Consumer Fraud Is Big Business

Consumer Fraud Is Big Business

by A. Scott White, CFP®, ChFC, CLU
President, Scott White Advisors

Consumer fraud is so big that the Federal Trade Commission has declared March 6 – 12, 2022 as National Consumer Protection Week.

Just how big is consumer fraud?    

In the U.S. last year, a record number of 2.8 million consumers filed fraud reports that described losing $5.9 billion to fraud — a $2.4 billion jump, or 71% increase— in losses in just one year.1

What is consumer fraud?

Defined as deceptive business practices that cause consumers to suffer financial or other losses, consumer fraud occurs when a person suffers a loss caused by deceptive, unfair, or false business practices. Consumer fraud victims believe they are participating in a legal and valid business transaction, but they are actually being defrauded.

What are the most common types of consumer fraud?

According to the FTC’s  Consumer Sentinel Network Databook for 2021, the most commonly reported categories of consumer fraud are:

  1. Identity Theft: When someone steals your personal information to commit fraud. The identity thief may use your stolen information to apply for credit, file taxes, or get medical services. Or they may file a fraudulent tax return in your name, resulting in a refund sent to them.
  2. Imposter Scams: When someone lies and tricks you into sending money to them. They might call you on the phone or send an email or text. Imposters might try to get you to pay them by asking you to buy a gift card or wire money.
  3. Online Shopping Scams: When scammers pretend to be legitimate online sellers, either with a fake website or a fake ad on a genuine retailer site.
  4. Other Scams: Prizes, sweepstakes and lotteries, internet services, business and job opportunities.

What signs should you look for that signal a scam?

According to the FTC, there are four signs it’s a scam1:

  1. Scammers pretend to be from an organization you know, like the Social Security Administration, the IRS, or Medicare, or make up a name that sounds official. Some pretend to be from a business you know, like a utility company, a tech company, or even a charity asking for donations.
  2. Scammers say there’s a problem or a prize. They might say you’re in trouble with the government. Or you owe money. Or someone in your family had an emergency. Or that there’s a virus on your computer. Some scammers say there’s a problem with one of your accounts and that you need to verify some information. Others will lie and say you won money in a lottery or sweepstakes but have to pay a fee to get it.
  3. Scammers pressure you to act immediately. Scammers want you to act before you have time to think. If you’re on the phone, they might tell you not to hang up so you can’t check out their story. They might threaten to arrest you, sue you, take away your driver’s or business license, or deport you. They might say your computer is about to be corrupted.
  4. Scammers tell you to pay in a specific way. They often insist that you pay by sending money through a money transfer company or by putting money on a gift card and then giving them the number on the back. Some will send you a check (that will later turn out to be fake), tell you to deposit it, and then send them money.

What Can You Do to Avoid a Scam?

The FTC recommends following these recommendations.1

  1. Block unwanted calls and text messages. Take steps to block unwanted calls and to filter unwanted text messages.
  2. Don’t give your personal or financial information in response to a request that you didn’t expect. Legitimate organizations won’t call, email, or text to ask for your personal information, like your Social Security, bank account, or credit card numbers.
  3. If you get an email or text message from a company you do business with and you think it’s real, it’s still best not to click on any links. Instead, contact them using a website you know is trustworthy. Or look up their phone number. Don’t call a number they gave you or the number from your caller ID.
  4. Resist the pressure to act immediately. Legitimate businesses will give you time to make a decision. Anyone who pressures you to pay or give them your personal information is a scammer.
  5. Know how scammers tell you to pay. Never pay someone who insists you pay with a gift card or by using a money transfer service. And never deposit a check and send money back to someone.
  6. Stop and talk to someone you trust. Before you do anything else, tell someone — a friend, a family member, a neighbor — what happened. Talking about it could help you realize it’s a scam.

National Consumer Protection Week is a reminder to be aware and cautious—so that you won’t be a victim of consumer fraud.

 

1https://www.consumer.ftc.gov/blog/2022/02/top-frauds-2021