Consumer fraud complaints are on the rise, according to the Federal Trade Commission. The agency received more than 1.8 million complaints in 2011, a 24 percent increase from 2010. More than half of these (55 percent) were fraud complaints.
Identity theft topped the list of complaints for the second consecutive year, accounting for 15 percent of all consumer complaints Debt collection comprised 10 percent, followed by prizes, sweepstakes and lotteries (6 percent), shop-at-home and catalog sales (5 percent) and banks and lenders (5 percent).
Consumers reported paying over $1.5 billion in the fraud complaints. The average amount paid was $537. More than two-thirds (68 percent) of consumers reporting a fraud complaint said the fraud had cost them something.
Almost half (43 percent) of the scammers made initial content with their victims via email, while another 13 used the Internet to fleece their marks. Only 7 percent reported mail as the initial contact.
Fraud is at a (Rocky Mountain) high in Colorado, the state with the highest per capita rate of reported fraud, the FTC found.
(What were the top scams of 2011? Check out this infographic).
The economic collapse has made people—especially seniors—more susceptible to fraid, according to a recent report by the Center for Retirement Research at Boston College.
“People face serious financial problems ranging from stagnant incomes to skyrocketing medical costs and house values that are less than the mortgage amount,” the report states. “Any one of these can make an individual more vulnerable to get-rich-quick schemes.”
Thanks to the Internet, scammers can contact thousands or even millions with a single click. They have begun using social network sites such as Facebook and LinkedIn to lure potential victims.
Who are the ripest targets? Along with seniors, the CRR report cautions that baby boomers are potentially lucrative targets. This generation “is enormous, with some 75 million people; increasingly well off; and facing cognitive decline.”
Research finds that the ability to make financial decisions declines with age. The report cites statistics that between the ages of 71 and 79, one-fifth of individuals are impaired, but that rises to half of those between the ages of 80 and 89. “When money is combined with cognitive decline among aging baby boomers, it can be a recipe for fraud,” the report states.
The four most common types of fraud for which to be vigilant against are investment fraud, advance-fee (or debt-settlement) fraud, insurance fraud, and tax fraud.
Clever con artists may present themselves in a myriad of guises, ranging from a “senior specialist” trained to handle concerns of the elderly, to a “magician” who promises investments with high returns at no risk. Beware the free lunch by which scammers lure their prey. Senior victims, a study found, were three times more likely to attend an investment seminar that offered a free lunch.
Investment red flags, though they appear to be obvious, bear repeating. Investments may be fraudlent if:
· They look too good to be true.
· Require an urgent response or immediate cash payment.
· Charge a steep upfront fee in return for the promise that you will make even more money at some unspecified date.
· Suggest recipients do not tell family members or friends about the offer.
· Send unsolicited Internet email deals.
· Try to instill fear that failure to act would be very costly.
· Cannot be questioned, inspected, or checked out further.
· Are so complex that they are difficult or impossible to understand.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.