Sweepstakes and prize offers have once again topped the list of telemarketing frauds reported to the National Fraud Information Center. A project of the National Consumers League, the NFIC was established in 1992 as the only national toll-free hotline, 800-876-7060, for consumers to get advice about telephone solicitations and to make reports of suspected fraud to law enforcement agencies.
Questions and fraud reports can also be made via this site. "Our expert counselors help consumers avoid being taken by identifying the hallmarks of fraud, such as being asked to pay a fee of some sort in order to get the prize or sweepstakes winning," said NFIC Director Susan Grant. Reports from victims are entered into NFIC's data system.
In 1996, the NFIC processed 5.7% more reports of possible telemarketing fraud than in the previous year. Reports are downloaded daily into the database maintained by the Federal Trade Commission and the National Association of Attorneys General, and are also provided to nearly 160 other agencies at all levels of government in the United State and Canada. The top ten telemarketing scams are:
Noting that "Most of these scams are designed to appeal to people's need for financial security," Grant observed that while some scams are perennial, such as work-at-home schemes, others are geared to take advantage of whatever is hot at the moment, like investments in wireless cable and other telecommunications systems licensed by the Federal Communications Commission. "Whether it's help winning the lottery or an offer to provide a loan or credit, all of these scams have one thing in common--empty promises."
The increase of telemarketing fraud reports made to the NFIC from 1995 to 1996 demonstrates that this problem is not disappearing. Certain types of fraud are on the rise. For instance, scams in which consumers are asked to pay to enter foreign lotteries and are guaranteed big winnings rose from #10 to #6. "Perhaps consumers are becoming so accustomed to state-run lotteries and other forms of legal gambling that they are better targets for fraudulent lottery offers," speculated Grant. "Unfortunately, their money just ends up in the con artists' pockets." She also said that while most of these solicitations were for Canadian lotteries in 1995, offers to enter lotteries in Australia, Germany and other countries increased in 1996.
The federal Telemarketing Sales Rule (TSR), which took effect December 31, 1995 and bars requests for payment before certain types of services are actually rendered, may account for why the number of reports concerning so-called recovery services fell precipitously in 1996. Recovery services, in which companies offer to help consumers get money back that they have previously lost in telemarketing frauds--for a fee--ranked third on NFIC's top ten list in 1995 but came in at #16 in 1996.
On the other hand, reports of fraudulent loan and credit arrangements involving upfront fees, also prohibited by the TSR, rose sharply. It appears that most of these bogus loan and credit operations moved from the United States to Canada to evade the rule (it still applies if they are soliciting U.S. consumers, but enforcement across international borders is more difficult). The increase probably reflects the fact that Canadian law enforcement authorities began to transmit reports concerning this type of cross-border fraud to the NFIC in mid-1996.
The NFIC statistics reveal one more significant trend in telemarketing fraud: it is becoming more global. While California remains the top location for illegal telemarketing operations targeting U.S. citizens, the Province of Quebec ranked #3 in 1996, up from #25; the Province of Ontario was #8, up from #20; British Columbia was #9, up from #10; and Nova Scotia, which was #11 in 1996, but did not even appear in the 1995 list. Frauds involving telemarketing operations in "other countries" came in at #14. As a result, the NFIC is being asked for information by a growing number of law enforcement agencies outside of the United States.
NFIC is a project of the National Consumers League. All rights reserved. © 1997.