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of the American Society of Travel Agents Phillip C. McKee,
III, Internet Fraud Watch Coordinator One hundred years ago next year, the National Consumers League was formed as America's first nonprofit consumer group. At that time, the League was at the forefront of the consumer movement battling overcrowded working conditions, unsanitary food handling procedures, and other market and workplace abuses. NCL is still leading the fight to protect the American consumer. One of the many threats facing consumers today is fraud. Criminals attempt to raid the pockets of consumers over the phone, through the mail, in person or over the Internet. To fight this growing threat, the National Consumers League founded the National Fraud Information Center in 1992. NFIC was designed to fight telemarketing fraud through prevention and by improving the enforcement capabilities of federal and state agencies. We run a national 800# hotline where consumers can call to ask questions and report cases of fraud. That number is 1-800-876-7060. Consumers in the US and Canada now know to call NFIC before sending their money. We handle on average 350 calls a day at the NFIC phone center. Of these, approximately 35% are consumers who have already lost money to scam artists. But we can still help them. Our telephone counselors can assist English and Spanish speaking consumers by taking a full report of what happened, including all the information a law enforcement agency would need. This report is entered into our computer system and shared with the Federal Trade Commission. It is also faxed out on a real time basis to any of more than 160 law enforcement agencies whose interests match the report. NFIC works closely with authorities in both the US and Canada to ensure that all cases of fraud reported to us are referred to the appropriate agents. In early 1996, the National Consumers League decided to expand its efforts to cover scams in cyberspace. Thus was born the NFIC website and the Internet Fraud Watch project. With the creation of www.fraud.org and the IFW section, www.fraud.org/ifw.htm, consumers from all across the globe can get tips on how to avoid scams or can report fraud through our online forms 24 hours a day, 7 days a week. Fraud.org now receives over 60,000 visits and over 1300 e-mails per week from consumers all across the globe. Internet Fraud Watch compliments the efforts of the National Fraud Information Center by performing the same prevention and reporting functions for Internet based fraud that NFIC does for telemarketing. IFW uses the same 800# and website as NFIC, allowing consumers and law enforcement one call or URL for all the information they need on telemarketing and Internet fraud. And what are the most common frauds online?
TOP TEN SUBJECTS OF REPORTS TO INTERNET FRAUD WATCH IN 1997
If you'll notice, travel fraud is not listed among the top 10. According to the computers, travel fraud is the 13th most commonly reported fraud online. But that is deceptive. Many of the scams that might be considered travel fraud by people in this room are not to be found in that category. They are scattered among business opportunities, pyramid schemes, and work-at-home plans. Inside the ranked travel fraud category are located the tried and true scams we've all seen in telemarketing and mail. A consumer visits a fraudulent travel website. She sees a contest going on and fills out the form. A few weeks later she receives an e-mail claiming that she has won a fabulous Caribbean vacation for two. The vacation is discounted to only $400 and she can take it any time within the next 18 months. She jumps at the chance, calls the number in the e-mail and gives them her credit card number. Unfortunately, she's unable to book the trip within the 18 month period because of delays intentionally caused by the crooks. Even if she was lucky enough to book the vacation, when she gets there she finds the accommodations are worse than substandard. Too bad she didn't know that, according to the Federal Trade Commission, a consumer cannot be required to pay for something that's been won as a prize. If you have to pay, you haven't won anything. Another common scam is the sale of bargain vacation packages. In this case a consumer sees a vacation package on sale either on a website or in an e-mail. He grabs at the chance to get a vacation for four for only $500. He doesn't even have to pick the travel date now. The only catch is, he must let that travel agent book the flight from his home to the port of departure for the cruise. The cruise may be discounted, but his flight winds up being vastly overpriced. Plus, the company never tells him about hidden port fees that balloon the price out even more. To make matters worse, the trip itself is often not as he'd expected. We've received reports from consumers whose luxury cruise turned out to be a day trip on a barge and whose 4 star hotel room was replaced with a true roach motel, supposedly because of over-bookings. That's the standard travel fraud report. The type of complaint that came in as the 13th most common online scam. However, there are others. Take for example the pyramid schemes where the "products" are travel vouchers issued by the same companies that sell the "discount vacation packages" or run the "travel contests." Not only does the consumer lose money when the pyramid collapses, but the travel vouchers are worse than worthless. Another common scam is the travel agent mill. In this business opportunity but travel related scam, some companies sell consumers on the idea that by purchasing a simple kit they can learn how to become a travel agent, set up their own profitable travel agencies, and get major discounts on travel everywhere they go. Unfortunately for the consumers, it's not true. The average consumer that buys the kit finds out that it doesn't really teach anything about the travel business. She also discovers that running a profitable travel agency is much harder than she'd been led to believe. Finally, the credentials issued by these mills are never recognized by other segments of the travel industry. In other words, the discounted air fare and hotel rooms never show up. It's all been a big waste of money. While scams online are both new and old, the Internet itself creates a whole new set of problems and opportunities for law enforcement and