Did you know current estimates reveal nearly 11 percent of Americans found themselves victims to some type of financial consumer fraud in 2011? And some of those victims were hit more than once. That means close to 38 million American consumers, in just one year, spent a considerable amount of their time righting those wrongs. There were two areas that accounted for most of those incidents.
The findings are outlined in a new and extensive look at consumer fraud by the Federal Trade Commission. Released last week, this is the first all inclusive effort since 2005 that presents both statistics and trends associated with our financial products and services. What’s not surprising is the role the internet plays in these criminal acts; in fact, the internet was cited as the preferred method for scammers looking to steal from others. And the primary targets are credit cards and weight loss products, though there are many other avenues these thieves follow as well.
Credit cards, not surprisingly, accounts for more than half of all targets – 56 percent to be exact. This is due to the fact that it’s difficult to buy anything online without a credit card number – and it makes it easy for those looking to commit consumer fraud.
Turns out, we are on a collective quest for losing weight and as a result, we’re willing to take our chances on any number of products to get that perfect body. More than 5 million Americans reported more than 7 million incidents of fraud associated with these weight loss products. That means, of course, we’re willing to take our chances again and again. The FTC consider these types of weight reduction products to be fraudulent if they promoted unrealistic promises of losing a lot of weight with little or no effort.
The complaints run the gamut, but of course, the products not living up to their promises was the big one,
they lost less than half of the weight they had expected to lose, if they lost any weight at all,
the FTC said. In this particular category are drugs not requiring prescriptions, other types of dietary supplements, skin patches, wraps and even earrings.
Other Product Fraud
All those pop up ads about winning money in different contests and sweepstakes? If you haven’t figured out most are bogus, maybe these numbers will help. The second most complained about products were fraudulent prize promotions. Close to 2.5 million of Americans fell victims to some type of sweepstakes or prize fraud. This type of consumer fraud hits about 1 percent of the American population. Coming in third place were unauthorized billing practices on credit cards. Actually, there were two types that tied for third.
Consumers complained about being billed without giving permission to those who signed them up in buyers’ clubs. Those are the companies that allow members to buy products at far lower than retail prices. The other specific billing fraud includes those that simply showed up on credit card statements with the consumer having no idea it was being done. These were most often categorized as internet related services, such as website hosting and virus protections.
Another common type of fraud is found in those work at home products that promise consumers they can work from home and earn substantial amounts of money. They buy the plan with hopes of ditching their nine-to-five only to realize it’s not what it’s supposed to be.
Method of Theft
As mentioned, credit cards were most often used to steal from consumers. More than half say their credit card information was compromised and used illegally after providing it to a company. Fifteen percent of consumers used their checking accounts to pay for products, either by providing their checking account information or their debit card information. The sellers then pulled the money from the accounts and then didn’t deliver the product as promised.
If we used to trust those television commercials, we’re now turning to the Internet. As a result, we’re not only learning about these offers online, but we’re also buying them and then researching them when they turn out to be less than promised or a downright scam. One third of complaining consumers actually did their research too late – after they realized they’d been lied to or scammed. The Internet has increased from being the source of information in just over 20 percent to just under 33 percent of all fraud and scam incidents. Now that we’re living via our smartphones, experts say that trend will likely continue and grow.
After the internet, it’s print media fraudsters are using. This vehicle includes newspaper, magazines and direct mail solicitations. These are the second most common way consumers are being drawn in. Almost 20 percent of the complaints originated from these particular sources. Interestingly, that’s an eight percent decline from 2005.
Telemarketers are still prevalent, too. These particular efforts of scammers account for 10 percent of all complaints.
The orders were placed using the internet in about 40 percent of these incidents, which is indicative of a 20 point increase from 2005. In 30 percent of those complaints, it was the telephone that allowed the hackers to get their financial information and it’s remained steady since 2005. Those of us who used snail mail are becoming fewer. Twelve percent of consumers were scammed using this slower method, which is an 8 percent drop from 2005.
Rounding out the top ten are:
- Credit repair scams
- Debt relief
- Credit card insurance
- Small business opportunities
- Mortgage relief scams
There’s another potential problem associated with consumer fraud; though, this report doesn’t address it. As this report was released last week, the Federal Trade Commission also announced it settled a lawsuit with debt collectors. These fraudulent collection agencies were ordered to pay out $800,000 to consumers who were deceived and forced into paying different fees when they paid their debts over the telephone. The fees weren’t charged for those who paid online or via snail mail. For deceptively charging a fee for payments authorized by telephone. The FTC also says companies violated different laws by threatening to sue consumers in an effort of forcing them to pay up. The FTC is encouraging customers who have been victimized via debt collectors to visit its website to learn how to file a complaint.
Were any of these methods or rankings a surprise to you? And have you ever been a victim of any kind of financial fraud? Share your story with us.