December 11th, 2001, 05:20 PM
Top 10 Internet Scams of the Year.
The top 10 Net scams of 2001
Old favorites and a few new twists, all designed to rip you off. Here's how to spot them -- and how to avoid them.
By Jennifer Mulrean
Online or offline, fraud packs a powerful punch to consumers' wallets. Last year, consumers reported losses totaling $138 million to the Federal Trade Commission (FTC), and the number of complaints is growing.
For the first nine months of this year, the FTC received 20,000 Internet fraud complaints. In August alone, it received 2,400 -- a 60% increase from the previous August.
And the average loss rose more than 50% to $636, from $427 in 2000, according to the National Consumers League (NCL). That increase is largely because of huge losses from an old scam, the Nigerian money offer, that's moving onto the Internet, says Holly Anderson, director of communications for the NCL, which released its "Top 10 CyberScams" for the first 10 months of 2001.
Not new, but no less painful
The Nigerian money offer is the fastest-growing Internet fraud and No. 3 on the NCL list, but it's far from new. The scam has been around in one form or another at least since 1990, according to Secret Service estimates. Online, it's gained a new lease on life.
"They used to target small business owners by snail mail, but now they're targeting everyone by e-mail," the NCL's Anderson says. "We're even getting them here."
The scam comes in the form of a plea for help, often from a supposed civil servant in Nigeria who is purportedly trying to get money out of the country. But it can come from other countries as well; one version is supposedly from the son of a late human rights activist in the Democratic Republic of the Congo and still others originate in Sierra Leone or the Ivory Coast. One version of the letter reads:
"We have identified a lot of inflated contract funds which are presently floating in the Central Bank of Nigeria ready for payment.
"However, by virtue of our position as civil servants…we cannot acquire this money in our names. I have therefore been delegated…to look for an overseas partner into whose account we would transfer the sum of US$21,320,000.00…"
In exchange for the use of their bank account, the recipient is told they'll receive a percentage of the funds -- 20% in the above letter. Sound farfetched? Unfortunately, a good 10% of all recipients seek further correspondence with the authors, and 1% of those respondents become seriously involved, according to the Middle Atlantic-Great Lakes Organized Crime Law Enforcement Network.
The trap is sprung when victims are told the deal is in jeopardy unless they can come up with cash to cover unexpected fees or bribes. Unfortunately, these first requests are followed by more and more requests for money, drawing out the scam as long as the victims are willing. Even scarier, victims are encouraged to travel to Nigeria to complete the fund transfer, and the Secret Service attributes at least one death of a U.S. citizen in Nigeria to the fraud.
Another class of Internet fraud
"There are two types of Internet fraud," says Betsy Broder, the FTC's assistant director for planning and information. "One is the same-old same-old, just put online," such as the Nigerian money offer.
"And two, there's the type that take advantage of the technology, like sites that disconnect your modem and reconnect it to a long-distance line. That's another whole class of online fraud."
This fraud came in at No. 4 on the NCL list under the label "information/adult services." Most often these involve adult sites that ask you to sign a user agreement before accessing and downloading "free" pictures. Unfortunately for those who don't bother reading the full text -- and who does, really? -- clicking "I agree" in some cases grants the site permission to reconnect your modem to another line.
"You don't even know it until you get a phone bill for $800," Broder says.
In an FTC case settled in August, a Web site operator was fined $10,000 for advertising free Web site membership and then using a "dialer" program to reconnect consumers' modems to her server -- which then routed the calls over an international line to Madagascar. The defendant's business selling the dialer program to other Web site providers was shut down as part of the settlement.
Be wary of Sept. 11 appeals
The FTC and NCL also warn consumers to watch out for scams related to the Sept. 11 terrorist attacks, including sites peddling anthrax treatments and fraudulent solicitations for relief. The charity scams have been carried out both over the phone and via e-mail. In some cases, solicitors are pretending to be from the Publisher's Clearing House and the American Red Cross. The NCL recommends donating only to charities you know via their official Web sites, and not giving out private financial information (for more on how to give wisely, see "Charity begins … with checking it out)."
"If you're being solicited, go directly to the Web site of the organization," Broder recommends. "Take the time to really make sure your money is going where you want."
Broder noted that while the FTC hasn’t seen a huge volume of these complaints, they are looking into each and every one of them.
The Top 10
The usual suspects rounded out the NCL list, including auctions, which held onto the top spot for the fourth straight year. They accounted for 63% of all Net-related complaints made to the NCL. That's down, however, from 78% in 2000.
