MSNBC | April 6 2010
By Bob Sullivan

Can you make money just by writing down the license plate numbers of cars in your neighborhood? It might sound like a game your older brother made up to keep you busy -- but two aggressive start-up firms are telling consumers to do just that, and both are spreading the word quickly online. But how does it work?

One of the two, Dallas-based Narc Technologies Inc., offers a simple explanation. They want you to rat on your neighbors. The firm's Web site, NarcThatCar.com, is designed to collect license plate numbers and locations so lenders can more easily repossess cars when the owners default.

In other words, the firm wants consumers to become the repo man's informant.

Its chief competitor, Data Network Affiliates, says it has no intention of getting into the business of repossession. It says it plans to use its database of license plate numbers to help find missing children through Amber Alerts. It also hopes to sell the data to other information-hungry marketing firms, and to turn its user base into a kind of buyer's club.

In each case, members only earn a couple of dollars each month from basic license plate collection.  But they stand to profit significantly if they convince friends and family to join -- a classic multi-level marketing ploy. And in each case, there are volumes of complaints about the companies online.

Before we get into the specifics, let's review a few basics.

1) Anyone who says you can make a lot of money by staying at home and doing very little work is almost certainly misleading you.

2) Multi-level marketing (MLM) is legal. Pyramid schemes are illegal.

3) What's the difference? Sale of a real product. Firms cannot design companies where the chief source of income is skimming a cut off of others who are talked into joining -- that's a pyramid scheme. But if company associates sell a real product, and merely enhance their income via "down line" percentages of sales from other hires they have sponsored, that's legitimate MLM.

MLM-like schemes, along with work-at-home scams, are a dime a dozen online, but they have really ramped up during the recession.  Jobless workers with plenty of time on their hands sometimes try dozens of work-at-home ideas, trying to hit on something that will earn them a little cash.

The attraction of Data Network Associates is simple: Unlike most work-at-home jobs, there's nothing to sell, said marketing director Warren Anthony. Members simply write down 20 plates per month for their $2.

"It's so easy, this is something my 80-year-old dad can do. A college kid can do it," he said.  He said they encouraged affiliates to gather plate numbers in parking lots at churches or malls in order to avoid spooking neighbors.

He said the firm has so far signed up 92,000 affiliates in only about three months. Together they have entered 1.3 million plate numbers into their database.  Already, the firm's Web site ranks in the top 8,000 on the entire Internet, he said.

Joining the service is "100 percent free," but members are urged to pay $130 for software that makes it easier to enter the license plate numbers and for a package of travel discounts.  One sales force member interviewed by msnbc .com who reported signing up 92 sales associates said paying for this "upgrade" was the fastest way to earn money.

But Anthony rejected the term upgrade.

"It is a package of products and services they are buying ... a business benefits package," he said.

The company's business is "turning data into cash," he said, and the firm has multiple strategies for raising revenue. Users will soon see ads when they log in to enter plate numbers. They will also receive member-only offers for services like Dish Network and ADT security systems.

"We tell people it's where Walmart meets Google," he said.

The associate msnbc.com interviewed, who spoke on condition of anonymity, said he had yet to receive any money from the company but expected a payout of about $400 in early April.

"This thing could get really crazy," he said. "We get paid down 10 levels deep. ... Think of it as just like Facebook."

NarcThatCar also claims similar success. A Web site that discusses the company said it recently held a conference call attended by 34,000 people

Measured by inquires to the Dallas office of the Better Business Bureau, the firm's popularity is exploding. With 20,000 inquiries since Jan. 1, Narc Technologies is easily the most asked-about company at the Dallas office, says spokeswoman Jeannette Kopko.

"That's very high activity," she said. "They seem to be doing a lot of recruiting, especially in Texas."

Many of those inquiries are "pre-purchase," she said, with prospective associates calling the BBB to check the company’s background.  That's a good practice; the Dallas BBB currently gives NarcThatCar an "F," rating, the agency's lowest grade.

"The reason is because we've seen a pattern of complaints," she said, noting that the agency has received nine complaints, with most of them resolved after BBB intervention.  "Also we are concerned whether this is multi level marketing that would be in compliance with the law or ... a pyramid scheme. They say their product is information that's collected. But is there a market for that?"

The Dallas BBB has asked NarcThatCar to prove that the database of license plate numbers it's collecting is indeed a valuable asset. On its Web site, the firm claims to have signed a "six-figure contract” with a lien holder company, but has yet to provide the requested details, Kopko said.

Narc Technologies -- which also uses the name Crowd Sourcing International -- charges associates a $100 sign-up fee and a $25-a-month fee for hosting a Web site about the product.  Members who "sponsor" other new sign-ups earn a percentage of the fee.

A message left with Narc Technologies was not returned. An associate of the firm who requested anonymity said the BBB rating was “undeserved” and stated that the firm has paid its associates several times. He also said the firm has several clients who pay for access to their data.

Kopko said a firm cannot pass the legal test for being an MLM – the requirement of substantial product sales -- simply by requiring new signups to buy a product.

"The question is: Would people be making more money from recruiting others rather than actual sales?" Kopko said.

That's the same question facing Data Network Affiliates.

Anthony, of Data Network Affiliates, bristled at the notion that some consumers might laugh when the suggestion is made that they could earn money just by writing down license plate numbers.

"You wouldn't put it like that," he said. The firm is the business of collecting and selling data, he argued, and plans numerous ways to monetize the information. "As far the plates, that's just a fun way to attract individuals."

RED TAPE WRESTLING TIPS

It's often hard to tell the difference between a legal multi-level marketing firm and an illegal pyramid scheme -- particularly because firms are so good at skipping along the outside edge of the law. But here are some tips, courtesy of the Texas state attorney general's office.

(Go here for even more tips)

* Ask about average monthly product sales for reps.  If sales are disproportionately low, you’re probably talking about a pyramid scheme rather than a multi-level marketing company.

* Ask about product returns policies if you are required to pay upfront for merchandise.  Laws vary, but in Texas, the firm must be willing to refund 90 percent of your inventory cost.

* Be wary of any firm that requires you to pay money to get a job.

* Be wary of high-pressure “business opportunities” in hotel seminars or meetings at a person's home. In Texas, and many other states, "regret laws" allow consumers to cancel contracts signed at such events for up to 72 hours.