Welcome to Luca!globe
FIGHTING CONSUMER FRAUD In February 1997, the ... Current Issue!    Navigation Tips!
Main Menu
CPA Journal
Professional Libary
Professional Forums
Member Services


In February 1997, the Federal Trade Commission issued a report setting forth its efforts to protect consumers from four types of fraud: telemarketing fraud against older Americans, investment fraud, business opportunity and job placement scams, and consumer finance scams.

As background, the FTC notes that marketing and telecommunications advances in the Information Age give everyone, even con artists, the power to boost the sophistication and reach of a sales pitch. Fraud promoters now masquerade as national sales firms, using telemarketing, direct mail, television, and the Internet to reach consumers nationwide. Thanks to personal computers, desktop publishing software, and affordable video equipment, bogus sales pitches have the look of legitimacy, and lure millions of consumers to take the bait. In sum, fraud promoters pose a significant threat to average consumers and to the economy.

Fraud against older consumers. Deceptive telemarketers target older consumers with a variety of scams and schemes. Prize promotion scams offer prizes in connection with promotions of services or subscriptions to magazines. According to the report, fraudulent prize promoters never deliver any worthwhile goods or services to consumers, let alone any prizes, for their money.

Telefunding and other mimicry fraud is perpetrated by claiming to raise money on behalf of a charity with the promise of sending a prize in return for the contribution. Little or nothing goes to actual charities; most money remains with the con artist.

Investment fraud. Again often based upon mimicry, the con artist seeks to sell an investment that looks and sounds like the real thing, often based upon news stories and current events. Older Americans are also often the object of such fraud.

Business opportunities and job placement scams. Fraud promoters develop business opportunity frauds and work-at-home scams that induce consumers to invest their own funds in start-up enterprises. Scam operators have seized upon computers and the Internet as new vehicles to promote and operate deceptive businesses. Job placement scam artists claim to be able find jobs--often for college graduates and other professions--based upon false success stories of placement with Fortune 500 companies, cruise ships and airlines, and the like.

Consumer finance scams. These frauds take the form of advance-fees for obtaining credit or a loan; fees to "repair" the credit of those who have experienced credit problems; and fees for researching college scholarship funds.

The report goes on to present the challenges to the various law-enforcement agencies in fighting these frauds. The report concludes--

Ultimately, consumer vigilance against deception is critical. Law enforcement agencies must also continue to find innovative ways to leverage their actions, and produce and disseminate consumer education materials that encourage consumers to avoid and report fraud. Only the combination of consumer education and law enforcement will deter fraud promoters from exacting further losses from consumers. *

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2009 The New York State Society of CPAs. Legal Notices

Visit the new cpajournal.com.