Know Your Rights: Laws Protecting You From Local Business Scams

Scammed woman by business
  • Americans lose billions to scams annually, with common frauds involving false advertising and fraudulent charities.
  • Federal laws like the Federal Trade Commission Act and the Lanham Act protect against false advertising.
  • Bait-and-switch tactics, while not illegal in all states, can be reported to the state’s attorney general.
  • Pyramid schemes are illegal under federal and state laws, with violators reportable to the Federal Trade Commission.
  • In case of a scam, document transactions, contact the business, consider civil litigation, and report the incident.

When you’re out and about or searching the internet for a local business to patronize, you generally expect to receive quality goods or services in return for your hard-earned money. Unfortunately, some bad apples will try to scam you out of your money. Thankfully, laws are in place to help protect you from falling victim to these scammers. Here’s what you need to know about scams, laws protecting you from them, and what to do if you ever become a victim.

Scams in The U.S.

It’s estimated that Americans have lost about $8 billion in 2022 alone to fraud in the U.S., with many of these scams coming from local businesses. The most common scams are fake products or services, misleading advertising, and fraudulent charities.

Federal Laws Protecting You From Scams

There are various laws that can protect you from scams. Here are some of them:

Man advertising on television

1. False Advertising

One of the most common local business scams is false advertising. This can take many forms, from misleading product or service descriptions to inaccurate pricing information. False advertising is so prevalent that federal laws, such as the Federal Trade Commission Act and the Lanham Act, specifically combat it.

Under these laws, businesses cannot make false or misleading claims about their products or services. They also cannot use logos or slogans likely to deceive consumers. Additionally, businesses must provide accurate pricing information, including any taxes or fees that may apply to the transaction.

2. Bait and Switch

Another local business scam you should be aware of is the bait-and-switch tactic. This is when a business lures you in with a great deal on a product or service, only to try and sell you something else once you’re in the door. While this is not illegal, it is unethical and can lead to you paying more than you intended.

However, some states have laws that make this practice illegal under certain circumstances. For example, in California, businesses are not allowed to advertise a product at one price but charge a higher price when the customer tries to purchase it. You should report this to your state’s attorney general if this happens to you.

3. Pyramid Schemes

Pyramid schemes are another local business scam that you might encounter. These are schemes where people are recruited to sell a product or service but are encouraged to recruit others to sell. The people at the top of the pyramid make money off the people they recruit, while those at the bottom often lose money.

Pyramid schemes are illegal in the United States under federal and state laws, such as the Federal Trade Commission Act and state deceptive trade practice laws. If you encounter a pyramid scheme, report it to the Federal Trade Commission.

Bill problems because of scam

4. Deceptive Billing Practices

Finally, you should be aware of deceptive billing practices. This is when a business charges you for goods or services you did not agree to purchase or tries to pay extra charges without your knowledge. This can be especially common in industries like healthcare and telecommunications.

Thankfully, federal laws are in place to prevent businesses from engaging in these practices. The Truth in Lending Act requires businesses to be clear and transparent about the terms of any credit or loan agreements, while the Telephone Consumer Protection Act prevents businesses from making unsolicited telemarketing calls.

What to do If You Get Into a Scam

It can be quite inevitable to experience a scam if you’re investing in a local business. If you do get scammed, here are some steps to take:


The first step is to document the transaction as much as possible, including any emails or texts you exchanged with the business. This will be important evidence if you decide to take legal action against them.

Contact the Business

Next, contact the business and attempt to resolve the issue amicably. You can do this by filing a formal complaint with their customer service department. If they are unresponsive or unwilling to help, consider seeking legal advice.

Civil Litigation

If the business does not respond, it’s time to ask for help from legal professionals. An experienced civil litigation attorney can handle the legal process from start to finish. They can help you file a lawsuit against the business and seek compensation for any losses you incurred due to their scam.

Report it

Finally, report the scam to your state’s attorney general or the Federal Trade Commission. This can help prevent other people from being scammed by this same business.

It’s important to know the different types of scams that local businesses may use and the laws protecting you from them. If you ever become a scam victim, document everything and contact the business if possible. You may also want to consider seeking legal advice or filing a lawsuit against the business to seek compensation for any losses. By taking these steps, you can help protect yourself from getting scammed by local businesses in the future.

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