A century ago, the National Consumers League was founded as America's first nonprofit consumer group. From the beginning, the League has led the battle against overcrowded working conditions, unsanitary food handling procedures and other market and workplace abuses. While NCL is still in the forefront of the struggle for increased food safety and the abolition of sweatshops and child labor, its efforts have also broadened to encompass some of the newer threats facing the American consumer today. One of those threats is fraud. Criminals attempt to raid the pockets of unsuspecting consumers over the phone, through the mail, in person or Online.

     To fight this growing threat, the National Consumers League founded the National Fraud Information Center in 1992. NFIC was designed to fight telemarketing fraud through by facilitating the enforcement efforts of federal and state agencies and by prevention-oriented consumer education campaigns. We run a national 800# hotline where consumers can call to ask questions and report cases of fraud. That number is 1-800-876-7060. Consumers in the US and Canada now know to call NFIC before sending their money. We handle on average 350 calls a day at the NFIC phone center. Of these, approximately 35% are consumers who have already lost money to scam artists. But we can still help them. Our telephone counselors can assist English and Spanish speaking consumers by taking a full report of what happened, including all of the information a law enforcement agency needs. This report is entered into our computer system and is faxed out in real time to over 160 law enforcement agencies all across North America whose interests match the report. The data is also shared with the Federal Trade Commission and entered into their Consumer Sentinel database for use by federal and state investigative agencies. NFIC works closely with authorities in both the US and Canada to ensure that all cases of fraud reported to us are referred to the appropriate agencies.

     In early 1996, the National Consumers League decided to expand its efforts to cover scams on the Internet. Thus was born the NFIC Web site and the Internet Fraud Watch project. With the creation of www.fraud.org and the Internet Fraud Watch section, www.fraud.org/ifw.htm, consumers from all across the globe can report fraud through our online forms 24 hours a day, 7 days a week.

     Fraud.org now receives over 120,000 visits and 1500 e-mails per week from consumers all across the globe. The Internet Fraud Watch compliments the efforts of the National Fraud Information Center by performing the same prevention and reporting functions for Internet based fraud that NFIC does for telemarketing. IFW uses the same 800# and Web site as NFIC, allowing consumers and law enforcement one call or URL for all the information they need on telemarketing and Internet fraud.

     And what are the most common frauds online?

Top 10 Frauds as Reported to NFIC/IFW from Jan.-June 1999

     If you'll notice, travel fraud is not listed among the top 10. Last year, when I spoke before you, travel fraud was the 13th most commonly reported scam online. According to our computers it is now the 32nd most commonly reported scam. This statistic is deceptive. Scams are now no longer as easy to define as they were before. Elements of multiple scams are blended together. Many of the scams that people in this room would consider travel scams are actually located in other categories. They are scattered among business opportunities, pyramid schemes, work-at-home plans and auctions.

     Of special concern is one particular combination travel scam - the sale of tickets, vouchers and travel-related services in online auctions. The variety of items sold in auctions is enormous. One common scenario involves a crook claiming that they purchase a nonrefundable but transferable ticket and are now unable to use it. He or she claims that their willing to sell the ticket for cheap, possibly even lose some money on it, as long as he or she doesn't loose the entire ticket price. Usually the ticket is for travel between two very desirable locations and coincides with a popular holiday or school travel. The high bidder in the auction sends payment and either gets nothing or gets a useless travel voucher.

     Another scenario involves frequent flyer miles. The scammer sets up an auction claiming that his or her frequent flyer miles are about to expire and that they are willing to use them to buy a ticket to anywhere for the highest bidder. Once again the high bidder sends payment and usually gets nothing. Sometimes, the scammer sends a letter stating that he/she JUST found out that the airline won't let him/her transfer miles in that way and that a refund will be sent shortly. Of course, a refund is never sent.

     Sometimes it's not just airline tickets but entire travel packages being sold at auction. The auction description tells potential bidders of luxury hotels, festive cruises and exotic ports of call. Sometimes the criminal claims to be unable to use the cruise himself/herself. Other times, the claim is that there were slots left empty in a group trip (a church or class trip for example) and so the tickets are being made available on the cheap. Once again the high bidder sends in payment and either receives nothing or travel vouchers.

