Consumer Fraud

Deceptive practices that result in financial or other losses for consumers

in the course of seemingly legitimate businesstransactions.
Many think that consumer fraud only affects unwitting people who are all
too willing to be duped. In truth, even the mostsavvy customer can fall vi
ctim to Fraud. It may be as simple and seemingly innocuous as getting s
tuck paying a higherrate for a magazine subscription, or it may be as dev
astating as having one's identity stolen.
According to the Federal Trade
Commission (FTC), consumers reported $343 million in losses from fra
ud in 2002. Inaddition to those who are unwittingly defrauded, there are
a number of consumers who share at least a degree of culpabilityin their
losses. People who try to save money on their income taxes by purchasi
ng a new Social
Security number or wagestatement may become victims of fraud, but ch
ances are that they understood that their actions were illegal, which mak
esthem guilty of fraud as well.
Consumer fraud can take place in person, by telephone or mail, or over t
he Internet. As technology continues to improve,Internet
Fraud has risen faster than other types. With or without technology, how
ever, consumers can protect themselvesagainst fraud by following a few
simple, common-sense measures such as not revealing personal inform
ation 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, buteven in its mildest form it can i
nvolve the theft of a consumer's long-distance access code. The thief sel
ls the code toindividuals who use the code to charge long-distance calls
all over the world. In its most serious form, a thief gains accessto the vict
im's Social Security number. With this number, and some other basic inf
ormation, a thief can create a double ofthe victim. The victim's informatio
n can be used to make purchases, to rent an apartment, or to take out b
ank loans. Often,victims of identity theft first find out their misfortune whe
n they receive credit card bills totaling thousands of dollars, eventhough
they had neither opened the accounts nor made the purchases.

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

off of forms (for example, if they work in an officewhere such information
is kept), by stealing a wallet or personal papers, or by otherwise exploitin
g a careless individual.(Fraud experts warn people never to give their So
cial Security or bank account numbers to someone who has phoned the
m,even from a seemingly legitimate business.) Often identity thieves wor
k in large rings that span several states, whichmakes it difficult to track th
em down. Thus, even when a theft ring is cracked, others quickly crop u
p to take its place.

Telephone and Mail Solicitations

To most people, junk mail and telemarketer calls are merely a Nuisance,
but unscrupulous companies can use both themail and the telephone to
part innocent (and not merely gullible) people from their money. Applicati
ons for credit cards orpersonal loans promise easy credit, but the fine pri
nt promises exorbitant interest rates. Sweepstakes promising millions in
winnings await the lucky recipient, who often feels compelled to send an
order for several magazines along with the prizereceipt. Charities use tel
emarketing and mass mailings to ask for donations; while some of those
charities are establishedand legitimate, others are dubious. Many phony
charities assume names that sound like better-known organizations in th
ehope of fooling consumers.
Every day, people are contacted by telephone and mail with phony offers
. Despite warnings from consumer-advocacygroups, people continue to
provide credit card numbers, bank information, and even Social Security
numbers to those whomthey do not know. The elderly are a common tar
get, in part because once they find that they have been defrauded theyre
fuse to report the crime because they are embarrassed. Groups such as
the Federal Trade Commission, the NationalConsumers League (NCL),
and Consumers Union provide information to the general public in an eff
ort to curtail fraud.
In 2002, several states initiated "do-not-call" programs that allow people
to store their telephone numbers in a centralizeddatabase that telemarke
ters are prohibited from calling. A telemarketer who calls a prohibited nu
mber faces stiff fines.

Internet Fraud

The growth of the Internet as a communication tool has also meant its gr
owth as an instrument of fraud. Internet fraud hasgrown so rapidly in rec
ent years that Federal Bureau of
Investigation (FBI) and the National White Collar Crime Centerlaunche
d the Internet Fraud Complaint Center, which compiles data and offers ti
ps on ways to avoid being defrauded. In2001, Internet fraud accounted f
or $17.8 million in losses, with a median loss of $435 per victim.
The most common type of fraud, accounting for nearly two thirds of all re
ported fraud, is Internet-auction fraud. Althoughthere are a number of leg
itimate online auction houses, there are many that are simply scams. Co
nsumers who purchaseitems on these sites find that the goods they bid f
or never existed, or that the goods are stolen, or that the seller has adde
dnumerous hidden charges. The seller might even act as a shill by placi
ng false bids. (Some consumers jump on the fraudbandwagon, as well,
by using aliases to place multiple phony high bids in order to deter low or
moderate bidders.)
The Internet is also home to credit card scams, investment scams, and h
ome-improvement scams. These may appear onweb sites or they may b
e sent in the form of unsolicited commercial e-mail (UCE), better known
as "spam." One commonspam message is the "Nigerian Letter," in which
a person who claims to be a former high official, usually from the Nigeria
ngovernment, seeks help in converting millions of dollars in funds. The c
onsumer is asked to provide bank accountinformation so that the funds c
an be transferred to that account.

