U.S. News

Too Good to Be True: Self-Employment Scams


If you’ve scoured the classified ads, chances are you’ve seen at least one job listing offering big money to the self-employed. The ads say you can be your own boss and earn a small fortune, all while clad in a bathrobe and flip-flops.

Unemployed man searching classifieds
Pawel Gaul | Getty Images

The only requirement is a fee for materials and registration. Once that formality’s out of the way, the gravy train will visit your home on a regular and unremitting basis.

Unfortunately, these advertisements often target people without traditional jobs, and if they take the bait they become trapped in one of the many self-employment scams out there.

One of the most common is stuffing envelopes. An advertisement placed by a fraudulent company will claim to seek people to mail letters from their homes rather than using an expensive, on-site staff. The person answering the ad would allegedly insert mailings into pre-addressed, pre-stamped envelopes, mail them and then watch the money roll in.

The applicant pays a fee for these materials, but they never arrive. Rather, he or she receives literature explaining how to place an advertisement similar to the original one. At this point the applicant either wises up and walks away, or runs the ad as instructed and becomes a scammer in the process.

The U.S. Postal Inspection Service considers envelope stuffing to be an illegitimate enterprise in almost all cases. "In practically all businesses, envelope stuffing has become a highly mechanized operation using sophisticated mass mailing techniques and equipment which eliminates any profit potential for an individual doing this type of work at home," according to the service. "The Inspection Service knows of no work-at-home promotion that ever produces income as alleged."

The Better Business Bureau has noted several other self-employment solicitations that are frequently nothing more than elaborate ruses. Among them is assembly work, which requires the applicant to purchase materials from a company offering to buy products built to their specifications. The company then rejects the finished products, usually claiming the workmanship fails to meet their high standards.

A similar scam involves medical billing, in which applicants pay large fees up front to receive computer software and training to process insurance claims. Their start date is often postponed indefinitely and permanently.

Not every advertisement directed at those seeking self-employment is a ruse. Tom Scarda is a consultant at FranChoice, a business that helps clients start their own businesses by matching them with franchise opportunities. He has sound advice for people seeking legitimate self-employment.

“Always visit, or ‘threaten’ to visit, the company's headquarters,” he advises. “Tell them that you only do business deals face to face.” This not only calls a potential scammer’s bluff, but allows legitimate businesses to show the franchise disclosure document that they’re required by federal law to register with the state Attorney General’s office. “The law directs that it be given to you upon the initial conversation with the company,” he says.

Scarda also recommends requesting the contact information of people who have joined their organization, and visiting them independently. Lastly, he offers a piece of advice that may be overused, but is rarely wrong. “If it seems too good to be true,” he says, “it probably is.”