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Consumer Fraud, Scams & Fraud Protection

Consumer fraud, while taking many guises, is perpetrated in three basic forms:
  • Against consumers by individual or organized rings of con artists;
  • By a business against consumers or customers;
  • By an employee or employees within a company against the company itself or other employees within the company.
Consumer fraud costs economies around the world billions of dollars each year. What is far worse is the devastating impact a single act of fraud can wreak upon the finances of an individual or family. Persons of retirement age can be especially vulnerable to fraud and scams for various reasons ranging from excessive generosity and loss of good judgement to being overly concerned about their independence and financial freedom; the latter condition makes the elderly easy targets for con artists promising large sums of money for a relatively small investment or “good faith” contribution. Senior citizens do not have a lock on being bilked by fraudsters, however; any one of us can fall victim to a scam, be it sophisticated or simple, if we do not keep our wits about us and exercise common sense.

It is ironic that some of the most successful forms of fraud are some of the simplest. Con artists and other perpetrators of fraud rely on a number of basic precepts to run their scams, stings and deceptions:
  • Deception - the greatest weapon of the con artist or perpetrator of fraud;
  • Speed - most frauds are committed quickly, with the perpetrator disappearing before the victim is aware that he or she has been defrauded;
  • Gullibility or innocence on the part of the victim;
  • Lack of due diligence - failure to thoroughly check identification, credentials and other forms of information;
  • Greed - that quirk of human nature which causes otherwise rational human beings to go for the too good to be true offer;
  • Embarrassment - reluctance on the part of victims to inform law enforcement because they feel embarrassed at having been tricked, especially if a scam is simplistic in nature, or feel they will be subjected to ridicule;
  • Intimidation of the victim, occasionally by threat or inuendo, but more often by enticing the victim to become a party to an illegal activity;
  • Lack of distribution of information and lack of cooperation between differing law enforcement agencies and governments.
It would take pages to list all the different types of fraud, if it could be done at all. A few of the more common types of fraud are:
  • Counterfeiting;
  • Embezzlement;
  • Illegal investment and trading activities;
  • Tax evasion and tax fraud;
  • Scams and stings;
  • Pyramid schemes;
  • Chain letters;
  • Identity theft;
  • Dummy auction bidding, also known as shilling;
  • Illegal check writing/cashing and credit card theft;
  • Bait and switch - advertising a low-priced item, then persuading a consumer to purchase a higher-priced one, often by claiming that the advertised item is unavailable;
  • Advertising false sale prices based upon inflated retail prices;
The internet has become a breeding ground for consumer fraud because of the speed, accessibility, and anonymity it provides to the scammer. Internet and email addresses are easily faked, or spoofed; email accounts and websites can be set up and abandoned quickly and with complete anonymity by internet thieves. These con artists migrate from website to website, collecting money from unsuspecting victims, then fleeing before law enforcement agencies can close in.

People often forget that when fraud or theft occurs, there are always multiple victims. When a consumer is bilked by a fraudulent merchant on an internet website, all legitimate internet merchants suffer because the victim is less likely to do business on the internet again and may caution other consumers to stay away. When individuals file false disability or insurance claims, rates for everyone increase as a result. Perhaps most alarming is the rising incidence of identity theft, which leaves in its wake a victim with a shattered credit history and bill collectors beating on his or her door. For these reasons, regardless of whether you are a consumer or a business person, it is your responsibility and moral obligation to report all occurrences or suspected occurrences of fraud promptly to law enforcement officials. It is the responsibility of law enforcement agencies to make it easier for citizens to report suspected cases of fraud.

Authored by Kenneth L. Anderson.  Original article published 24 February 2006.

Follow links to the right to learn more about consumer fraud and fraud protection. At the left margin, Related Links address topics of interest pertaining to security and consumer protection. View the Security & Consumer Protection SiteMap for a complete list of security and consumer protection topics.

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