Typology of Fraudulent and Deceptive Commercial Practices Cases in E-commerce - Economic Crisis Focus

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Allan Cole
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1 Typology of Fraudulent and Deceptive Commercial Practices Cases in E-commerce - Economic Crisis Focus OECD ICPEN Joint Meeting 1 April 2009 Stacy Feuer Assistant Director for International Consumer Protection US Federal Trade Commission

$Econsumer Complaints Top Products or Services by Complaint Count 1 January 1 December 31, 2008 Banks 3% Credit Cards 3% Others 6% Cars 3% Travel\Vacations 3% Internet Access Services 3% Shop-at-Home\$

2 Econsumer Complaints Top Products or Services by Complaint Count 1 January 1 December 31, 2008 Banks 3% Credit Cards 3% Others 6% Cars 3% Travel\Vacations 3% Internet Access Services 3% Shop-at-Home\ Catalog Sales 50% Lotteries 5% Foreign Money Offers 5% Clothing 5% Computers: Equipment\Software 7% Internet Auction 7% 1 Percentages are based on the 10,308 econsumer complaints received from January 1 to December 31, Federal Trade Commission Released March 2009

3 Econsumer Complaints Top Violations 1 January 1 December 31, 2008 Failure to Honor Warranty or Guarantee 3% Undisclosed or Unsubstantiated Charges 3% Merchandise or Service Not in Conformity with Order 4% Other Violations 21% Merchandise or Service Never Received 21% Defective/Poor Quality 5% Billed for Unordered Merchandise or Service 5% Unauthorized Use of Identity/Account Information 5% Failure to Honor Refund Policy 8% Cannot Contact Merchant 10% Other Misrepresentation 15% 1 Percentages are based on the 14,124 econsumer law violations reported from January 1 to December 31, 2008, NOT the total number of econsumer complaints. One complaint may have multiple law violations. Federal Trade Commission Released March 2009

4 Top 25 Complaint Categories 2008 Rank Category No. of Complaints Percentages 1 1 Identity Theft 313,982 26% 2 Third Party and Creditor Debt Collection 104,642 9% 3 Shop-at-Home and Catalog Sales 52,615 4% 4 Internet Services 52,102 4% 5 Foreign Money Offers and Counterfeit Check Scams 38,505 3% 6 Credit Bureaus, Information Furnishers and Report Users 34,940 3% 7 Prizes, Sweepstakes and Lotteries 33,340 3% 8 Television and Electronic Media 25,930 2% 9 Banks and Lenders 22,890 2% 10 Telecom Equipment and Mobile Services 22,387 2% 11 Computer Equipment and Software 21,442 2% 12 Business Opportunities, Employment Agencies and Work-at-Home Plans 20,286 2% 13 Internet Auction 17,294 1% 14 Advance-Fee Loans and Credit Protection/Repair 17,263 1% 15 Health Care 16,275 1% 16 Auto Related Complaints 14,278 1% 17 Travel, Vacations and Timeshare Plans 13,200 1% 18 Credit Cards 13,196 1% 19 Magazines and Buyers Clubs 10,188 1% 20 Telephone Services 9,300 1% 21 Office Supplies and Services 9,091 1% 22 Investment Related Complaints 7,980 1% 23 Home Repair, Improvement and Products 7,635 1% 24 Debt Management and Credit Counseling 6,718 1% 25 Real Estate 6,573 1% 26 Grants 2,634 <1% 27 Charitable Solicitations 1,889 <1%

5 Typology of E-commerce Cases Category 1: Fraudulent practices that exploit capabilities of Internet and e-commerce to victimize consumers, e.g., spam, spyware, phishing Category 2: Traditional fraudulent and deceptive commercial practices using the Internet and e-commerce as advertising and marketing tool, e.g., free offers that aren t really free Category 3: Cases that fall in more than one category, e.g., spam s selling bogus weight loss products

7 Category 1: Internet-Based Scams FTC Asks Court to Hold Internet Pagejacking Defendants in Contempt (Jan. 31, 2008) Judgment Entered Against Spyware Scammer (Mar. 10, 2008) FTC Halts Illegal Spam Operation: Adult Site Violated CAN-SPAM Act (May 6, 2008) Court Halts Bogus Computer [ Scareware ] Scams (Dec. 10, 2008)

8 Category 2 Traditional Scams on Internet Online Advertiser Settles FTC Charges. Free Products Weren t Free (Jan. 30, 2008) ValueClick to Pay $2.9 Million to Settle FTC Charges (Mar. 17, 2008) Free Software CD Internet Operation Settles FTC Charges (June 11, 2008) FTC Targets [Online] Weight-Loss Marketers Allegedly Bogus Free Sample Offers (Feb. 9, 2009)

9 Category 3 Hybrid Cases Judge Agrees with FTC, Orders Spammers to Pay More Than $2.5 Million and Stop Selling Bogus Weight-Loss and Anti-Aging Products (Feb. 4, 2008) FTC Shuts Down, Freezes Assets of Vast International Spam Network (Oct. 14, 2008) FTC Charges Marketers of Kinoki Foot Pads With Deceptive Advertising; Seeks Funds for Consumer Redress (Jan. 28, 2009)

10 Economic Crisis Scams Mostly Category 2 scams: Online Marketers of Prepaid Debit Cards to Subprime Consumers Will Pay More than $2.3 Million to Settle FTC Charges (Jan. 24, 2008) FTC Obtains Court Order Halting Internet Payday Lenders Who Failed to Disclose Key Loan Terms and Used Abusive and Deceptive Collection Tactics (Feb. 23, 2009) Also Category 1 scams, e.g., phishing: Consumers Warned to Avoid Fake s Tied to Bank Mergers (Oct )

11 Types of Scams Employment scams Work-at-Home Business opportunities Economic stimulus package scams Government grants and payment schemes Collateral negative option schemes, unauthorized billing, spyware Credit repair scams Debt settlement scams Mortgage loan modification and foreclosure recovery schemes

13 Employment: Work-At-Home Scams FTC Acts Against Scammers Who Marketed Envelope Stuffing Schemes to Spanish-Speaking Consumers Across The Nation (Aug. 21, 2008)

News Flash! FTC Warns Consumers About Economic Stimulus Scams March 4, 2009.

16 News Flash! FTC Warns Consumers About Economic Stimulus Scams March 4, The FTC is warning consumers to stay away from websites that claim the stimulus package gives out easy-toget grants for almost anyone that applies. These ads, which feature photos of President Obama and Vice President Biden, show up on social networking sites, streaming video sites, search engines and more. Any site that says you have to pay money to get free money is a scam.

17 PRESIDENTOBAMAGRANTS.COM

21 Credit Repair FTC Charges Seven Credit Repair Companies with Deceiving Consumers Throughout the U.S. (Mar. 17, 2009) CREDIT PROBLEMS? Trying To Buy A House? Have A Low Credit Score? We Have the Solution for You! WE CAN LEGALLY RESTORE YOUR CREDIT BY ELIMINATING Late Payments Collections Judgments And other negative information 100% Guaranteed to raise your credit score! FREE CREDIT CONSULTATION

25 Stacy Feuer Assistant Director for International Consumer Protection The views expressed in this presentation are my own and do not reflect the views of the Commission or any individual Commissioner.

Helping Victims of Identity Theft and Consumer Fraud Crimes., 2017 at 3 pm ET Thursday, July 13, 2017 at 3:00pm ET

Helping Victims of Identity Theft and Consumer Fraud Crimes, 2017 at 3 pm ET Thursday, July 13, 2017 at 3:00pm ET What is the need? What FTC resources are available to assist victims of ID Theft and fraud?