Make no mistake about it, the pyramiding scam is very similar to direct selling and multi-level marketing (MLM) schemes, except that recruitment is the MLM's main driver as compared to straight buy-and-sell businesses in which commission is the primary compensation.

Although Filipinos are not the only ones lured by such easy-money schemes, Philippine Women’s University Sociology Professor Bro. Clifford Sorita, highlighted three factors why Filipinos are easily enticed by such schemes.

First, quick-money is very appealing to Filipinos because of the “Instant Mentality” holds promise – whether true or false is another matter – of getting rich in a short span of time. The professor explained economic conditions influence the Filipino's gullibility.

“Ang economic fundamentals ng mga Pinoy ay humanap ng extra na pag-ka-kakitaan kaya humahanap sila ng mga investment opportunities that could supplement their financial obligations,” Sorita told GMA News Online in a phone interview.

On top of that, the business models of these schemes are framed in such a simple manner that entices many people to join.

“Ang mga Pilipino kasi nahihirapanan maintindihan ‘yung mga legitimate business opportunities or investments na kumplikado, kaya doon sila sa simple lang,” he added.

Although the “bandwagon effect” – people doing something primarily because other people are doing it – is not so big in the Philippines, when one of their friends, acquaintances, or family members are the ones who invited them to join, they have the tendency to give in and join.

“Pero may side effect ito, because it would also mean greater hurt kapag ang nanloko is someone close to you,” he noted.

“Hindi naman greed ang main motivator para sumali ang mga Pilipino, more on need talaga [for additional money]. Ang mga manloloko, ‘yun ang greedy,” he added.

Last week, an alleged scam operating via Facebook duped people who invested some P100 million.

The company, Upwarm, is a local “network marketing” company selling such merchandise as soaps, food supplements and perfumes, according to its Facebook page.

The owners of the company have denied the allegations, saying that it was their distributors that facilitated the scam. They further explained that they have not used the social media network to proliferate their products.

Do your homework

There three ways to spot illegal marketing schemes in the Philippines, according to the Department of Trade and Industry and the Direct Selling Association of the Philippines (DSAP).

Your first assignment is to do research on the company. A simple search on the Internet can go a long way, but if you noticed that the traffic is clogged with praises for the company, think again: it may be phrased to bury the complaints.

Aside from online search, prospects may also ask for these documents from representatives of the company:

DTI registration or from the Securities and Exchange Commission

Business permit from the local government unit

Tax identification number from the Bureau of Internal Revenue

The absence of at least one of these documents should be a cause for a red flag.

The 8-point test

DSAP came up with this test to check if it the direct-selling or multi-level marketing company is legit:

a.) Is there a product?

b.) Are commissions paid based on product sales or and not from the entry fees paid upon registration of new recruits?

c.) Is the company selling a product and not a position?

d.) Is there no direct correlation between the number of recruits and compensation?

e.) If recruitment is to stop today, will the participants still make money?

f.) Is there a reasonable product return policy?

g.) Do products have fair market value?

h.) Is there a compelling reason to buy?

If the answer to all the questions is YES, then the company is legit. But if the answer is NO, then the probability is high that it is a pyramid scam.

The Consumer Code of the Philippines or Republic Act No. 7394 bans chain distribution or pyramid sales schemes in selling consumer products. The law defines pyramiding sales schemes as marketing style that derives income primarily from recruitment of other persons rather than sales of consumer products.

Check with authorities

Do your legwork!

Call or visit government agencies to check if the company have been reported as illegal or if the authorities have received complaints against the company. One may call on these hotlines to check:

DTI Consumer Protection Group – (02) 897-7384 or (02) 751-0384 loc 3288

National Bureau of Investigation Anti-Fraud and Action Division – (02) 525-4093 or (02) 523-8231 loc. 3456

Bangko Sentral ng Pilipinas Cash Department Investigation Staff (for investment scams) – (02) 523-9806 or (02) 524-7011 local 2388 – VS, GMA News

Tags: pyramidscam, pyramidingscam