for criminals. There are millions of people online, with thousands of new users every day. Each one of these consumers is a potential victim. Once online, consumers are bombarded with unsolicited commercial e-mail (spam) advertising everything from legitimate services to fraudulent investment schemes. Websites abound offering both legitimate and fraudulent products and services. Consumers often find it difficult to determine which site is truly legitimate and which one is trying to steal their hard-earned cash. Internet Fraud Watch and other groups attempt to educate consumers on how to spot a scam, but plenty of people find out too late. Those victims are not without support. Federal and state law enforcement agencies have been extremely active on the Internet. In Operation Trip-Up alone, the FTC and 12 other law enforcement agencies brought 36 separate actions against travel-related scams. During FTC sponsored surf days, agencies from all across the globe surf the Internet looking for possible fraud. Many attorneys general offices have established special task forces to handle Internet fraud in all its manifestations. Law enforcement agencies are using the power of the Internet to bring criminals to justice. However, the Internet is the perfect medium for criminals as well. While a consumer may get a telemarketing call and remember the frequently repeated warnings about telemarketing fraud, or visit a store and decide that the products being sold really aren't as great as the ad claimed, there's no such protection online. Anyone can put up a great looking website and the average consumer has difficulty determining which sites are legitimate and which are scams. Plus, when you buy something online, you are essentially buying it sight unseen. If something goes wrong and you've purchased from a legitimate company, then you can always return it for a replacement. But, as the victims of travel scams online can tell you, it's not always so easy to get satisfaction from a company you've never really seen. The nature of the Internet also makes directly contacting consumers cheaper than ever. A company can send out thousands upon thousands of e-mails for no more than the cost of a mass-mailing program and an Internet access account. It's also easy to post messages to hundreds of different newsgroups at once. If such e-mails or posts come from legitimate companies, it's simply an annoyance. But crooks selling bogus travel packages and forging header information to mask their identity are a danger to consumers. A company may use throw-away accounts (easily created and discarded free accounts) and forged headers to make it appear that e-mails and posts recommending a travel agency come from many different people instead of the crooked agency itself. It's far easier than most people realize for cybercrooks to hide their real identities and locations.
TOP 20 COMPANY LOCATIONS
And have you ever tried to get a refund from another continent? On the Internet, national boundaries are meaningless. Crooks can be located on the other side of the planet or right down the street. It's all the same online. Consumers must also realize that consumer protection laws in the US are not the same as in other countries. You may have certain rights here, but it may be impossible to enforce those when the company is half-way around the world. The twelfth most common company location for scams reported to IFW was any country outside of the US or Canada. Canadian locations took two of the top twenty slots. Crooks aren't the only people on the Internet from around the globe. Victims of Internet fraud can also be found everywhere in the United States and abroad. TOP 20 CONSUMER LOCATIONS
The states with the largest populations, of course, rank highest. But foreign nationals come in at number eight. And many smaller and/or predominantly rural states are in the top twenty. The ease of browsing and purchasing online is especially tempting when the nearest town is over an hour away. Getting to a traditional travel agent for some people is a trip in and of itself. Not only do consumers come from all over the globe, they're paying for things in many different ways.
TOP PAYMENT METHODS
Most alarmingly, checks and money orders were the most common methods of payment in 1997. Even worse, cash is the fourth most common payment method. Cash payments allow crooks to maintain their anonymity. And checks or money orders don't offer the same protections that a credit card does. Once a check or money order is cashed, that's it. Relatively few people reported paying by credit card, which is ironic considering that consumers have more protection in the event of fraud, deception or non-delivery of goods with credit cards than with the other payment methods. You can always dispute a charge on a credit card bill, as long as you file a written dispute within sixty days. With cash there's not even any proof that the payment occurred. And try telling the convenience store that sold you a money order that you want them to get your money back for you. Public education must be a major component of any effort to curb Internet fraud. Consumers need to know how to check out the offers they see and the companies that make them. They need to learn how to identify the warning signs of fraud in this new medium, how to protect their privacy and how to pay safely. They need to know that legitimate travel agents, such as ASTA members, abide by strict codes of ethics and will never sell such things as travel vouchers or use the hard sell tactics commonly seen in scams. Industry groups need to make sure that consumers are aware of these standards. Education is the key to protection. The National Consumers League has taken a leading role in educating the public about Internet fraud. The National Fraud Information Center/Internet Fraud Watch website (www.fraud.org) provides a wealth of information on safe cybershopping and tips on how to avoid many different types of common scams. The website also has articles warning consumers about new trends, common scams and recent government enforcement actions. Plus consumers can use our links to go directly to other useful resources, such as the Federal Trade Commission or the BBBOnLine program. I would like to thank the American Society of Travel Agents and Stan Bosco for inviting me to speak at this conference.
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