Consumer Fraud

• Author: Jeffrey Lehman, Shirelle Phelps

Page 146

Deceptive practices that result in financial or other losses for consumers in the course of seemingly legitimate business transactions.

Many think that consumer fraud only affects unwitting people who are all too willing to be duped. In truth, even the most savvy customer can fall victim to FRAUD. It may be as simple and seemingly innocuous as getting stuck paying a higher rate for a magazine subscription, or it may be as devastating as having one's identity stolen.

According to the FEDERAL TRADE COMMISSION (FTC), consumers reported $343 million in losses from fraud in 2002. In addition to those who are unwittingly defrauded, there are a number of consumers who share at least a degree of culpability in their losses. People who try to save money on their income taxes by purchasing a new SOCIAL SECURITY number or wage statement may become victims of fraud, but chances are that they understood that their actions were illegal, which makes them guilty of fraud as well.

Consumer fraud can take place in person, by telephone or mail, or over the INTERNET. As

technology continues to improve, INTERNET FRAUD has risen faster than other types. With or without technology, however, consumers can protect themselves against fraud by following a few simple, common-sense measures such as not revealing personal information to strangers.

Following are some of the most common types of consumer fraud.

Identity Theft

IDENTITY THEFT accounts for more than 40 percent of all fraud complaints reported to the FTC. All identity theft is serious, but even in its mildest form it can involve the theft of a consumer's long-distance access code. The thief sells the code to individuals who use the code to charge long-distance calls all over the world. In its most serious form, a thief gains access to the victim's Social Security number. With this number, and some other basic information, a thief can create a double of the victim. The victim's information can be used to make purchases, to rent an apartment, or to take out bank loans. Often, victims of identity theft first find out their misfortune when they receive credit card bills totaling thousands of dollars, even though they had neither opened the accounts nor made the purchases.

Identity thieves can gain access to their victim's information by...