CONSUMER

GLOBAL HEADQUARTERS • THE GREGOR BUILDING 716 WEST AVE • AUSTIN, TX 78701-2727 • USA CONSUMER FRAUD

TABLE OF CONTENTS

COURSE INTRODUCTION Course Objective...... xi Course Overview ...... xi Learning Objectives ...... xii

I. CONSUMER FRAUD OVERVIEW Introduction ...... 1 Who Are the Victims of Consumer Fraud? ...... 1 Why Do Consumers Become Victims? ...... 1 Who Are the Perpetrators of Consumer Fraud? ...... 1 Why Do Perpetrators Commit Consumer Fraud? ...... 2 Video ...... 2 How Do Perpetrators Execute Consumer Fraud Schemes? ...... 2 The Three Elements of Fraud ...... 2 Situational Pressure ...... 3 Perceived Opportunity ...... 3 Rationalization of the Act ...... 3 How Does Consumer Fraud Affect Consumers? ...... 3 Review Questions ...... 4

II. CONSUMER FRAUD DELIVERY METHODS Introduction ...... 7 Internet ...... 7 Email ...... 7 In Person ...... 8 Door-to-Door ...... 8 Seminars ...... 8 Telephone ...... 8 Telemarketing ...... 8 Television ...... 9 Infomercials...... 9 Review Question ...... 10

III. ONLINE METHODS USED TO OBTAIN CONSUMER DATA Introduction ...... 11 Online Schemes Used to Obtain Consumer Data ...... 11 Technical Vulnerabilities ...... 11 War Driving...... 11 Malware ...... 12 Social Engineering ...... 14 Phishing ...... 14 Video ...... 15 Video ...... 17 Pharming ...... 18

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III. ONLINE METHODS USED TO OBTAIN CONSUMER DATA (CONT.) Video ...... 18 Review Questions ...... 19

IV. ELDER FRAUD Introduction ...... 21 Elder Fraud ...... 21 Why the Elderly Are Targets ...... 21 Elder Fraud Schemes...... 22 Protecting Against Elder Fraud ...... 22 Red Flags of Elder Fraud ...... 23 Review Question ...... 24

V. ENTREPRENEURIAL SCHEMES Introduction ...... 25 Franchises ...... 25 Business Opportunities ...... 26 Display Racks ...... 27 Vending Machines ...... 28 Invention-Promotion Agencies ...... 28 Vanity Publishing ...... 29 Wealth-Building Programs...... 30 Work-at-Home Opportunities ...... 30 Assembly and Crafts ...... 31 Chain Letters ...... 32 Coupons ...... 32 How to Spot a Fake Coupon ...... 33 Envelope Stuffing...... 34 Medical Billings ...... 34 Internet-Based Scams ...... 34 Overstocked and Discontinued Items ...... 35 Report Writing ...... 35 Mystery Shoppers ...... 36 Reshipping ...... 37 Turnkey Websites ...... 38 Questions to Consider ...... 38 Survey Schemes ...... 39 Why Survey Schemes Are Successful ...... 39 Review Questions ...... 41

VI. ADVANCE-FEE SCHEMES Introduction ...... 43 Advance-Fee Schemes ...... 43 Video ...... 43 419 Advance-Fee Scheme ...... 44 Sale of Crude Oil Below Market Price ...... 45 Disbursement of Money from Wills ...... 45 Threat or Extortion ...... 45

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VI. ADVANCE-FEE SCHEMES (CONT.) Preventing 419 Advance-Fee Schemes ...... 45 Money Transfer Schemes ...... 45 Sweepstakes and Prizes Schemes ...... 46 Advance-Fee Sweeps ...... 46 Video ...... 47 Free Prizes ...... 47 One-of-Five Prizes ...... 47 Puzzle Sweepstakes ...... 48 False Text Message Prize Offers ...... 48 Lottery Schemes ...... 48 Foreign Lottery Schemes ...... 49 Review Questions ...... 50

VII. SCHEMES Introduction ...... 51 Credit Card Fraud Schemes ...... 51 Credit Card Offers ...... 52 Secured and Unsecured Cards ...... 52 Gold and Platinum Cards ...... 52 Credit Card Loss Protection Plans ...... 53 Debit Card Payments to Cab Drivers ...... 53 Credit Card Validation Code Scam ...... 54 Chip Card Scam ...... 55 Credit Card Interest Rate Reduction Scam ...... 55 Review Questions ...... 57

VIII. CONSUMER DEBT AND LOAN SCHEMES Introduction ...... 59 Consumer Debt and Loan Schemes ...... 59 Debt Relief Schemes ...... 59 Debt Consolidation Schemes ...... 60 Credit Repair Schemes ...... 61 Credit Card Debt Elimination Scheme ...... 61 Credit Analysis Offers Scheme...... 61 Educational Program Scheme ...... 62 Debt-Collection Agency Schemes ...... 62 Government Debt Collection Schemes ...... 63 Time-Barred Debt Schemes ...... 63 Lender Debt Collection Schemes ...... 64 Fake Debt Collector Schemes ...... 64 Consumer Debt Schemes ...... 65 Car Title Loan Schemes ...... 65 Online Payday Loan Schemes ...... 66 Review Questions ...... 67

