Recession-Fueled Fraud Increases the Need for a Federal Role in Fraud-Fighting – National Consumers League

By John Breyault, Vice President for Public Policy, Telecommunications and Fraud

Consumer misery – in the form of rampant unemployment, high foreclosure rates, and dwindling retirement savings – is blood in the water for scammers. These con artists know that consumers in desperate financial straits are more vulnerable to the kinds of frauds these criminals routinely peddle. Unfortunately, the worst economy in a generation has caused the traditional “boots on the ground” of consumer protection – state and local consumer agencies – to see their already-slim budgets slashed to the bone or eliminated altogether. Given these disturbing trends, consumers will increasingly depend on federal authorities to protect them from the growing threat of fraud.

This was the message that NCL Executive Director Sally Greenberg delivered to a subcommittee of the Senate Commerce Committee on Tuesday in testimony on the impact of the economic meltdown on consumer fraud. Greenberg was asked to testify by the committee thanks in part to the work that NCL’s Fraud Center does every day to educate consumers about consumer fraud and alert authorities when victims come to NCL looking for help.

“Absent increased action at the federal level to bring scam artists to justice and educate consumers about the threat of fraud, consumers will be caught between the proverbial rock and a hard place,” noted Greenberg in her testimony.

To address these issues, Greenberg offered several recommendations, including beefing up staffing levels and enforcement budgets at the Federal Trade Commission (FTC), making the FTC’s Consumer Sentinel database open and searchable by the public, and creating a consumer education grant program to help state, local, and non-profit organizations launch innovative anti-fraud projects.

In support of Greenberg’s testimony, NCL released its semi-annual rankings of the top ten frauds reported to the Fraud Center.  Fake check scams again topped the scam category rankings, increasing by more than 4% of the total complaints submitted. Complaints involving prizes, sweepstakes, or free gifts also increased, particularly among fraud perpetrated by telemarketers. In response to the continued growth of fake check-related complaints, NCL in 2009 has begun to look deeper into the scams behind the fake checks. Our six-month review indicated scams involving fake mystery-shopping jobs, phony sweepstakes winnings, and overpayment for goods made up more than 65% of the total fake check scam complaints received. NCL believes that consumers’ vulnerability all three scam types is closely linked to difficult financial circumstances, which are likely exacerbated by the worsening economic climate.

Click here to see video of the Senate hearings on fraud linked to the recession, including NCL’s remarks.