Consumer alert regarding gifting circles
The Financial and Consumer Services Commission is warning consumers about gifting circles that are operating in the province and specifically targeting women.
The commission says gifting circles, even those that are marketed as charitable ventures, are pyramid schemes and participating in such a scheme is illegal, regardless of whether or not a person makes money.
Gifting circles are made up of 15 people divided into four levels: one at the top, two on the second level, four on the third and eight on the bottom.
The commission says members in the top three levels do not have to pay to join, with funding coming from members at the bottom level who must pay a membership fee or "give a gift" to join.
Once the bottom level has been filled, the woman at the top is "celebrated", collects funds paid by the bottom level and, in exchange, gives them each a small gift, typically significantly different in value from the payout she received.
After the top-level member is paid out, the group then splits in two and the members at the second level move up with new recruits needed for the new top members to get their payout.
The commission says the cycle continues until there are no more recruits to bring to the group, at which point it falls apart.
Consumers are encouraged to be on the lookout for the warning signs of a pyramid scheme:
- Earnings are based on how many people you can recruit, rather than through the sale of products or services.
- Pyramid schemes promise to make you rich or return your payout with little effort or risk.
- You are asked to contribute large quantities of money or purchase large quantities of products upfront to get the circle started.
- The training and promotional material focuses on convincing you that the opportunity is not a scam.
- The recruiter encourages you to keep the information secret, to make it seem exclusive.
The chance of making it to the top of a pyramid scheme is slim at best, and the commission says you are more likely to lose all of the money you have contributed.
The Financial and Consumer Services Commission encourages people to seek out reputable charitable avenues if they wish to help women in their community, and should check the Canada Revenue Agency's charities listing to be sure the charity is registered, before donating time and money.
New Brunswickers who are uncertain about the legitimacy of an opportunity, or who wish to report a pyramid scheme, can contact the Financial and Consumer Services Commission online, by e-mail or by phone at 1-866-933-2222.