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IX. SCHEMES Introduction ...... 69 Foreclosure Rescue Schemes ...... 69 Builder Bailout Schemes ...... 70 Equity Skimming ...... 71 Property Flipping ...... 71 Loan Modifications ...... 71 Mortgage Appraisals ...... 71 Credit Insurance Packing ...... 72 Balloon Payments ...... 72 Review Questions ...... 73

X. TELECOMMUNICATIONS AND TELEMARKETING SCHEMES Introduction ...... 75 Telecommunications Fraud ...... 75 Mobile Schemes ...... 75 Text Message Spam ...... 76 Telemarketing ...... 77 Video ...... 77 Factoring Companies ...... 78 International Factoring Companies ...... 79 Telemarketing Magazine Sales Scheme ...... 79 Rip and Tear Scheme ...... 80 Robo-Call Schemes ...... 80 Automatic Debit Programs ...... 81 Signs of a Telemarketing Scam ...... 82 How to Handle a Sales Call ...... 83 Consumer Education ...... 83 Stopping Unsolicited Phone Calls ...... 83 Review Questions ...... 84

XI. E-COMMERCE SCHEMES Introduction ...... 85 E-Commerce Schemes ...... 85 Online Buyer and Seller Schemes ...... 85 PayPal ...... 86 Craigslist Apartment Rental Schemes ...... 86 Craigslist Car Schemes ...... 87 Craigslist Ticket Schemes ...... 87 Amazon Schemes ...... 88 Review Question ...... 90

XII. ONLINE AUCTION FRAUD SCHEMES Introduction ...... 91 Online Auction Fraud ...... 91 Shilling ...... 92 Sniping ...... 92 Bid Shielding ...... 92

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XII. ONLINE AUCTION FRAUD SCHEMES (CONT.) Bid Siphoning ...... 92 Misleading Descriptions and Images ...... 92 Second-Chance Offers ...... 92 Fee Stacking ...... 93 Failure to Ship Merchandise ...... 93 Loss and Damage ...... 93 Switch and Return ...... 93 Reproductions ...... 93 Escrow and Bonding Services ...... 93 Black-Market Goods ...... 94 Gray-Market Goods ...... 94 Online Penny Auctions ...... 94 Tips When Using Online Auctions ...... 95 Review Questions ...... 96

XIII. TRAVEL AND VACATION SCHEMES Introduction ...... 97 Travel and Vacation Schemes ...... 97 Travel Certificates ...... 97 Travel Packages ...... 97 Discount Travel Clubs ...... 98 Timeshares ...... 98 Tips for Travel and Vacation Schemes ...... 98 Review Question ...... 100

XIV. LIFESTYLE SCHEMES Introduction ...... 101 Offers and Sales Schemes ...... 101 Charity Schemes ...... 101 Gifting Circle Schemes ...... 102 Free Information Services Schemes ...... 102 Natural Disaster Schemes ...... 103 Green Energy Schemes ...... 103 Home Improvement Schemes...... 104 Preventing Home Improvement Schemes ...... 106 Life Event Schemes ...... 106 Review Question ...... 108

XV. MERCHANDISING AND HOLIDAY SHOPPING SCHEMES Merchandising Schemes ...... 109 Free Trials ...... 109 Holiday Shopping Schemes ...... 109 Retail Sales ...... 109 Credit Card Offers ...... 110 Review Questions ...... 111

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XVI. EDUCATIONAL DEVELOPMENT SCHEMES Introduction ...... 113 Diploma Mill Schemes ...... 113 Career or Vocational School Schemes ...... 114 Financial Aid Schemes ...... 114 Student Loan Debt Relief Schemes...... 115 Employment Service Schemes ...... 116 International and Overseas Employment Firms ...... 116 Review Question ...... 117

XVII. COLLECTIBLES FRAUD SCHEMES Introduction ...... 119 Collectibles Schemes ...... 119 Art Schemes ...... 119 Precious Stones and Metals Schemes ...... 119 Rare Coins Schemes ...... 120 Antique Schemes ...... 120 Forged Autograph Schemes ...... 121 Review Question ...... 122

XVIII. HEALTH AND MEDICAL FRAUD SCHEMES Introduction ...... 123 Health-Related Schemes ...... 123 Dietary and Health Cure Schemes ...... 123 Cosmetic Surgery Schemes ...... 123 Health Club Schemes ...... 124 Weight-Loss Program Schemes ...... 124 Online Pharmacy Schemes ...... 124 Medical Alert System Schemes ...... 125 Anti-Aging Product Schemes ...... 125 Hospice Fraud Schemes ...... 126 Health Insurance Schemes ...... 128 Medical Billing Fraud Schemes ...... 128 Phantom Billing ...... 128 Inflated Hospital Bills ...... 128 Self-Referrals ...... 129 Drive-by Doctoring ...... 129 Prescription Discount Card Scheme ...... 129 Miracle Cure Schemes ...... 130 Review Questions ...... 132