Income Tax Fraud

The Internal Revenue
Service warns taxpayers to be on guard against tax scams that can resu
lt in loss of funds and, insome cases, legal difficulties. Some con artists
make money at their victims' expense by claiming that they can help tos
ecure tax refunds for their clients. Invariably, the clients must pay a fee u
p-front. One example of this is a company thatclaims it can help taxpaye
rs find legal loopholes that will allow them to stop paying taxes. Another i
s a company that offersto help people submit claims for nonexistent cred
its. (Some African-Americans have been targeted by a "reparations" sca
min which they are told they can apply for a slavery-reparations credit si
mply by paying a fee. No such credit exists.)
If the taxpayer knowingly engages in a scheme that is illegal (for exampl
e, signing up for a new Social Security number), heor she may face fines
or imprisonment.

Combating Fraud
Education is key to combating consumer fraud. The FTC, FBI, NCL, Con
sumers Union, and Direct Marketing Association allwork to educate the p
ublic and to identify fraudulent businesses. The Better Business Bureau i
s also a useful tool forconsumers who wish to find out information about
specific companies.

Examples of Consumer Fraud

False Advertising and Consumer Fraud
False advertising is one of the most common forms of consumer fraud.
Such fraud often results when misleading statements are made in an
advertisement in an attempt to over-hype a product or service. For
example, if a LASIK service guarantees 20/20 vision, and a customers
vision is only 20/30 following a procedure, then this could be considered
false advertising.

Unfair Pricing and Consumer Fraud

Consumer fraud often relates to pricing issues. For example, any instance
where overcharging of advertised pricing occurs might be considered
consumer fraud. Additionally, concealing an additional fee (such as
shipping, service charge, etc.) without expressly notifying a customer of the
fee beforehand is considered consumer fraud. Due this, pricing and other
claims in advertisements are often accompanied by fine print stipulations
that indicate any additional pricing requirements.

Unfair Terms and Conditions and Consumer Fraud

In some cases, an unscrupulous business may trick you into agreeing to
unfair terms and conditions. Sometimes, such an agreement is requested
prior to the completion of a sale. In such cases where the terms are

deemed unfair, a customer may have legal rights to file a claim against the
corporation. Since sensitive personal data is often related to the terms and
conditions of a service, this type of consumer fraud often relates to identity
theft. To minimize the chances for becoming a victim of such fraud, it is
recommended you read the terms of agreement prior to agreeing to them.

Safety Issues and Consumer Fraud

Examples of consumer fraud occasionally relate to the safety of a product
or service. If a retailer has reason to believe an item may be unsafe, yet
chooses to sell the item anyway without advertising potential harm, then
this may be considered consumer fraud. It is for this reason that choking
hazards are required on some toys and some food products require the
announcement that an item has been manufactured in a factory that
contains peanuts (a common allergy trigger).

Types of Consumer Fraud

Cashiers Check Fraud
Scammers take advantage of the trust people place in cashier's checks
to steal money from your account or to avoid paying you for goods and
services. It is difficult to detect fraudulent cashier's checks. When you
deposit a fraudulent check into your account, the law requires your bank
to make the funds available within a specific period of time even if the
check has not yet cleared through the banking system. Once the check
is returned unpaid, your bank, generally, can reverse the deposit to your
account and collect the amount of the deposit from you. To learn more,
read Avoiding Cashier's Check Fraudand Answers about Cashier's
Checks.

