Say you are offered investments that look like regular mutual fund investments.
You ask how much money is invested.
The sales people say, all funds are invested.
You read the contract and found nothing suspicious.
Turns out, you overlooked a verse in the 20 page contract that states that 50-70% of the money goes to pay the agent commission; only partially % is invested. The very important term is well hidden within those 20 pages.
You confront the sales people and they say that all of the money is invested. If you let the investment grow, in 1000 years you'll get your money back if the market is good. So the whole thing is "long term investment".
Is this fraud?
What does the law says in say Indonesia, USA, or anything?
NB: If it's a fraud, is this a crime or still just purely civil matter?
Update: In Indonesia many insurance companies charge high acquisition costs. So 100% of premi is gone to pay for the acquisition costs. Actually the total amount gone is about 230% of yearly premi.
Things get interesting because in some companies, even when the insurance benefit only worth $10, an agent can set premi to be very high (thousands of dollars or even more) and claim that all money are "invested".
So basically customers put $5k on "investment". Agent says "all are invested." Customer thinking that all are invested put huge money only to see all those money are gone for fees.
- Nothing. All money are gone for acquisition fee. About 50% is to pay insurance agent.
- Insurance protection worth $10.
- An option to "continue" the "investment" where customers will lost even more money for insignificant insurance cost.
Basically customer miss the part where it says that 100% of premiums are gone for acquisition fees. It's written in contract but quite well hidden among terms that's not important due to low insurance portion of the arrangement (like how to file a claim).
Note: If you said that this is fraud in your own jurisdiction, please tell what exact laws/court case a person can use to sue the agent or companies. In Indonesia, for example, there is law that customer have right to get information that is honest, clear, and correct. However, the company can says that the information is there in the middle of the contract that the customer have agreed. The company can also says that they have paid agent to "explain" the contract to customers and if anything goes wrong, it's "agent's" fault.
Basically this question relates to When a contract is being analyzed in court, is it the understanding of the parties or the written contract that is to be established?
Basically the customer miss some important term of the contract. However, the contract is written in such a way that most people would miss those terms.