XIX. AUTOMOTIVE SCHEMES Introduction ...... 133 New and Used Vehicle Schemes ...... 133 Leasing Schemes ...... 133 Financing Schemes ...... 134 Gas-Saving Products Schemes ...... 135 Odometer Fraud Schemes ...... 135

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XIX. AUTOMOTIVE SCHEMES (CONT.) Automotive Repair Schemes ...... 135 Highway Bandits ...... 135 Repair Estimate Schemes ...... 136 Parts Replacement Schemes ...... 136 Tips to Consider When Getting a Vehicle Repaired ...... 136 Curbstoning Schemes ...... 136 Airbag Schemes ...... 137 Car Accident Referral Schemes...... 138 Tips to Help Consumers Avoid Car Accident Referral Schemes ...... 138 Towing Schemes ...... 138 Review Questions ...... 140

XX. INVESTMENT SCHEMES Introduction ...... 141 Investment Schemes ...... 141 ...... 141 Video ...... 144 Commodities Trading Fraud ...... 145 Ponzi Schemes ...... 145 Video ...... 146 Pyramid Schemes...... 146 Review Questions ...... 147

XXI. OTHER CONSUMER FRAUD SCHEMES Introduction ...... 149 Modeling and Acting Schemes ...... 149 Airline Ticket Schemes ...... 149 Inheritance Schemes ...... 150 Living Trust Schemes ...... 150 Parking Lot Schemes ...... 151 Scamming Families of Migrant Children ...... 151 Grandparent Schemes ...... 151 Government Imposter Schemes ...... 152 Sweetheart or Friendship Schemes...... 152 Video ...... 153 Revenge Schemes ...... 153 Short-Term Home Rental Schemes ...... 153 Take the Money and Run Scheme ...... 153 Bait and Switch Scheme ...... 153 Price Jacking Scheme ...... 154 Deceptive Email Schemes ...... 154 Hotel Schemes ...... 154 Subsidized Housing Schemes ...... 155 Schemes ...... 156 Child Adoption Schemes ...... 156 The Puppy-Dog Sale ...... 156 Tips and Warning Signs of Child Adoption Schemes ...... 157

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XXI. OTHER CONSUMER FRAUD SCHEMES (CONT.) Online Pet Adoption Schemes ...... 158 Gift Card Schemes ...... 159 Electronic Payment Fraud ...... 160 Dishonest Bank Employees ...... 160 Misrepresentation of Identity ...... 161 Forged Authorizations ...... 161 Nanny Scam ...... 161 Tech Support Schemes...... 162 Security Alert Schemes ...... 163 Fortune Telling Schemes ...... 163 Review Questions ...... 164

XXII. CURRENT TRENDS AND STATISTICS Introduction ...... 167 The U.S. Federal Trade Commission ...... 167 The Bureau of Consumer Protection ...... 167 The Consumer Sentinel Network ...... 167 The Top Ten Complaints Reported to the Consumer Sentinel Network ...... 169 Amounts Consumer Reported Losing to Consumer Fraud Schemes ...... 169 The Methods of Payment Reported ...... 169 The Methods of Fraudster Contact Reported by Complainants...... 170 The Age of Consumers Who Made Reports to CSN in 2016 ...... 170 The Ten States with the Most Fraud Complaints per 100,000 People ...... 170 Review Questions ...... 171

XXIII. CONCLUSION ...... 173

XXIV. APPENDIX A: VIDEO TRANSCRIPTS ...... 175

XXV. SOLUTIONS TO REVIEW QUESTIONS I. Consumer Fraud Overview ...... 183 II. Consumer Fraud Delivery Methods ...... 186 III. Online Methods Used to Obtain Consumer Data ...... 187 IV. Elder Fraud ...... 190 V. Entrepreneurial Schemes ...... 191 VI. Advance-Fee Schemes ...... 193 VII. Credit Card Fraud Schemes ...... 194 VIII. Consumer Debt and Loan Schemes ...... 195 IX. Mortgage Fraud Schemes ...... 196 X. Telecommunications and Telemarketing Schemes ...... 197 XI. E-Commerce Schemes ...... 199 XII. Online Auction Fraud Schemes ...... 200 XIII. Travel and Vacation Schemes ...... 202 XIV. Lifestyle Schemes ...... 203 XV. Merchandising and Holiday Shopping Schemes ...... 204 XVI. Educational Development Schemes ...... 206 XVII. Collectibles Fraud Schemes ...... 207

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XXV. SOLUTIONS TO REVIEW QUESTIONS (CONT.) XVIII. Health and Medical Fraud Schemes ...... 208 XIX. Automotive Schemes ...... 209 XX. Investment Schemes ...... 210 XXI. Other Consumer Fraud Schemes ...... 212 XXII. Current Trends and Statistics ...... 215

XXVI. CONSUMER FRAUD FINAL EXAMINATION ...... E-1

XXVII. INDEX...... I-1

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