The most common scams, the amounts of money victims are losing, and other aspects of telemarketing and Internet fraud have changed in some important respects in the last several months based on complaints made to the National Consumers League's National Fraud Information Center/Internet Fraud Watch programs. Statistics from the first nine months of 2000 provide some interesting insights, especially in the methods of payment in connection with certain fraud categories.
Telemarketing Fraud
Work-at-home scams have fallen since attaining the status of #1 telemarketing fraud last year. Prizes and sweepstakes top the list so far in 2000. While telephone billing scams such as slamming and cramming have also declined, complaints about bogus offers for credit cards and credit card protection plans are rising. Reports about charges for buyers clubs that consumers never agreed to pay for and Nigerian money offers are also increasing; in 1999 neither of those categories were in the top ten. Complaints about buyers clubs have more than tripled, from an average of four per month in 1999 to nearly 14 per month in the first nine months of 2000. Nigerian money offers have increased six-fold, from two per month to more than 12. The good news, however, is that in both telemarketing and Internet fraud, none of the consumers who received the Nigerian money offers actually went far enough to lose money in the schemes. The top ten telemarketing scams and percentage of total reported are indicated below:
| 1999 Top 10 Frauds | Jan.-Sept. 2000 Top 10 Frauds | ||
| Work-At-Home | 16% | Prizes/Sweepstakes | 18% |
| Prizes/Sweepstakes | 15% | Magazine Sales | 14% |
| Telephone Slamming | 15% | Credit Card Sales | 12% |
| Advance Fee Loans | 11% | Work-At-Home | 9% |
| Magazine Sales | 10% | Telephone Slamming | 7% |
| Telephone Cramming | 9% | Advance Fee Loans | 7% |
| Credit Card Offers | 5% | Credit Card Loss Protection | 4% |
| Travel/Vacation | 3% | Telephone Cramming | 3% |
| Credit Card Loss Protection | 2% | Buyers Clubs | 3% |
| Investments | 2% | Nigerian Money Offers | 2% |
Methods of Contact
Consumers fall prey to telemarketing fraud in a number of ways, but con artists most frequently solicit them by phone, mail, or in print advertisements. Telephone solicitations have increased significantly as indicated below:
| 1999 Solicitation Method | Jan.-Sept. 2000 Solicitation Method | ||
| 52% | Phone | 50% | |
| Phone | 30% | 35% | |
| 11% | 9% | ||
Methods of Contact
More seniors are being victimized by telemarketing fraud. In 1999, 26 percent were age 60 and older, but that age group increased to 36 percent of victims in the first nine months of 2000.
Money Lost
Consumers are losing more money to telemarketing fraud, an average of $1,425 per person so far in 2000 compared to $975 in 1999. While the most common method of payment is still by check, there has been a dramatic increase in payments by credit card and debits from consumers’ bank accounts. Those increases are due in part to the rise in complaints about credit card loss protection plans, buyer's clubs, credit card offers, and magazine sales scams.
The top five methods of payment for all telemarketing frauds and percentage of all payments are as follows:
| 1999 Top 5 Payment | Jan.-Sept. 2000 Top 5 Payment | ||
| Check | 36% | Check | 24% |
| Telephone Bill | 23% | Credit | 23% |
| Money Order | 15% | Bank Account Debit | 15% |
| Credit Card | 12% | Telephone Bill | 14% |
| Bank Account Debit | 6% | Money Order | 10% |
When the top telemarketing frauds from January through September 2000 are examined individually in terms of the top methods of payment in each category, stark differences appear. Nigerian money offers are not included since no payments were made:
| Telemarketing Fraud | Method of Payment | |
| Prizes/Sweepstakes | Check | 36% |
| Credit Card | 18% | |
| Wire | 16% | |
| Money Order | 11% | |
| Cash | 7% | |
| Magazine Sales | Check | 44% |
| Credit Card | 39% | |
| Bank Account Debit | 11% | |
| Money Order | 3% | |
| Debit Card | 2% | |
| Work-At-Home | Money Order | 60% |
| Check | 13% | |
| Credit Card | 10% | |
| Bank Account Debit | 5% | |
| Cash | 3% | |
| Credit Card Offer | Bank Account Debit | 60% |
| Check | 13% | |
| Money Order | 10% | |
| Credit Card | 5% | |
| Debit Card | 3% | |
| Work-At-Home | Money Order | 31% |
| Check | 30% | |
| Credit Card | 19% | |
| Bank Account Debit | 9% | |
| Cash | 6% | |
| Telephone Slamming | Telephone Bill | 93% |
| Check | 3% | |
| Bank Account Debit | 2% | |
| Advance Fee Loans | Money Order | 44% |
| Wire | 18% | |
| Check | 12% | |
| Cash | 11% | |
| Bank Account Debit | 5% | |
| Credit Card Loss Protection | Credit Card | 86% |
| Bank Account Debit | 7% | |
| Debit Card | 3% | |
| Check | 2% | |
| Telephone Cramming | Telephone Bill | 88% |
| Check | 2% | |
| Buyers Clubs | Credit Card | 65% |
| Bank Account Debit | 16% | |
| Checks | 6% | |
| Debit Card | 6% | |
| Check | 2% | |
From the information taken in connection with telemarketing fraud reports, it is not possible to determine how many victims gave the companies their bank account or credit card numbers and how many of those companies already had that information. However, at a workshop held by the Federal Trade Commission in July to discuss the Telemarketing Sales Rule, industry representatives acknowledged that there is a growing trend toward marketers having "pre-acquired account information" about consumers.
That information is obtained from the consumers' banks or from other companies with whom they have done business. Pre-acquired account information makes it easier to conclude a sales call quickly because the consumer does not have to provide that information. But it also makes it easier for fraudulent vendors to make credit card charges or withdrawals from consumers' bank accounts even if those consumers never agreed to pay. Credit card charges are especially high in reports about fraudulent credit card loss protection plans and buyers clubs. Bank withdrawals also rank high in several categories, particularly in bogus credit card offers and buyers clubs.
It is interesting to note the percentage of consumers who wire their payments in prize and sweepstakes scams and advance fee loan offers. This is likely due to the sense of urgency that con artists in both schemes create. It is also alarming to see that cash is being sent in some categories: prizes and sweepstakes, work-at-home, and advance fee loans. Payment by cash, often using courier services, helps fraudulent telemarketers get their money quickly and conceal their crimes, and makes it difficult for consumers to document that the frauds occurred.
Location of Fraudulent Companies
Efforts by law enforcement agencies in the United States and Canada to work together to combat cross-border telemarketing fraud appears to be paying off. Fraudulent Canadian companies account for 5 percent of those consumer reported in the first nine months of 2000, down from 9 percent in 1999. But reports about companies located in other foreign countries have risen, from only 1 percent in 1999 to 3 percent in the first nine months of this year.
For more information, write or call the National Consumers League at 1701 K Street, NW, Suite 1200, Washington, D.C. 20006, (202) 835-3323. Log onto NCL at http://www.natlconsumersleague.org
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