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NCL warns Senate of recession-fueled fraud

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New Fraud Center Statistics Underscore Call for Increased Federal Fraud Fighting
Release Date: July 14, 2009
Contact: 202-835-3323, This email address is being protected from spambots. You need JavaScript enabled to view it.

WASHINGTON, DC – Appearing today before a Senate subcommittee, the National Consumers League (NCL) said that frauds linked to the bad economy are on the rise and called upon federal fraud cops to “vigorously enforce existing anti-fraud statutes and regulations” and redouble their efforts to educate consumers about the growing threat of recession-fueled fraud.

NCL warned that consumers’ thinly-stretched pocketbooks have “increased their vulnerability to fraudsters offering promises of extra income. The consumer group warned that nearly one in three consumers could be at risk for fraudulent work-at-home schemes and that fake check complaints involving phony sweepstakes and bogus “mystery shopper” jobs continue to increase.

Top Scams, January - June 2009 (read full report)

1. Fake Check Scams
2. Internet: Gen Merchandise
3. Prizes/Sweepstakes/Free Gifts
4. Phishing/Spoofing
5. Nigerian Money Offers (not prizes)
6. Business Opportunities/Franchises/Distributorship
7. Advance Fee Loans, Credit Arrangers
8. Friendship & Sweetheart Swindles
9. Internet: Auctions
10. Lotteries/Lottery Ticket Buying Clubs

“Consumers face a double bind. The economic crisis has made them increasingly vulnerable to fraud while local agencies that investigate scams and enforce the laws are shutting their doors, leaving consumers with fewer avenues to protect their interests,” said Greenberg. “Absent increased action at the federal level to investigate and prosecute scam artists, consumers will be caught between the proverbial rock and a hard place.”

In support of Greenberg’s testimony, NCL’s Fraud Center released its semi-annual ranking of the top telemarketing and Internet scams plaguing consumers so far in 2009, with fake check scams continuing to top the list. For the first six months of 2009, fake check scams made up more than 44 percent of the total complaints NCL received, with more than half of these complaints (55 percent) involving a fraudulent mystery shopper job or phony sweepstakes winnings. Average losses per victim were more than $3,000.

Phony business opportunity scams -- which include fake franchises and distributorships – were not among the most commonly reported scams to the Fraud Center in 2008. However, in the first six months of 2009, they have risen into the top ten most-reported scams. Earlier this year, an NCL-commissioned survey found that 31 percent of respondents were more likely to consider starting a home-based business due to the current economic climate. NCL believes that this is a reflection of a weak economy, loss of jobs, and consumers’ eagerness to find viable employment.

“The worsening economy has clearly had an impact on consumers' vulnerability to fraud.” said John Breyault, NCL Vice President for Public Policy, Telecommunications and Fraud. “Consumers should be wary that scammers are eager to prey on those in greatest financial need.”

NCL’s Fraud Center is unique among consumer organizations. It was created in 1992 to combat the economic menace of telemarketing fraud. In 1996, it expanded its fraud-fighting efforts to include scams in cyberspace. The Fraud Center’s www.fraud.org and www.fakechecks.org. Web sites are a consumer resource with information on the most common telemarketing and Internet scams. Consumers can report suspected fraud there using NCL’s online complaint form. These reports are then transmitted to the appropriate agencies among NCL’s law enforcement and consumer protection partners in the U.S. and Canada. These reports alert authorities to emerging scams and help put them in touch with victims, while providing the necessary ammunition to investigate and shut down fraudulent operations.

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About the National Consumers League

The National Consumers League, founded in 1899, is America's pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.