Fictitious/Unauthorized Banking
Banks operating without a license or charter in the United States or any
other country are operating in an unauthorized manner. When we are
notified of a fictitious bank, we may issue an alert. The individual alerts
can be found on our internet site. Click here to view the consolidated
listing. If you have information pertaining to such an institution, please
contact us at OCCAlertResponses@occ.treas.gov; in writing at Office of
the Comptroller of the Currency, Enforcement & Compliance Division,
400 7th Street SW, Suite 3E-218, Washington, D.C. 20219; or by phone
at (202) 649-6200.

High Yield Investment Fraud (Prime Bank

Fraud)
High yield investment fraud, also called prime bank fraud, involves
issuing or trading prime bank, prime European bank, or prime world
bank financial instruments that do not, in fact, exist. Fraudulent
individuals or companies promise their victims huge profits with little risk
if they invest in these instruments. Promoters use fake documents that
appear legitimate and often claim to have special access to investment
programs that ordinarily are available only to top financiers in the worlds
financial centers. Fraudsters claim to have secret or insider knowledge
to share with a select few and use that premise to cloak their operations
in secrecy. To learn more, read How Prime Bank Frauds Work. If you
suspect that someone has approached you with a fraudulent investment
opportunity, visit the Enforcement Complaint Center on the Securities
and Exchange Commissions Web site.

Identity Theft
Identity theft is a serious crime. It occurs when someone uses your
personal information, such as your name, Social Security number, or

credit card number, without your permission to commit fraud or other

crimes. The Federal Trade Commission (FTC) estimates that as many
as 9 million Americans have their identities stolen each year. You should
review your credit report and credit card statements often to verify that
you made the charges shown. To learn more, read OCCs Answers
about Identity Theft, If You Become a Victim of Identity Theft,
and Identity Theft on the FTC Web site.

Phishing
Fraudsters are always looking for ways to get your personal or financial
information. When they use the Internet to do that, its called phishing.
These scam artists send e-mail or pop-up messages that might alert you
to a problem with your account or state that you have a refund waiting.
Some of these messages appear to come from legitimate companies. To
learn more, read Internet Pirates are Trying to Steal Your Personal
Financial Information.

Illinois Attorney General

Attorney General Lisa Madigans Consumer Protection Division protects Illinois

consumers and businesses victimized by fraud, deception, and unfair business
practices. The work of the Division is carried out by the following bureaus: Consumer
Fraud Bureau, Charitable Trust Bureau, Franchise Bureau, Health Care Bureau, and
Military and Veterans Rights Bureau.
The Consumer Fraud and Health Care Bureaus offer informal dispute resolution
programs for consumers with complaints concerning their purchases and health
care. Although the Attorney Generals Office will do its best to assist you, the
Attorney Generals Office is prohibited from representing citizens privately. If you
need a lawyer, please see our list of legal aid referrals or contact the Illinois State Bar
Association.

Law enforcement actions are taken by the Attorney General to protect the public
good and ensure a fair market-place. You can read more about major Attorney
General Consumer Protection cases on the settlements page.
An important part of the Divisions work is to provide Illinois citizens with the
information necessary to avoid becoming victims of consumer fraud and to aid in
making wise purchasing decisions. To this end, our website contains a number of
fact sheets, news releases and links to other consumer-related sites.
The Division also advocates on behalf of Illinois citizens by holding hearings and
drafting reports and legislation on emerging consumer issues.

How to Avoid Being a Victim of Consumer Fraud

Never give your credit card, social security number, or any
other financial information out over the telephone, by mail, or by
email unless you initiate the contact and know who you are
dealing with.
Here are some "red flags" that should warn you that a letter,
phone call, or email you receive may be a scam:
High pressure tactics. Beware of phrases like: "You will
lose out if you don't act now" or "Don't discuss your
sweepstakes winnings with anyone until you get your
check."
Up front payment. If you are told you must pay up front to
receive your prize or winnings, it's likely to be a scam. If
you've won something, it's yours and you should not have
to pay anything in advance, including taxes or shipping
and handling.
Refusal to provide written information. If the person or
company contacts you but refuses to give information in
writing, don't do business with them.

 Unrealistic profits. Be skeptical if you are told that you can

make lots of money quickly with no risk, or with no
experience or training.
If you receive a telephone call that includes any of these red
flags, just hang up. You don't have to listen. Remember that
telemarketing fraud is a crime and the people who practice it
are criminals.