Fraud Examination, 3E Chapter 15: Consumer Fraud COPYRIGHT © 2009 South-Western, a part of Cengage Learning

Learning Objectives Define what consumer fraud is and understand its seriousness. Understand identity theft. Classify the various types of investment and consumer fraud. 2

Consumer Fraud Definition: Any fraud that targets individuals as victims. 3

Consumer Fraud Two Primary Types of Consumer Fraud 1.Identity Theft 2.Consumer Scams 4

Consumer Fraud Seriousness of the Problem The US Federal Trade Commission released a statistical survey in 2004 with the following findings: Nearly 25 million adults—11.2% of the adult population—were victims of fraud during the year studied. 34% of American Indians and Alaska Natives were victims 17% of African American were victims 14% of Hispanics were victims 6% of non-Hispanic, whites were victims 5

Identity Theft Definition Circumstances when someone uses another person’s name, address, Social Security number, bank or credit card account number, or other identifying information to commit fraud or other crimes 6

Identity Theft The Identity Theft Cycle 7

Identity Theft Minimizing the Risk Guard your mail from theft Opt out of preapproved credit cards Check you personal credit information at least annually Guard Social Security card and number Safeguard all personal information Guard trash from theft Protect wallet and other valuables Protect the home, computer, passwords 8

Investment/Consumer Scams Work-at-Home Schemes Multilevel Marketing Pyramid Scheme Chain Letter, Mail Stuffing, Product Testing, and Craft Assembly 9

Investment/Consumer Scams Investment Scams Unreasonable promised rates of return Investments that do not make sound business sense Pressure to get in early on the investment Use of a special tax loophole or a tax avoidance scheme A business with a history of bankruptcy or scandals 10