FTC Details Efforts to Halt Internet Scams

The Federal Trade Commission today told a Senate committee that efforts to combat fraud and deception on the Internet are critical for all consumers, including seniors, because, “Internet fraud causes significant injury to consumers and harms public confidence in the Internet as an emerging market.” Howard Beales, Director of the FTC’s Bureau of Consumer Protection told the Senate Special Committee on Aging that the Commission has brought 319 law enforcement cases involving Internet scams, including cases involving identity theft, auction fraud, investment fraud and “Nigerian scams,” and cross-border Internet fraud.

According to the testimony, the FTC maintains a central clearinghouse of identity theft victims, making the information available to more than 850 criminal and civil enforcement agencies throughout the nation. The testimony says that in 2003, 214,905 complaints were filed in the ID Theft Clearinghouse, about 10 percent of which came from consumers age 60 or older. The FTC refers identity theft cases to criminal authorities because the FTC Act provides no direct criminal law enforcement authority, but the agency also has brought law enforcement actions to stop practices that involve or facilitate identity theft. “Our cases have attacked alleged ‘pretexting,’ the use of false pretenses to obtain consumers’ confidential financial information, and ‘phishing,’ the use of spam directing consumers to update or validate their confidential payment information on copycat Web sites that appear identical to the sites of the legitimate companies with which they do business.” The FTC also has taken law enforcement action against companies that misrepresent the security they provide for consumer information.

The testimony states that auction fraud accounted for nearly half of all Internet-related fraud complaints consumers reported to the FTC’s Consumer Sentinel Database in 2003. “Among seniors age 60 and over, auction fraud accounted for 29 percent of all Internet-related complaints in 2003, and ranked third in the list of ‘Top 15’ product or service complaints reported by seniors.” The FTC has worked with state attorneys general and local law enforcers in bringing more than 50 civil and criminal cases involving auction fraud, according to the testimony.

The testimony states that deceptive business opportunities and work-at-home scams filled the last two slots of the “Top 15” scams affecting seniors age 60 and older. In response, the FTC has brought law enforcement cases and led state and federal law enforcement sweeps against these investment scams. In addition, ‘Nigerian Scams’ are a persistent con in which a purported third-world official or business representative typically offers to share his family’s fortune with a consumer in return for help with circumventing his country’s currency restrictions by moving assets outside his country to a safe banking haven – but only after the consumer sets up a bank account in the scammer’s name with a good-faith deposit, which soon vanishes. The Commission has issued a Consumer Alert on Nigerian scams as part of its consumer education mission, and assisted criminal authorities in identifying potential cases,” the testimony says.

According to the testimony, cross-border fraud on the Internet is a growing problem, and older consumers are often the targets of cross-border fraud. “Top frauds reported by seniors comprised 20 percent of all cross-border fraud complaints where consumers reported their age. Top frauds reported by consumers age 60 and over included prize promotions, sweepstakes scams, foreign money offers, advance-fee loans, and foreign lotteries – all common cross-border schemes.” The testimony notes that bogus claims for products that promise to cure or treat serious diseases also are a problem for seniors and have been the target of agency actions.

“The Commission is hard at work on efforts to protect all Americans, including the elderly, from Internet scams. Through consumer education outreach efforts and enforcement actions that halt law violations and return money to victims, the Commission seeks both to help consumers protect themselves and to take action when they cannot,” the testimony says.

The Commission vote to approve the testimony was 5-0.

Copies of the testimony are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. P97 4406)