The Australian Competition and Consumer Commission is urging caution after revelations that thousands of small business owners are being lured into a damaging telecommunications financing scheme.
Small telcos are allegedly selling telecommunications services to business owners under the false pretence of providing free electronic goods, ultimately leaving businesses broke.
As the telcos fold, small business owners are left without the phone services they purchased, while financing firms hound them regarding unpaid bills for goods they didn’t know they had purchased.
According to the ACCC, the telcos use a bundled-services-deal business model, and the “free” equipment is supplied to customers under rental agreements by finance companies not related to the telcos.
ACCC chairman Graeme Samuel told the ABC the alleged scam has potentially cost business owners tens of millions of dollars.
“What the small business doesn’t realise is that almost invariably they’re signing, as well as with the telecommunications company, a rental agreement with a finance company,” he says.
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He adds: “If it sounds too good to be true, then it usually is. Don’t be suckered into these types of deals, and read the contracts you’ve been given. After you’ve read your contracts, you may even want to go over them with a legal representative, just to make sure that what you’re getting isn’t totally wrong.”
Samuel warns that a lot of these businesses are being told to ignore finance deals written into contracts.
“Don’t believe that,” he says. “You can’t take people at their word. Common sense dictates you need to check these contracts out for yourself.”
The ACCC says there are simple tips start-ups can follow to protect their businesses from scams:
- If it looks too good to be true, it probably is. Use your common sense; the offer may be a scam.
- Always get independent advice if an offer involves significant money, time or commitment.
- Remember there are no get-rich-quick schemes; the only people who make money are the scammers.
- Do not agree to offers or deals straight away. Tell the seller you are not interested or that you want to get some independent advice before making a decision.
- You can contact your local office of fair trading, ASIC or the ACCC for assistance.
- Never send money or give credit card or online account details to anyone you don’t know and trust.
- Check your bank account and credit card statements when you receive them. If you see a transaction you don’t recognise, report it to your bank or credit union.