     Both of these scenarios have something in common. In both cases, the crook DOES NOT claim to be a travel agent. In traditional travel scams the criminal poses as a travel agent or broker offering low cost tickets or packages. One of the best pieces of advice that we could give in the past was to check with professional associations such as ASTA to see if the vendor was actually a travel agent. And, since ASTA prohibits the sale of vouchers as a part of its code of ethics, the sale of vouchers was an immediate tip-off to savvy consumers. Unfortunately, neither of these pieces of advice applies anymore. The crooks are no longer claiming to be travel agents. They now portray themselves as an average person who simply needs to get rid of unused tickets/miles without losing too much money.

     So how can a consumer protect himself/herself from this new type of scam? For starters, check out the verifiable information. For example, if the person claims to be selling frequent flier miles, contact the sponsoring airlines and ask if those miles can be sold and/or transferred. If the person cannot nominate anyone he/she desires to use the miles, then don't bid on or offer to purchase the miles. If it's a travel package, contact the companies involved in the trips components. If the person selling the package says they bought a cruise for $600 but is offering to sell it for as low as $400, call the cruise line. You might find out that the ticket isn't transferable or that the ticket actually costs only $300. It might even turn out that the cruise line isn't running a cruise at that time or place.

     As if the auction scams weren't enough, there are still other types of travel combination scams. For example, there are pyramid schemes where the "products" are travel vouchers. Or contests where the prize is a fabulous vacation package but hidden in the entry form is an authorization to change long distance carriers. No one wins the trip but everyone has their long distance switched to an exorbitantly expensive carrier.

     Finally, there are the traditional travel scams we've all seen by phone or mail but that are now online. A consumer visits a fraudulent travel Web site. She sees a contest going on and fills out an entry form. A few weeks later she receives an e-mail claiming that she has won a fabulous Caribbean vacation for two. The vacation is discounted to only $400 and she can take it any time within the next 18 months. She jumps at the chance, calls the number in the e-mail and gives them her credit card number. What she gets is a vacation certificate and a travel voucher. They promise to be redeemable for a vacation anytime within the next 18 months. Unfortunately, every time she tries book her vacation she either gets a busy signal, the "agent" never gets back to her or she's told that all the slots are filled on that date. Soon her 18 months are up and her vouchers are no longer valid. Her prize turned into a big scam.

     While scams online are both new and old, free standing and combinations, the Internet itself creates a whole new set of problems and opportunities for law enforcement and for criminals. There are millions of people online, with thousands of new users every day. Cisco systems highlights this growth in their current ad campaign. They point out that there are now more e-mails sent every day then regular mail, including junk mail. Once a consumer goes online, he or she is bombarded with unsolicited commercial e-mail (spam) advertising everything from legitimate services to fraudulent investment schemes. Web sites abound offering both legitimate and fraudulent products and services. Consumers often find it difficult to determine which site is truly legitimate and which one is trying to steal their hard-earned cash. Internet Fraud Watch and other groups attempt to educate consumers on how to spot a scam, but plenty of people find out too late.

     These victims are not without support. Federal and state law enforcement agencies have been extremely active on the Internet. Just this past August, the FTC and 21 other agencies charged 25 companies in "Operation Trip Trap." During FTC sponsored surf days, agencies from all across the globe surf the Internet looking for possible fraud. Many attorneys general offices have established task forces to handle Internet fraud in all its manifestations. Law enforcement agencies are using the power of the Internet to bring criminals to justice.

     The Internet Fraud Watch and the National Fraud Information Center facilitates the efforts of law enforcement agencies by providing a one-stop reporting center for consumers at www.fraud.org.

     However, the Internet is the perfect medium for criminals as well. While a consumer may get a telemarketing call and remember the oft repeated warnings about telemarketing fraud or visit a store and decide that the products being sold really aren't as great as the ads claim, there's no such protection online. Anyone can put up a great looking Web site and the average consumer has difficulty determining which sites are legitimate and which are scams. Plus, when you buy something online, you are essentially buying it sight unseen. If something goes wrong and you've purchased it from a legitimate company, then you can always return it for a refund or replacement. But, as the victims of travel scams online can tell you, it's not always so easy to get satisfaction from a company you've never really seen.

Most Common Methods of Initial Contact Reported from Jan.-June 1999

     The nature of the Internet also makes directly contacting consumers cheaper than ever. A Web site with carefully chosen keywords will rank highly on Internet searches drawing thousands of consumers directly it. A company can also send out thousands upon thousands of e-mails for no more than the cost of a mass-mailing program and an Internet access account. It's also easy to post messages to hundreds of different newsgroups at once. If such e-mails or posts come from legitimate companies, it's simply an annoyance. But crooks selling bogus travel packages and forging header information to mask their identity are a danger to consumers. A company may use throw-away accounts (easily created and discarded free accounts) and forged headers to make it appear that e-mails and posts recommending a travel company come from many different people instead of the crooked agency itself. It's far easier than most people realize for cybercrooks to hide their real identities and locations.

