Scams are taking hundreds -- and in some cases, thousands -- of dollars from consumers hoping to win a government grant or a small-business loan. New York is among the regions hard hit by the scam.

"All of these offers are bogus. The loans don't exist and neither do the millions of dollars in 'free money' that is supposedly available from the government," said Teresa A. Santiago, Chairwoman and Executive Director of the Consumer Protection Board ("CPB").

Jan Pisanczyn, Regional Director of the Small Business Development Center at the State University College at Brockport, joined Santiago in issuing the warning.

"The only 'free money' is the cash that's going into the pockets of the scam artists," said Pisanczyn. "Unfortunately, the allure of free money has always been a strong draw to most people."

"In many cases, people are not listening carefully when telemarketers, websites and television advertisers offer people help in obtaining a government grant," said Santiago. "Consumers who pay these fees only receive pamphlets or books that list government agencies and programs. Even after people apply for these non-existent grants, many people still don't realize that they have been taken in scam."

Jeffrey Boyce, Deputy Commissioner for Small Business Services at Empire State Development, encourages entrepreneurs to visit the state's web site - - to find out about legitimate government resources to help their small business get started or expand.

Santiago says a Canadian-based crime ring has been placing advertisements in newspaper classified sections that claim to offer loans for small businesses. But she says the loans are never delivered.

"Instead, victims of this scam are instructed to send thousands of dollars via Western Union to pay for insurance on the loan," said Santiago. "By using Western Union, the scam artists are able to collect the money without leaving any trace of their true identity or location."

This long-running loan scam continues to suck people in partly because it uses the names of actual American companies such as "Mortgage Expo" and "Empire State Financial Services." The name 'Margaret Taylor' is often used in this scam. Consumers may find these names on the Internet and think they are dealing with a legitimate company.

Santiago says there's been explosion in the number of government-grant and loan scams in recent weeks and in the number of victims hurt by them. "There is a virtual epidemic of telemarketers, websites and classified ads being used by scam artists to swindle people here in New York and throughout the country," she said.

One scam involves a Florida telemarketing company identified as "Consumer Grants USA." It uses telemarketers and a variety of fraudulent company names such as the "Government Grant Information Guide," "National Grant Center" and "Federal Government Grant Processing Center."

Often using telemarketers with Indian accents, this company "guarantees" an $8,000 grant from the government if consumers are willing to pay a $257 fee. These grants can be used "to improve your house, buy a new house, double-up your business and overall clean-up your bills," a telemarketer recently told an investigator for the Consumer Protection Board.

Their misleading sales tactics include posing as government officials and lying about the company and its true purpose. In addition to $8,000 "guaranteed " grants from the government, the company has also claimed to offer scholarship and disaster-relief assistance in other telemarketing calls.

Santiago says consumers are fooled into thinking that the telemarketer knows part of their checking account number. When the consumer gives the rest of the account number, the $257 is quickly removed from their account. Because the transaction is electronic, banks say they cannot stop the transaction unless the consumer closes the checking account completely.

Eventually, consumers learn that they will get nothing more than a booklet listing government grants -- and not an actual grant -- for this "one-time" fee of $257.

"Books, tapes and conferences are typical in these scams. They sell you information that is easily obtained in any library or directly from the government. But worse, they lie about the government offering 'millions' -- and, in some scams, even 'billions' of dollars -- in government grants," said Santiago.