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Types of Fraud

Consumer fraud has never been as widespread as it is today with identity theft and Internet scams topping the list. Fortunately, many businesses have various customers protection methods in place to prevent or significantly reduce the potential for customer fraud.

5 Common Types of Fraud

1 - Identity Theft

Identity theft occurs when someone assumes your identity by using your name, birth date, social security number or other indicators for the purpose of committing fraudulent transactions. The primary goal of identity thieves is to gain access to your bank account or credit cards and drain those accounts as quickly and completely as possible. You can reduce your risk of being a victim of identity theft by shredding bank statements, cutting up credit cards and never giving your social security number of credit card number over your phone unless you have made the call personally.

2 - Fake Charity Organizations

Since scam charities employ the same collection methods used by legitimate charities to obtain funds, it can be difficult to determine whether a charity is genuine or fake. The Federal Trade Commission suggests you never give cash to charities you've never heard of and ignore people who pressure you to contribute money. Fake charities are especially rampant after a natural disaster, with clever scam artists preying on your sympathy and generosity. If you aren't sure if a charity is legitimate, ask for contact information and research that information before donating.

3 - You've Won $1,000,000,000 USD in the Nigerian Lottery!

Overseas lottery scammers usually target vulnerable seniors through phone calls, letters sent by snail mail and authentic looking emails claiming they've won a lot of money in a country-held lottery or sweepstakes. Scammers typically instruct their victims to send X amount of dollars to pay for "processing and transference" of their winnings within a certain time period. Of course, when victims wire the money as instructed, they receive nothing in return. Unfortunately, the FTC and FBI receive hundreds of thousands of lottery scam complaints every year that are nearly impossible to solve. In fact, the FBI suspects there are many more victims that do not report being scammed because they are too embarrassed to admit they fell for this scam.

4 - Work at Home Fraud

Designed to take your money up front without any intention of providing genuine information about "lucrative" at-home employment, business opportunity scams will ask you to pay for materials needed to start working at home. Instead of receiving legitimate information about working from home, victims typically get a packet revealing how they can make thousands of dollars a day by offering similar work at home scams to other people. Be aware that ALL advertisements claiming anyone can make hundreds of thousands of dollar annually by working one hour a day are, without a doubt, fraudulent.

5 - Pyramid/Ponzi Schemes

Pyramid schemes are unscrupulous and illegal business models promoting the recruitment of members by promising them large amounts of money for bringing others into the scheme. There are no investments, services or products involved with a pyramid scheme. However, as recruitment continues exponentially, the process develops into an unsustainable platform where no one profits and everybody loses money--except for the originator of the scheme.

Tips for Avoiding Being the Victim of Fraud

Checking the Better Business Bureau to see if an organization actually exists and is credible is a good way to start researching the legitimacy of any company. If you are purchasing something online from a company you've never done business with, pay with a credit card only. Credit card charges can be disputed if you fail to receive services or goods due to misrepresentation by the offending business. In fact, federal law limits a consumer's liability to no more than $50 if a credit card account incurs unauthorized or fraudulent charges.

Be aware that most unsolicited emails are fraudulent or do not fully provide the information or services they purport to offer. Instead of replying to unsolicited emails in an attempt to get them to stop emailing you, it is safer to delete them since responding to these emails verifies you have a working email address that could be sold to other scammers.

Finally, check the status of your credit rating at least once a month to ensure you haven't been the victim of identity theft. It's best to visit the three major credit agency websites--TransUnion, Experian and Equifax--to ensure your credit rating is uniform across the board. A recently implemented federal law allows anyone to request a free copy of their credit report once every year.*

*This article is not an exhaustive list of fraud protection methods and does not constitute legal or professional advice. Information is for educational purposes only. If you have specific legal or professional questions, please consult with your attorney or professional advisor.

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