The Definition of Consumer Fraud : A Lawyers Perspective

Consumer fraud is a broad category of illegal behaviors designed to defraud the public and occurs when a consumer suffers a financial or other personal loss. Consumer fraud happens when unscrupulous businesses and con artists intentionally set out to victimize consumers by using dishonest business practices that are unfair, deceptive or flat out false. 

While consumer fraud most often happens to the most vulnerable sections of the population, such as senior citizens and college students, all consumers are at risk of being defrauded.

The victims of consumer fraud either believe they are participating in a valid business transaction or have been coerced into the transaction through false promises, inaccurate claims or practices that are designed to directly cheat consumers. Consumer fraud is usually considered a white-collar crime, a term that was coined at the turn of the 20th century regarding the harmful acts of robber barons and U.S. corporations. 

These people were called “criminaloid” who were high-status businessmen and were looked at differently from the traditional image of a criminal. One well known instance of high-status businessmen engaging in consumer fraud occurred in 1965 when Ralph Nader exposed the dangers of the unregulated, or under-regulated, business practices of the automobile industry. 

Today the definition has been expanded to include all manors of crime that use deception to get consumers to willingly pay money for fraudulent or nonexistent products or services. Examples include:

• Weight-loss and exercise products that are said to guarantee to help people lose weight, but do not live up to the promises.

• Getting consumers to provide payment information, typically online or over the phone, without ever delivering the product.

• Soliciting donations for a fake charity by using the same methods legitimate charities use to raise funds. Fake charities will only accepts types of payments that are hard to trace, such as cash or gift cards.

• Pressuring a consumer to pay immediately and even having a courier will come to their home to pick up the payment.

• Price misrepresentation happens when the consumer is offered a low prices, but is charged at a higher rate.

• Unnecessary repairs for items like cars and appliances where the repair person claims a there is a mechanical or electrical problem when there is really nothing wrong.

• Offers to invest in a fraudulent business venture. This often includes fraudulent real estate investment opportunities or selling a share of a nonexistent business.

• Credit card interest rate reduction calls where consumers are offered a guarantee reduction on credit card interest rates for a fee. In addition to paying the fee for a fraudulent service, any personal information the scammer get is often used to commit identity theft.

• Identity theft happens when a criminal uses a consumer’s personal information that includes their name, date of birth, social security number and banking information to assume the consumer’s identity. This is done to access the victims existing accounts, open new credit-card accounts in their name or collect tax refunds.

• Fraudulent stockbroker schemes where credit card information is obtained under the guise of the fraudster purchasing stocks for the consumer.

• Mortgage fraud scams are usually aimed at distressed homeowners who are facing foreclosure. These scams focus on offering fake foreclosure rescue or loan-modification schemes. The FBI reports these crimes are often perpetrated by industry professionals, such as real estate agents and mortgage brokers who have the knowledge to make the scam seem completely legitimate.

• Bank card fraud occurs when a third party uses a consumer’s debit or credit card information to pay for services, purchase goods, withdraw cash or otherwise use the card without the consumers knowledge or permission. 

• Debt collection fraud occurs when a scammer contacts a consumer claiming the consumer owes a non-existent debt. The fraudster will often make threats of arrest and imprisonment to scare the consumer into paying off the debt or they make an offer to settle the account for pennies on the dollar.



• Lottery fraud can include sweepstakes, domestic and foreign lottery drawings and the like. This type of fraud will originate with a phone call, postal mailing or email and typically targets the elderly. The scammer will offer to deliver the prize as soon as they receive payment to cover the taxes.

• The coronavirus pandemic and the associated hastily passed legislation created ripe opportunities for hucksters to prey on consumers’ fears and financial needs.

Summary

The Federal Trade Commission Bureau of Consumer Protection was established to fight fraudulent business practices by collecting complaints, conducting investigations and suing those companies that have broken the law in trying to take advantage of unsuspecting consumers. Congress has also passed specific federal laws to protect consumers against certain deceptive practices, such as in real estate transactions.

The Federal Trade Commission also accepts consumer complaints in regards to businesses that may have committed fraud. In cooperation with local and state law enforcement agencies, the Federal Trade Commission investigates outright fraud as well as unfair business practices designed to target consumers. 

The Consumer Financial Protection Bureau is another government agency created to protect consumers from financial scams by ensuring financial institutions treat consumers fairly.

At its most basic, consumer fraud involves a violation of public trust. Scammers are always looking for new and inventive ways to fraud consumers and the Consumer Financial Protection Bureau says consumers can protect themselves by knowing what to be on the lookout for. 

Given the nature of the scams, most often being set up to seem like legitimate businesses, consumers must be on guard when any unsolicited offer comes their way. Before giving out any personal or payment information, consumers should always confirm the legitimacy of the business with their local or state regulatory or licensing agency.

At Parker Waichman attorneys we are passionate about fighting for the rights of our clients! Our highly skilled attorneys have years of experience and we are determined to obtain the best results for every one of our clients. If you need representation, contact us today to speak with one of our legal experts so we can be sure your rights are protected.

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