#BTEditorial – If it’s too good to be true…

Many years ago, the banking system was somewhat restrictive for average working-class Barbadians, so some of them resorted to hiding their money under their beds, burying it in the ground, or finding other ingenious ways of safeguarding their earnings – because they did not trust the banks.

Some got involved in “meeting turns” or “sou sous”. In these arrangements, each member of the group makes a standard contribution to a common fund once per time period – for example, once a week or once a month. Then each period, the total contributions are disbursed to a single member of the group. The recipient changes each period in a rotating fashion such that all the members eventually become recipients.

Meeting turns can sometimes involve neighbours, groups of friends, family members, or work colleagues, and are often informal in nature, although in modern times we would hope there is some written documentation outlining member contributions and other such matters, as well as contact information for the people in charge.

Although more Barbadians now utilise commercial banks and the credit union movement has grown tremendously, there are still some who do not trust these institutions and continue to rely on arrangements like the meeting turn in their efforts to save money. Unfortunately, there is no legislation that we know of to govern these financial arrangements, which means that there is scope for exploitation of members and there is no legal recourse if they collapse.

There was a well-documented story in the media last year about one meeting turn which went awry, with its members complaining that the person in charge had been dodging them when they sought her out to get their pay-outs when they were due.

Another financial arrangement that has come under scrutiny lately is what is known by members as a “blessings circle” or similar terminology, but what officials have described as a pyramid scheme. A pyramid scheme tends to be more of a business arrangement than a lending instrument, and it seems to have come back into the spotlight recently, because as people try to find ways to safeguard their financial future, particularly amid this COVID-19 pandemic, they may be tempted to get involved in schemes that promise big money after an initial small investment. 

Essentially, a pyramid scheme is a model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. Pyramid schemes have existed for at least a century in different guises. Some multi-level marketing plans have been classified as pyramid schemes, and Barbadians would be familiar with the latter, which have surfaced over the years, encouraging people to sell various products such as general consumer items and natural health supplements.

These organisations are often based in other countries, and when they hold meetings to get participation on the local level, senior members usually charm the audience with stories of how well they are living as a result of these business arrangements. However, once people get on board, they receive complaints from customers that the products are overpriced or do not live up to their initial promise. In terms of the health products, there may be other risks, such as the fact that they may “clash” with existing medication the consumer may be taking, or they may contain substances not cleared by local health authorities.

It is worthwhile to note that as recruiting multiplies in these schemes, recruiting becomes quickly impossible, and most members are unable to profit. As such, pyramid schemes are unsustainable and often illegal.

This problem surfaced recently in neighbouring Trinidad and Tobago where law enforcement authorities are now investigating the return of an estimated TT$22 million in cash to what they are referring to as the “Drugs Sou Sou”. What is most disturbing about this matter is that the ringleaders are said to be members of the island’s police and defence forces.

Trinidad’s National Security Minister Stuart Young has described the matter as a complex one which that country’s Financial Intelligence Bureau is now examining; while Prime Minister Dr Keith Rowley has solicited assistance from law enforcement authorities in the UK and Barbados in their investigations.

Meanwhile, as a report surfaced over the weekend of a similar scheme in a local church, Director of Consumer Protection with the Fair Trading Commission, Dava Leslie-Ward, warned Barbadians not to get involved in such arrangements.

The organisers of such schemes prey on the ignorance of consumers, in that they present a pretty picture to would be participants, leaving out the hard work that goes into the recruiting process and the fact that those lower on the ladder never earn as much as people at the top.

Barbados does have legislation that speaks to these pyramid schemes. As Leslie-Ward pointed out: “Under the Consumer Protection Act, anyone found guilty of organising a pyramid scheme can be fined $10 000 or sentenced to up to two years in prison. A company can be fined up to $100 000 and company directors, if involved, fined $25 000 and/or sentenced to two years in prison.”

So, while these are desperate times for some, we need to be careful when new money-making ventures or “investment opportunities” appear out of the blue and offer returns on investment that seem somewhat outrageous or unrealistic. If it seems too good to be true, it often is, and we should stay away from them and rely on safer methods of earning money or trying to create savings.