Computer Crime Research Center

Internet Consumer Fraud Continues to Rise
(By Roy Mark)

The Internet tops the list of the Federal Trade Commission's (FTC) annual report detailing consumer complaints about identity theft and listing the top 10 fraud complaint categories reported by consumers. According to the FTC, 47 percent of non-identity theft complaints were Internet-related, a 31 percent increase since 2000.

As in 2000 and 2001, identity theft topped the list, accounting for 43 percent of the complaints lodged in the FTC's Consumer Sentinel database. The number of fraud complaints jumped from 220,000 in 2001 to 380,000 in 2002, and the dollar loss consumers attributed to the fraud they reported grew from $160 million in 2001 to $343 million in 2002.

The top 10 categories of consumer fraud complaints in 2002 include Internet auctions (13 percent), Internet services and computer complaints (6 percent), advance fee loans and credit protection (5 percent), shop-at-home/catalog sales (5 percent),foreign money offers (4 percent), prizes/sweepstakes and lotteries (4 percent), business opportunity and work-at-home plans (3 percent), telephone services (2 percent), health care (2 percent), and magazines and buyers clubs (2 percent).

J. Howard Beales III, director of the FTC's Bureau of Consumer Protection, said the increased numbers of complaints from 2001 to 2002 had several possible explanations.

"One of them has to do with the success of our outreach efforts -- that is, more people know where to complain about fraud and ID theft," Beales said. "That's important because more complaints give us a more complete picture of the types of fraud that are occurring, the characteristics of fraud victims, and the companies that are appropriate targets for law enforcement."

Beales said another explanation for the increase has to do with the increase in the number of partners to the Consumer Sentinel database who contribute and use data for enforcement purposes. Forty percent of the complaints in the Sentinel database come through data contributors like the Social Security Administration's Office of Inspector General, the Internet Fraud Complaint Center, the National Consumers League's National Fraud Information Center, and Better Business Bureaus around the country.

Consumer Sentinel is a database established in 1997 by the FTC in conjunction with the state Attorneys General and Canada's Phonebusters.

"Sentinel currently provides about 630 law enforcement agencies in the U.S., Canada and Australia with access to one million complaints. Consumer Sentinel has become law enforcement's virtual water cooler -- a place where information can be shared, investigations can be coordinated, and resources can be pooled. This makes for smarter and better law enforcement," Beales said.

Beales also said there is no evidence that the explosive growth of the Internet has led to an increase in consumer fraud. Instead, he said, it has revived a number of near-dead frauds such as chain letters.


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