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FTC lists 2007's top consumer frauds

Internet still a den of thieves

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For the seventh year in a row, identity theft is the number one complaint reported to the US Federal Trade Commission.

Americans reported 20 per cent more cases of consumer fraud in 2007 over the previous year, with nearly a third of the 813,899 complaints related to stealing personal data.

The FTC released its latest damage report in the always-avant-garde annual rag, "Consumer Fraud and Identity Theft Complaint Data. Bathroom reading at its finest, care of the US government.

Who were the winners and losers? Well, supposedly everyone on the list came out worse — but let's not look at that glass as half-empty. Chin up! The internet economy is still thriving!

Thriving with cutthroats and embezzlers. But pedantic thinking will only make you a gloomy Guss. Let's take a peek:


Top 10 ways to lose your money through fraud

Category Complaints %
1) Identity Theft 258,427 32%
2) Ship-at-Home/Catalog Sales 62,811 8%
3) Internet Services 42,266 5%
4) Foreign Money Offers 32,868 4%
5) Prizes/Sweepstakes and Lotteries 32,162 4%
6) Computer Equipment and Software 27,036 3%
7) Internet Auctions 24,376 3%
8) Health Care Claims 16,097 2%
9) Travel, Vacations, and Timeshares 14,903 2%
10) Advance-Fee Loans and Credit Protection/Repair 14,342 2%

It's important to note that the numbers are derived from self-reported and unverified consumer complaints. Some are surely baseless, and obviously, fraud and identify theft often go unnoticed or unreported. Nevertheless, the FTC totals the damage reported at over $1.2bn. Eighty nine percent of those who filed a complaint reported an amount paid.

Psst, hey you...

Only about 53 per cent of all fraud complaints received by the FTC included the method of initial contact. Out of that small majority, most said they were parted from their money via the internet.

About 49 per cent were first contacted by e-mail. Trolling the web-at-large for victims only hooked about 15 per cent. That's about as effective as traditional methods: snail mail netted 14 per cent of victims and telephone 11 per cent.

Contact Method Complaints %
E-mail 142,445 49%
Web Site/Internet 44,244 15%
Mail 40,542 14%
Phone 31,769 11%
Other 32,780 11%

Dribble-down economics

Although the reported cases of identity theft in the US increased over 2006, it took a slightly smaller percentage of total complaints from the previous year.

In 2006, about 63 per cent of complaints received by the FTC were fraud and 37 per cent were identify theft.

In 2007, about 68 per cent of complaints received were fraud and 32 per cent were identity theft.

Year Identity Theft Fraud Complaints Total Complaints
2005 255,627 (37%) 437,899 (63%) 693,526
2006 246,124 (37%) 428,159 (63%) 674,283
2007 258,427 (32%) 555,472 (68%) 813,899

Good ol' fashion hucksters, scammers and spinners appear to have pulled themselves up by their bootstraps and are eating a fatter share. But both the mean and median amount reported to have been lost has gone down. Alas, is there none left untouched by this tempestuous economy?

In 2006, the average (mean) amount paid to scammers was $3,257. The median amount paid was $500. In 2007, the average amount paid to scammers was $2,507, and the median amount paid in 2007 was $349.

Fraudsters don't accept IOUs, young man

The most common method of paying a scammer is credit card (33 per cent), followed by wire transfer (28 per cent) and bank account debit (17 per cent).

According to the report, the percentage of fraud complaints with wire transfer as the method has increased 5 per cent over last year.

Broken down by age, the number of complaints peaks at the 18-29 year-old and becomes less frequent with maturity.

About 28 per cent of complaints were between the ages of 18 and 29; twenty-three per cent were between 30 and 39; nineteen per cent were between 40 and 49; thirteen per cent between 50 and 59; and 10 per cent were 60 and over. Over 95 per cent of victims who contacted the FTC directly reported their age.

Those interested in delving further into the numbers, including a state-by-state look at fraud, can read the report over yonder. (PDF warning)

Colorado Declares war on internet purchased baby food

Legislators in Colorado are hearing testimony this week on a bill that would limit online sales of infant baby food, coupons, and cold medicine.

The bill's author, Representative Alice Borodkin, claims "e-fencing" is a $37bn dollar industry worldwide — far more profitable than traditional fencing operations. A copy of the bill is available here. (Another PDF warning).

If passed, it would be unlawful in Colorado to sell via an internet auction infant formula or baby food, unless the seller can provide a written or electronic record of their purchase of the product.

Sellers also would need to pony-up personal data and a receipt in order to sell coupons, "value-loaded cards," or nonprescription drugs that contain the decongestant pseudoephedrine.

Some states such as Illinois and New Jersey have passed similar laws. Attempts on a federal level to pass electronic fencing laws have failed.

We're switching data sources from the FTC over to the US Federal Bureau of Investigation. Hold onto your hat and don't expect the numbers to match up.

The FBI's Internet Crime Complaint Center (IC3) hasn't released data for 2007, but 2006 data indicates auction fraud was the most frequently reported online crime. (That would be number 7 in total 2007 fraud complaints to the FTC. Well under the "internet services" category — suggesting either auction fraud reports have gone down significantly or the two government sources are off-kilter.)

Auction fraud made up about 45 per cent of reported complaints received by the IC3 in 2006. That number was down dramatically from 2005, when auction fraud composed of 63 per cent of complaints.

It's the seedy underbelly of mashed peas that you suspected all along. ®

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