Top 20 Company Locations Reported from Jan.-June 1999

     And have you ever tried to get a refund from another continent? On the Internet national boundaries are meaningless. Crooks can be located on the other side of the planet or right down the street. It's all the same online. Consumers must realize that consumer protection laws in the US are not the same as in other countries, nor do they always apply. You may have certain rights here, but those rights may be impossible to enforce when the company is half-way around the globe or just north of our borders for that matter. If you'll notice the ninth most common location for companies to be located was in the Canadian province of Ontario.

Top 20 Consumer Locations Reported from Jan.-June 1999

     Crooks aren't the only people on the Internet from around the globe. Victims of Internet fraud can also be found everywhere in the United States and abroad. The states with the largest populations, of course, rank highest. But many of the smaller and/or predominantly rural states are ranked among the top 20. The ease of browsing and purchasing online with home delivery is especially tempting when the nearest town is over an hour away. Getting to a traditional travel agent for some people is a trip in and of itself.

Most Common Payment Methods Reported from Jan.-June 1999

     Unfortunately, while these far-flung consumers have learned to master their computers they still haven't learned a few basic rules of purchasing. A frighteningly large number of consumers still send Money Orders and Checks. While, thankfully, the number of people sending cash has decreased dramatically relative to the other payment methods, consumers are still very reluctant to use their credit cards to make purchases. When a consumer pays with a money order there is usually no way to stop the payment or dispute it. Once it's mailed, it might as well be cash. With a check, not only do consumers usually not realize they've been scammed until after the check's been cashed, but the check also reveals his/her bank account and routing number, all a crook needs to make bank debits at will.

     Relatively few people report paying by credit cards of any type, which is ironic considering that consumers have more protection in the event of fraud, deception or non-delivery of goods with credit cards than with any other payment method. You can always dispute a charge on a credit card bill, as long as you file a written dispute within sixty days. With cash there's not even any proof that you paid, and try telling the convenience store clerk that sold you the money order that you want him to go get your money back for you.

Age Range of Consumers Reporting Fraud from Jan.-June 1999

     Our statistics also show that the consumers most likely to be scammed online are of an age that is both likely to be knowledgeable about computers and have the money or credit to purchase such big ticket items as vacations online.

     Public Education must be a major component of any effort to curb Internet fraud. Consumers need to know how to check out the offers they see and the companies that make them. They need to learn how to identify the warning signs of fraud in this new medium, how to protect their privacy and how to pay safely. They need to know that legitimate travel agents, such as ASTA members, abide by strict codes of ethics and will never sell such things as travel vouchers or use the hard sell tactics commonly seen in scams. Industry groups need to make sure that consumers are aware of these standards. But as our statistics show, it's not enough to learn about one type of fraud. Consumers need to be educated about many different scams so that they can spot the different fraudulent parts of the new combination scams online.

     The National Consumers League has taken a leading role in educating the public about Internet fraud. The National Fraud Information Center/Internet Fraud Watch Web site (www.fraud.org) provides a wealth of information on safe cybershopping and tips on how to avoid many different types of common scams. The Web site also has articles warning consumers about new trends, the latest scams, and recent government actions. Plus consumers can use our links to go directly to other useful resources, such as the Federal Trade Commission or the BBBOnLine.

     But education and government enforcement efforts are not enough. In the first half of 1999 the most common place for scams to occur was an online auction house. While some auction sites have tried to protect consumers by offering escrow services, feedback areas, and promising to remove problem vendors. However, more needs to be done. Frequently there are no warnings of any kind that fraud might be possible. Instead consumers are told the exact opposite on most sites. Auctions are fun and safe. And even some sites that do have warnings and that do have feedback areas make it difficult to report potential abuses. The industry needs to take greater responsibility for the safety of its customers. The vast majority of auction sites need to follow the lead of a handful of major sites that offer escrow services, complaint procedures and feedback areas.

     With all of that said, e-commerce is the great frontier for business. While it does have the possibility of fraud, so does any other kind of business transaction. With consumer education, government enforcement actions, and industry consumer protection initiatives, e-commerce can be a safe and incredibly convenient method for conducting business. I should know, I make most of my purchases online.

     I would like to thank the American Society of Travel Agents and Stan Bosco for inviting me to speak at this conference.

NFIC is a project of the National Consumers League. 
All rights reserved. © 1999.