Identity Fraud Tops FTC Annual List of Consumer Fraud Problems

How to protect yourself from identity fraud and the other big consumer scams of the year: Internet ScamBusters #71

The FTC just released its annual consumer fraud and ID theft report yesterday — and there are some fascinating results we want to share with you.

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So, let’s get started…

How to Protect Yourself From the Biggest — and Worst — Internet Scams

We’ll start by summarizing the most interesting findings of the FTC’s 2003 Consumer Fraud and ID Theft Report. Then, we’ll focus on three of the top Internet issues, and give you specific — and easy — recommendations for how to avoid getting taken.

The FTC received 516,740 consumer complaints in 2003, up almost 28% from 2002. Forty-two percent of these related to identity theft.

Excluding identity theft, the top 10 category rankings were:

– Internet auctions (15%)

– Shop at home, catalog sales (9%)

– Internet services and computer products (6%)

– Prizes/sweepstakes and lotteries (5%)

– Foreign money offers (4%)

– Advance-fee loans and credit protection (4%)

– Telephone services (3%)

– Business opportunities and work-at-home plans (2%)

– Magazine and buyers clubs (1%)

– Office supplies and services (1%)

Internet related fraud accounted for 55% of the reported complaints, up from 45% in 2002.

The total losses reported exceeded $437 million, with victims losing an average of $228. Of this, Internet losses totaled almost $200 million, and about $195 per victim.

Brief analysis: Clearly, Internet fraud is a very significant portion of overall fraud. Identity theft continues to grow significantly. We believe there are no real surprises on the category list. You can find our discussion of these issues in the ScamBusters archives.


Let’s look at three of the most important types of fraud, and summarize how to protect yourself.

1. Identity Theft

By far the largest problem, identity theft does not just involve losing money. It can take thousands of hours to repair the damage done to your credit when a scammer steals your financial information and your identity.

We recommend that you protect yourself by:

– Never giving out financial information to people who contact you out of the blue.

– Buy and use a shredder. Don’t let scammers hunting through your garbage find your bank and credit card account numbers, pre-approved credit card invitations, etc.

– Avoid falling for ‘phishing’ scams. For more information on this extremely fast-growing aspect of identity theft, see:


– Don’t carry extra credit cards or financial information with you that you don’t use on a daily basis. In other words, leave the Gold card at home if you don’t use it.

– Don’t post private information in public (or even semi-private) forums or venues on the Internet. You never know who might be lurking.

– Be extra careful with your passwords.

– Install and use a firewall.

For more on Identity theft, visit



2. Internet Auctions

There are many ways you can get scammed if you buy or sell using Internet auction sites. Three of the most common are:

– Misrepresentation: The merchandise turns out to be different than what it sounded like. In other words, what you see and read about is NOT what you get.

– Failure to ship: You pay for the product but receive nothing.

– Escrow fraud: For more expensive items like cars and jewelry, the seller asks you to use a fraudulent escrow company.

It’s almost impossible to protect yourself from auction fraud 100% of the time. The good news is that most auctions are legitimate.

Here are three things you can do to significantly reduce your chances of getting taken:

– Check out the seller’s rating. All of the reputable auction sites let buyers rate their experiences with sellers. Be sure to check this info before you bid and send money to a seller.

– If you have any questions at all about the auction, ask the seller. You want to understand exactly what you’re buying to reduce the likelihood of a misunderstanding.

– Only use reputable escrow companies, such as those recommended by the auction sites. Scammers are great at creating compelling ‘sob stories’ of why it’s important to use their special escrow company. Don’t use escrow companies recommended by sellers.

For much more on auction fraud, visit:


3. Advance-fee loans

Most people know this as the ‘Nigerian fee scam.’ We’ve written about this extensively, so you can learn more at:


This year, the new variations were new countries and new reasons behind why the money is now supposedly available for transfer.

Churches and religious groups have been especially hard hit as religious leaders are told that a wealthy person died and after praying, they now believe that their small church should be the recipient of a few million from the deceased person’s estate. For more on this variant, visit:


We’ll make only one recommendation about this type of scam: If you receive ANY email from someone you don’t know offering you millions of dollars — hit delete. It’s a scam.

Finally, we’d like to conclude with our single best recommendation for protecting yourself from Internet fraud: Never respond to — or buy from — any unsolicited email.

That’s it for this month. Next month we have a special treat for you. In the meantime… please check out our two new offers below. And have a great month!