Top ten scams of 2016

Bogus Internet merchandise sales continue to bedevil consumers, top complaint list.

2016_scams_table.pngIn 2016, for the fourth consecutive year, the National Consumers League’s Fraud.org received more complaints about Internet merchandise scams than any other type of fraud, making up nearly one-third (29.17%) of complaints received, an increase of 7% from 2015. Internet merchandise scams  are also becoming more expensive for their victims, with a median reported loss of $450 (a 67.9% increase in 2016).

Read the full report here.

Internet merchandise scams come in many forms—often involving bogus sales of high-dollar goods such as electronics, designer clothing, and even pets. Many victims first encounter these scams via online ads promising deep discounts on popular merchandise. When they click on the ads, they are directed to a website to enter payment information or are instructed to contact a scammer directly. Unfortunately, once the money is paid, the merchandise never arrives. In many cases, buyers report being contacted again and instructed to send more money to cover fake “shipping” or “insurance” charges.

Examples of Internet merchandise sales scams:

  • Anna, California. Paid $3,500 for a used Honda. The seller spoofed a third-party payment site and requested the funds in the form of iTunes gift cards. The car never showed up.
  • John, Indiana. Paid $600 for a Rottweiler puppy named Roscoe. Roscoe never arrived.
  • Dan, a farmer from Germany. Lost more than $22,000 being defrauded by a company posing as suppliers of animal feed. Goods were never shipped.
  • Jennifer, Texas. Bought nearly $400 worth of non-existent airline tickets through a fake site.
  • Irene, Chicago. Ordered NFL jerseys through a website claiming to be an official NFL gear vendor. What arrived were clearly low quality knock-offs.

“The convenience of online shopping is simply unbeatable for many consumers,” said John Breyault, who directs Fraud.org. “Obviously there are plenty of legitimate companies online, but there are also fraudulent sellers out to cheat consumers—and they are very good at what they do.”

Breyault offered the following advice for practicing safe online buying habits. (Even more tips available here.)

  • Do a price-check for similar merchandise before trusting an unknown online retailer, especially one advertising on Craigslist. If the price listed is far below traditional online retailers (think Amazon, Best Buy, Zappos) for a piece of popular merchandise (such as wireless phones, game consoles, sneakers, or designer clothing), the “deal” could easily be a scam.
  • Know who you’re dealing with. If the seller is unfamiliar, check with your state or local consumer protection agency and the Better Business Bureau. Some Web sites have feedback forums, which can provide useful information about other people’s experiences with particular sellers. Get the physical address and phone number in case there is a problem later.
  • Look for information about how complaints are handled. It can be difficult to resolve complaints, especially if the seller is located in another country. Look on the Web site for information about programs the company participates in that require it to meet standards for reliability and help to handle disputes.
  • Pay the safest way: Credit card. If a fraudulent transaction is disputed promptly, chances are the consumer won’t be on the hook for the fraud thanks to banks’ zero liability guarantees and federal consumer protections.

Other 2016 trends: Fake check scams making a comeback

Complaints involving fake checks increased significantly in 2016, particularly in off-line schemes (victims contacted by phone, mail or in person—up 33.85% from 2015). In these scams, consumers think they are receiving a check as payment for lottery winnings, as payment for a work-at-home job or other ruse. The catch is that they are instructed to deposit the funds into a personal bank account and send proceeds from the check to the scammer. By the time the bank catches on that it’s a fake check, the money is long gone and the victim is left owing their bank.

Scammers turning away from wire transfer, embracing gift cards as payment method.

Wire transfers and credit and debit cards remain the payment method of choice for scammers, but gift cards as a new form of payment are on the rise. In 2016, Fraud.org saw a 30.86% increase in complaints where the payment method included gift cards, including numerous complaints where scammers asked for payment via iTunes gift cards. In such instances, the victim is instructed to load funds onto a gift card and then give the code and PIN number off the back of the card to the scammer, who then quickly deducts funds from the card, leaving the consumer with worthless plastic and little recourse to obtain a refund.

Median scam loss doubles

The cost of falling victim to a scam increased significantly in 2016. In complaints where a loss was reported, the median loss was $600, double the $300 median loss reported in 2015. The most expensive type of scam for victims continued to be friendship and sweetheart swindles (also known as “romance scams”), with a median loss of $2,000.

Meet the scams: The rest of the worst of 2016

Prizes/Sweepstakes/Free Gifts
Requests for payment to claim fictitious prizes, lottery winnings, or gifts

Recovery/Refund Companies
Scammers contact victims and claim the consumer owes money on a fictitious debt or to help recover money lost in a previous scam

Fake Check Scams
Consumers paid with phony checks for work or for items they’re trying to sell, instructed to wire money back to buyer

Advance Fee Loans, Credit Arrangers
False promises of business or personal loans, even if credit is bad, for a fee upfront

Computers: Equipment and Software
Scammers claim to offer “technical support” for computer problems and charge a fee to fix a nonexistent problem

Phishing/Spoofing
Emails pretending to be from a well-known source ask consumers to enter or confirm personal information

Scholarships/Grants
For a fee, a “search company” offers to conduct customized search for scholarships or grants for students. Scammers take money and run or provide a worthless list

Friendship & Sweetheart Swindles
Con artist nurtures an online relationship, builds trust, and convinces victim to send money

Charitable Solicitations
Scammers contact victims claiming to represent non-existent charities (or real charities they don’t actually work for) and ask for donations.

Regardless of the type of scam, many instances of fraud can be avoided by remembering the old rule of thumb: If something seems too good to be true—it probably is. 

If you ever do have questions about a potential fraud or think you might be a victim of a scam, report it immediately via Fraud.org’s secure online complaint form. Embarrassment or fear of friends and relatives finding out about the crime causes many victims of fraud to remain silent. Only by speaking out can we give law enforcement the tools they need to bring these criminals to justice.

Read the full 2016 report.