Consumer watchdog issues warning to small business: Yellow Pages scams back on the cards

The old-school Yellow Pages scam is back in action. In the past week the Australian Competition and Consumer Commission has received over 60 reports from SMEs of a scam involving companies pretending to act as the Sensis Yellow Pages directory.

The past week’s complaints bring the total number to 90 for the current financial year, as more and more small businesses are receiving faxes from “Yellow Page Australia” and “Open Business Directory”.

The fax appears to be seeking confirmation of the contact details of the business, but in the fine print it reveals it’s actually an agreement to sign up to an online business directory service – which costs $99 a month for a minimum period of two years.

ACCC deputy chair Michael Schaper told SmartCompany small businesses are often targeted because they generally have less sophisticated record-keeping systems.

“They’re under a huge amount of time pressure and with this scam you’re doing something which looks reasonably legitimate.”

“Small business owners are generally honest souls and think if they receive a bill they should pay it. The small businesses owner is usually paying the bills late at night or on a weekend and often doesn’t have anyone to raise the alarm,” he says.

In 2011 there was another “Yellow Pages” scam, although the ACCC successfully prosecuted two overseas companies for sending thousands of fake faxes to local businesses. The scammers were fined $2.7 million by the Federal Court.

Schaper says despite this case of a successful prosecution, scammers are generally difficult to catch and they have so far been unable to identify the perpetrators.

“There is a limited jurisdiction and ability to prosecute outside of Australian borders,” he says.

Other types of scams which frequently target small businesses are fake invoices, such as messages warning a company’s domain name registration has expired and a bill for a renewal fee, or scammers sending unsolicited emails pretending to be the Australian Taxation Office.

The ACCC reported in 2012 businesses lost $93 million to scams and 84,000 were reported to the watchdog.

But figures from the Australian Institute of Criminology have shown less than 10% of scams get reported, making scams potentially a $1 billion problem.

Research conducted by Curtin University in 2012-13 and published in June revealed financial losses due to scams ranged between $100 and $10,000 per annum and the time spent rectifying the scam was up to 100 hours.

The study also indicated the financial cost to a scammed small business greatly exceeds that of the scammed amount.

Should a small business be the victim of a hacker, it can cost up to $10,000 to rectify.

Schaper says to avoid being the victim of a scam, small businesses should delete or discard anything which seems questionable, trust their gut instincts, perform cross-checks before paying bills and isolate bank accounts.

“If you’re going to check something to see if it’s legitimate, don’t look at the URLs of the suspicious email, go to the business through a legitimate contact point. Often the scammer will have set up fake phone numbers and websites,” he says.