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From identity theft and misleading statements to fake offers and pyramid schemes, many people are unaware or unsure of what is consumer fraud.
While difficult to identify, if you get caught up in any consumer fraud types, it can be your worst nightmare that can affect you for a long time.
People of all ages, especially the elderly and young adults, can all be taken advantage of. Now more than ever, it is up to consumers to protect themselves against different types of fraud.
In this guide, you will find important information on consumer fraud, types of fraud to protect yourself from, and how to avoid becoming a victim.
First, What is Consumer Fraud?
Consumer fraud is defined as “various deceptive and illegal activities involving the use of unfair, misleading, illegitimate, or false business practices, which can lead to personal or financial loss.”
Below are listed some different types of consumer fraud and financial fraud.
Identity theft is when personal information, i.e. your name, Social Security number, bank account number, or credit card information, stolen and used to impersonate the victim for theft, fraud, or other serious crimes.
This consumer fraud type is often the most devastating because the victim usually finds out about it only after the damage is done. Identity theft can often take form as an emptied bank account, unfamiliar credit, and debit card debts, and lowered credit scores.
Recovery from this type of financial fraud can take a long time and need a lot of effort.
There are actions to take if you find that you have been a victim of theft.
- Report the fraud to the FTC and lookup steps to take as you recover your identity and repair any damage.
- Place a fraud alert with credit bureaus and obtain a credit report.
- Be wary of anyone claiming they are from the IRS, Social Security Administration, or another government agency.
- Alert the police for local monitoring.
This type of consumer fraud involves gaining access to usernames, passwords, and credit card details, i.e. PIN numbers, electronically by disguising themselves as someone trustworthy. This can get accomplished via email, text, or other social platforms.
Here is one example of this type:
A consumer receives an email that says there has been suspicious activity on their account. They need to click a link or open an attachment to access their information.
The way to avoid this is to never give out your account information, especially online, and delete any message you find untrustworthy.
This is a very common type of consumer fraud today due to its accessibility to anyone with an Internet browser.
While many shopping and traveling websites are legitimate, there are also many fraudulent websites to watch out for.
One notorious scam on the Internet comes from an email known as the “Nigerian scam” or advance-fee scam. This is when an email sender promises a share of fictional monies from a foreign country’s banking system in exchange for helping free funds with an advanced payment or information from a bank account.
Other common advance-fee scams take form as companies that contact potential victims offering one-time deals or highly incentivized credit cards.
To avoid advance-fee scams, do not give large sums of money to any entity you don’t recognize, even if they promise something in return.
Other types of email scams to watch out for include:
- bogus government grants
- IRS scams
- fake emails from the FBI or CIA seeking your personal information
Email scams are dangerous and can come in many forms, such as falsely selling debt collection, charity, dating, or health products.
This type of fraud makes individuals vulnerable as it preys on fear, the desire to help others, or finding what seems to be a good deal.
When shopping online, never leave your credit card information on a website you are unfamiliar with. Be skeptical of low prices and rebates. Make sure you are using a secure payment method and do not pay with wire transfers or other insecure payment methods.
If you are unfamiliar with an online business, check the company’s rating on the Better Business Bureau or a state consumer agency, and ask for a physical address and phone number that is reported as legitimate.
Keeping an eye on the information you use online is essential in the fight to avoid identity and financial theft.
When homeowners need help paying the mortgages for their homes, this can make them targets for potential fraud. According to the National Crime Prevention Council, the FBI received 93,508 reports of mortgage fraud in 2011 alone.
Different types of mortgage fraud can include foreclosure rescue schemes, loan modification schemes, and equity skimming. These scams are offered by real estate and/or mortgage professionals misusing their authority.
Other signs can appear as:
- seeming like the home-buying process is slower than normal
- being advised to stop contacting your mortgage servicer or making mortgage payments
- telling you to start sending payments to a different lender
- paying fees in advance of providing its services
- increasing pressure to sign over the deed to your home.
The best way to avoid this is to never accept unsolicited help and keep an eye on any deals that seem too good to be true. Other ways to protect yourself include:
- Seek referrals and disregard unsolicited contacts related to a real estate deal.
- Check the licenses of any real estate professional or company offering you business.
- Do not sign paperwork if you cannot understand the terms.
- If it seems too good to be true, it probably is!
Fake Charities and Lotteries
This type of financial fraud in the form of sweepstakes, drawings, or fake organizations usually targets the elderly and come in the form of robocalls or postcards.
Be careful of entering lotteries from foreign countries, research the name of the company, contact a known number, and never pay money to take out winnings. Additionally, if you are requested to give out your personal information to prove you have won something, do not disclose it or else you could become a victim of identity theft.
Do not give in to pressure to donate to a charity immediately. Also, do not assume you can get a tax deduction from donating to any organization. In the latter case, check if the organization has 501(c)3 status.
Consumers are especially vulnerable to frauds and scams due to the COVID-19 pandemic.
As of April 2020, according to the FTC, more than 23,000 COVID-19-related scams have been reported with a loss of approximately $18 million.
The effects of COVID-19 are present even in this new form, which takes inspiration from fear and passed government legislation.
The most common scams related to this include:
- calls, emails or texts about a new home-testing kit, cure, vaccine, or treatment for the coronavirus
- calls from companies or someone posing as the IRS asking for your personal information or charging fake fees for faster processing of your unemployment or stimulus check
- fake calls from the World Health Organization (WHO) or Center for Disease Control (CDC)
- price gouging (raising an item’s prices to abnormally high numbers) of supplies in high demand, including masks, hand sanitizers, and household/personal care items
Though it is unfortunate there are scammers taking advantage of the current health crisis, it is important to not pay for any unfamiliar services you do not recognize. Be aware that any legitimate contract tracers will need your health information only.
Price gouging of any items should be reported to the attorney general in your state while government agencies will never call you to ask for money or personal information.
Report Frauds and Scams to Protect Yourself and Others
Reporting consumer fraud of any kind is essential to making sure other people do not fall victim to the many frauds and scams that are out in the wild. Any of the above-mentioned methods have a chance of subjecting yourself to financial and personal loss.
It is important to report consumer fraud to the Consumer Financial Protection Bureau (CFPB) and the FTC. Knowing what is consumer fraud will save you time and money in the long run and help avoid becoming a statistic.
Speak to a personal injury lawyer today to see how you can protect yourself from any kind of fraud and scams.