What Is Consumer Fraud?

Michael Bennett
September 30, 2015 - 2298 Views

Consumer fraud comes in many different shapes and forms. However, the official definition describes it as “deceptive practices that result in financial or other losses for consumers in the course of seemingly legitimate business transactions.”

Basically, this means that goods or services are sold using some form of deception. The goal is to make consumers pay more than would be reasonable, sometimes for products or services they will never receive. The practices are deceptive and unlawful and unsuspecting customers are conned out of a lot of money. As technology evolves, consumer scams evolve as well. This is why many now originate on the internet.

A lot of people believe that only unwitting people who are naive will be duped. In reality, however, anyone can be victimized by consumer fraud. For instance, you may be paying too much for a magazine subscription. This is something minor, but it can also be as bad as having your identity stolen.

The Federal Trade Commission has stated that, in 2002, there were $343 million worth of losses due to fraud. Some of these were victims of fraud, others were people who committed fraud, sometimes unwittingly so. In other cases, it may have been done on purpose. For instance, someone may purchase a new Social Security Number, which is illegal.

Consumer fraud can happen over the telephone, in person, by mail or via the internet. Internet fraud is rising particularly quickly. However, regardless of technology, there are things that you can do in order to protect yourself. One of those ways is to know the types of consumer fraud that exist.

1. Identity Theft

The FTC has reported that identity theft has been the main consumer complaint for several years running. This kind of fraud comes in many forms, from mild to severe. All types of identity theft, however, are serious and can have devastating consequences for the victim. In many cases, the victims don’t know what has happened until much further down the line, when they start receiving debt collection letters or are refused credit when they apply for it themselves.

An identity thief is able to access information through a variety of ways. He can steal or intercept personal mail, read it off forms, exploit it from people through cunning methods and more. Often, fraudsters work together in state-wide or even national rings and share the information between them. Unfortunately, this also makes it very difficult to stop the crime, because when one thief has been found, others are there to take his place.

2. Mail And Telephone Solicitations

Most people already find telemarketing calls a nuisance. But what is worse is that sometimes, these calls are actually ways to cleverly con even the least naive people out of their personal details. They make promises of prizes, pretend to be charities addressing some sort of current major disaster, and so on. Phone offers happen on an almost daily basis and various consumer protection agencies warn people about this continuously. Organizations that help consumers fight this include the National Consumers League and the Consumers Union.

Consumers are encouraged to register their telephone number with the National Do Not Call Registry. This will stop telephone calls from genuine telemarketers and should make it more difficult from scamming marketers to find the telephone number. Furthermore, if a call is still received, it means that they are more likely to be fraudulent.

3. Internet Fraud

The Internet is becoming an increasingly important means of communication. Because of that, fraud is now also committed through the Internet and it is becoming increasingly alarming. The Internet Fraud Complaint Center has been launched by the FBI and the National White Collar Crime Center in order to collect data on this type of fraud and help people avoid it. The median per victim loss in internet fraud in 2002 was $435 per victim, and this is rising.

A common form of internet fraud is found in fake internet auctions. While there are a number of legitimate ones, many are not. Here, people ‘win’ items that never arrive. And even on the legitimate sites, fraud often takes place. For instance, someone can place fake bids on an eBay listing in order to drive the price upwards.

Other forms of scams that are perpetrated online include investment scams, credit card scams, and home improvement scams. The Nigerian 419 letter is also a form of internet fraud. People who are victimized by these cons are often defrauded out of thousands of dollars.

4. Income Tax Fraud

The IRS warns against a number of scams designed to defraud people out of their money. They may claim to help get tax refunds or offer legal loopholes so that they don’t have to pay tax. There are also certain scams that target specific groups of people. For instance, the slavery reparation scam tries to convince people of African-American origin that they are entitled to a refund because they are descendants of slaves.

How to Fight Fraud

The above are just some of the most common types of consumer fraud, but there are many more. The most vital weapon against fighting this is education. This is why many organizations, including the Federal Trade Commission, the Federal Bureau of Investigations, the Consumer Union and many others are working together to fight it. Not only do they work hard at identifying individuals and businesses who engage in fraud, but they also want to provide information to consumers. This information helps consumers identify fraudulent scams, giving them an opportunity to not just avoid them, but report them as well.

Michael Bennett

About Michael Bennett

Michael Bennett is Editor-in-Chief of Consumer Protect.com. Since 1999, he's worked across a multitude of areas of consumer protection including defective products, environmental issues, identity theft, predatory lending and more. If you find his articles helpful please share them with your readers.