Your Money: Gifting clubs are pyramid schemes

  • Follow Your Business

Better Business Bureaus are detecting a rise in gifting clubs, groups that manage to convince newcomers that they will receive thousands of dollars if they make a “gift” to participate in a private, invitation-only network.

The clubs go by various names. In prior years, groups were organized under the names of The Airplane, Friends Helping Friends, The Pit Stop and the Original Dinner Club.

Today’s groups methods are similar. The groups target those with an affinity – such as women’s clubs, community groups, church congregations, social clubs and special interest groups. Participants are invited to attend private meetings. While invitees initially may not be asked to pay any money up-front, eventually participants are asked to contribute $500-$5,000.

The philosophy of charitable giving is often used to draw people in. Organizers may cloak their schemes in religious terms, using the love of God as a sales pitch or employing feel-good words like renewal celebrations. Some clubs are touted as fund-raisers for a good cause or as an empowerment program to help people help themselves.

However, gifting clubs are nothing more than pyramid schemes that separate people from their money.

Participants put their money into a pool and must find new contributors to keep the pool growing. Recruits add cash and go out to find more folks. There are typically “levels” of participation that you can rise to as you and your recruits bring in more players. Players who get in early, walk away “winners.”

However, experience shows that such pyramids always collapse and latecomers lose their entire investment.

The club organizers advise recruits that the operation is legal; it is not. Almost every state has laws prohibiting pyramid schemes and/or assessing penalties on those who participate.

If you are approached to join such a club, the BBB advises you to ask yourself three questions:

• Do I have to make an “investment” or give money to get the right to recruit others into the program?

• When I recruit another person into the program, will I receive what the law calls “consideration” (that usually means money) as a result?

• Will the person I recruit have to make an “investment” or give money to get the right to recruit and receive “consideration” for getting other people to join?

If the answers are “yes,” steer clear of the scheme.

Never buckle under to high-press sales pitches, even when they come from the mouth of a trusted friend, co-worker, neighbor or church member.

Reach Kelvin Collins, the president/CEO of the Better Business Bureau of Central Georgia and the CSRA Inc., at (800) 763-4222 or www.bbb.org.


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