An inside look at the fraud blight

The FTC updates massive fraud survey

While the Internet opens up a world of e-commerce it continues to be a playground for delinquents to commit fraud - which is just part of an almost unbelievable trend that found 25.6 million adults - 10.8% of the adult population - hit by the crime in 2011.

[RELATED: FTC: Identity theft retains its throne as No.1 worst scourge in Top 10 consumer complaint list]

A comprehensive study Consumer Fraud in the United States out this week from the Federal Trade Commission said the Internet, which includes email, social media, auction sites and classified ads, was the location for most fraud, followed by print advertising, and TV and radio. 

The deep dive fraud survey was conducted in late 2011 and early 2012 with the agency calling 51,192 "working telephone numbers." It is the first the agency has done on this specific topic since 2005.

The  top 10 fraud categories were: 

  • Weight-loss Products
  • Prize Promotions
  • Unauthorized Billing for Buyers' Club Memberships
  • Unauthorized Billing for Internet Services
  • Work-at-Home Programs
  • Credit Repair Scams
  • Debt Relief
  • Credit Card Insurance
  • Business Opportunities
  • Mortgage Relief Scams

Some other interesting finding directly from the FTC report:

  • Print media - direct mail solicitations, newspaper or magazine advertisements, and posters or flyers - were the second-most frequent source of information about offers that turned out to be fraudulent, accounting for almost 20% of incidents. This was a decline of about 8% points since 2005.
  • Telemarketing was the source of information in just under 10% of incidents, a figure that was almost the same as 2005.
  • Orders were placed using the Internet in almost 40 percent of fraudulent incidents in 2011. This was an increase of 20 percentage points since the 2005 survey when roughly 20% of frauds were ordered via the Internet.
  • Orders were placed by telephone in another 30 percent of incidents. This figure was largely unchanged from the results of the 2005 survey.
  • The percentage of orders placed by mail decreased from just over 20% to 12%, while the proportion of orders that were placed at the sellers' place of business fell from around 16% to 12%.
  • Credit cards were used as the method of payment in over half - 56 percent - of all fraudulent transactions. In another 15% of incidents, consumers paid for a fraudulent product or service directly from their checking account. These include cases where the seller obtained the money by using the consumer's debit card or card number and cases in which the seller took the money directly from the account after obtaining the account number, as well as cases where the consumer wrote a check to the seller.
  • Fraudulent work-at-home programs - programs where purchasers paid for a program that was promoted as enabling consumers to earn money by working at home and where purchasers did not earn at least half of the amount they were told they would earn - ranked fifth among the specific frauds included in the survey, with an estimated 1.8 million victims - 0.7 % of the adult population.
  • The FTC said an estimated 17.3% of African Americans and 13.4% of Hispanics were victims; the rate for non- Hispanic whites was 9%.
  • The survey found that high school graduates were the least likely to have been fraud victims; those who did not complete high school were the most likely to have been victims.

[RELATED: FTC awards $50k in prizes to cut off exasperating robocalls]

  • Consumers who were more willing to take risks and those who had recently experienced a negative life event (such as a divorce, death of a family member or close friend, serious injury or illness in their family, or the loss of a job) were much more likely to have been victims.
  • Consumers who indicated they had more debt than they could handle were significantly more likely to have been fraud victims than those who were more comfortable with the amount of debt they had.

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