| For Immediate Release | CONTACT: | Holly Anderson |
| 1/27/99 | ||
| (202) 835-3323 | ||
FOR IMMEDIATE RELEASE
WASHINGTON, DC... Cramming, billing consumers for optional
services that they never ordered, was the number one scam reported
to the National Fraud Information
Center last year. The second most reported telemarketing fraud
was advance fee loans, a credit fraud where consumers pay up front
fees hoping to receive personal or business loans.
1998 NFIC Top Ten Telemarketing Frauds
1. Telephone cramming
2. Advance fee loans
3. Telephone slamming
4. Prizes/sweepstakes
5. Work-at-home schemes
6. Magazine sales
7. Credit card offers
8. Telephone pay-per-call services
9. Business opportunities/franchises
10.Travel/vacation offers
The amount of money that consumers are losing to fraudulent
telemarketers in credit-related schemes is on the rise. That's
why the National Fraud Information Center and other fraud fighters
are issuing a special warning today about credit frauds, which
are the focus of National
Consumer Protection Week, February 1-8.
"These companies either call consumers directly or advertise
for them to call to get loans, credit cards, credit card protection
or credit repair services," explains Susan Grant, director
of NCL's National Fraud Information Center. "But these telemarketers
never deliver on their promises. Their real aim is simply to take
money from consumers, not to give them money or credit assistance."
Two other credit-related subjects, credit card loss protection
plans and credit repair, rank 16 and 24 out of a total of 50 telemarketing
fraud categories.
In each of the four credit-related telemarketing fraud categories,
advance fee loans, credit card offers, credit card loss protection
and credit repair, the average loss per consumer went up from
1997 to 1998, in some cases significantly:
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"The hallmarks of all these frauds is that people pay their money up-front and get nothing in return," observes Ms. Grant. "And the crooks seem to be getting more greedy."
"Telemarketing fraud reaches across state, national, and international lines," Ohio Attorney General Betty D. Montgomery said. "Illegal telemarketers use the phone as an assault weapon, and in the wrong hands, it can be just as effective as a gun to your head. The good news is that law enforcement authorities are working together to stop illegal telemarketers no matter where they are."
Canadian law enforcement is also aggressively fighting fraud. According to George Bennett of Industry Canada, "Canadian consumers and businesses will be better protected from telemarketing frauds by new measures contained in proposed amendments to the Competition Act, which will also help address the concerns of The United States about the growing problem of cross-border telemarketing frauds."
In the case of advance fee loans, 80 percent of the fraudulent
telemarketers that consumers reported to the NFIC in 1998 were
located in Canada. Regardless of where the companies are located,
if the victims are in the U.S., U.S. law prohibits telemarketers
from asking for fees up-front to loan money. Barry Elliott, Detective
Staff Sergeant with the Ontario
Provincial Police, and of Project
Phonebusters, warns, "If you can't get a loan where you
live you can't get a loan anywhere."
How a consumer pays is a particularly interesting aspect of credit-related
telemarketing fraud because it varies according to the scam. For
instance, the NFIC's 1998 statistics reveal that most payments
for advance fee loans were by money order or check. But nearly
85 percent of the payments that consumers made for credit card
loss protection plans were by credit card. The telemarketers often
misrepresent themselves as being affiliated with the consumers'
credit card issuers and pretend that they need to "verify"
the account numbers in order for the consumers to qualify for
protection against lost or stolen cards. Some consumers do not
realize that a fee will be charged to their accounts. And since
consumers already have protection by law from liability for lost
or stolen cards, credit loss protection plans are not really necessary
More than 40 percent of the payments in bogus credit card offers were through debits from consumers' bank accounts in 1998, according to the NFIC. "Because these consumers may not already have credit cards and often have credit problems, the easiest way for crooks to get money from them is to ask for their bank account numbers and then withdraw it," says Ms. Grant. Bank account withdrawals also accounted for more than 26 percent of the payments that consumers reported making in 1998 for credit repair services.
NCL cautions consumers never to pay in advance for loans, credit cards, or credit-related services that are offered by telemarketers. Furthermore, people should not provide their credit card or bank account numbers to any vendor unless they actually intend to pay for something with those accounts.
Click here for a top ten fact sheet.
The National Consumers League, founded in 1899, is America's pioneer
consumer organization. The NCL's three-pronged approach of research,
education and advocacy has made it an effective representative
and source of information for consumers and workers. NCL is a
private, nonprofit membership organization dedicated to representing
consumers on issues of concern.
Phonebusters, is a National Task Force established in 1993, which has become the central source of telemarketing complaints throughout Canada. The project partners include the Ontario Provincial Police, R.C.M.P., Industry Canada, several Provincial Ministries, Bankers Association, the Canadian Couriers Association and the Better Business Bureaus.
For more information, write the National Consumers League at 1701 K Street, N. W., Suite 1200, Washington, DC 20006; 202-835-3323.
The National Consumers League, founded in 1899, is America's pioneer consumer organization. NCL's three-pronged approach of research, education and advocacy has made it an effective representative and source of information for consumers and workers. NCL is a private, nonprofit organization representing the consumer on marketplace and workplace issues.