Auctions also lead the number of Net-related complaints received by the FTC for the last two years. Reported losses for Internet auctions reached about $425,000 for August 2001, versus $240,000 for August 2000. Most auction-related complaints involve merchandise that was either misrepresented or never delivered, according to the NCL. The same problems also characterize the majority of general online shopping complaints, which came in at No. 2 on the NCL list.
NCL's top 10 Net frauds for Jan.-Oct. 2001
Category % of all complaints Average loss
Auctions 63% $478
Online shopping 11% $845
Nigerian money offers 9% $6,542
Information/adult services 3% $234
Internet access 3% $568
Work-at-home plans 2% $120
Computer equipment/software 2% $1,102
Advance-fee loans 1% $1,209
Credit card offers .6% $412
Business opportunities .4% $16,031
What you can do
Both Jupiter Research and Bizrate.com are expecting online holiday shopping to increase again this year. Jupiter expects an increase of 10% to 20% over last year's levels of $10.8 billion, while Bizrate is calling for an increase of about 31%, excluding travel-related spending. So, how can you protect yourself?
In general, the FTC recommends following the five tips below for safer online shopping. If you're shopping at auctions, however, the NCL and FTC also suggest using escrow services such as Tradenable, formerly I-Escrow.com. These are third parties that hold the buyer's payment until he receives his order.
This is especially important if you're not paying with a credit card, but the services have been slow to catch on. In a report issued early this year, the NCL noted that only 6% of auction purchases are made through an escrow service, mainly because consumers either weren’t aware of the service or didn’t want to pay for it (Tradenable charges 4% for transactions up to $25,000).
The FTC's safe shopping tips:
Use a secure browser. Secure browsers, such as the latest versions of Internet Explorer and Netscape, support encryption of your orders, making it more difficult to steal credit card numbers.
Know the seller. If you're at an auction, research the feedback other buyers have provided on the seller. Otherwise, shop at sites you know and trust.
Pay with a credit card. Using a credit card provides an element of safety that cash and money orders do not. Federal law says you're only liable for up to $50 on orders you dispute with your credit card company and some credit card companies offer increased protection. Visa has a "Zero Liability" policy, meaning you're not responsible for any amount of disputed purchases, for example.
Keep passwords private. This is fairly straightforward: Don't tape your passwords to your monitor. Use unique passwords at each site.
Keep a record of your transactions. Don't rely on the site to e-mail you a copy of your receipt. Print one or make a snapshot of it and save it on your computer.
The NCL recommends an additional step: Use a credit card that offers "substitute" or "single-use" numbers for online shopping. In Fall 2000, American Express became the first major credit company to offer single-use credit card numbers, which -- as their name implies -- expire after each purchase. Discover and independent card issuer MBNA have since jumped on the bandwagon, and Anderson expects more companies to do so.
"It's such a win-win situation for those companies," she says.
Anderson says single-use credit cards also go a long way to alleviating consumer fears of having their credit card numbers stolen, which a recent NCL survey showed was the No. 1 fear for shopping online.
Finally, don't let chagrin keep you from reporting fraud. Information is the best tool for fighting the good fight against these scammers. Use the links at left to file complaints to the FTC or the NCL.
Unfortunately, there's no failsafe protection against doing business with a merchant who files for bankruptcy. The most glaring recent example is CyberRebate.com, which left thousands of consumers in the lurch. Consumers who shopped at the site paid exorbitant prices for items with the understanding that most and sometimes all of that cost would be returned to them in a rebate check some weeks later. But when the site folded, many consumers were left without rebate checks to cover hundreds -- sometimes thousands -- of dollars in purchases.
"That one is really difficult because they actually received the item, and it probably wasn't misrepresented. They just didn't get the rebate," Anderson says. "There's some question about when a company goes bankrupt if you can still dispute [the purchases] and whether consumers are at the bottom of the list of creditors."
According to postings in an MSN Community dedicated to tracking the mess, some consumers have had success getting refunds from their credit card companies, though most are being handled on a case-by-case basis.
December 11th, 2001, 05:32 PM
Welcome back Ennis glad you didn't leave. Great article too. I figured that the work at home would have been the biggest scams.
[gloworange]\"A hacker is someone who has a passion for technology, someone who is possessed by a desire to figure out how things work.\" [/gloworange]
December 11th, 2001, 05:36 PM
You just cant keep me away, well until I saw some posts I figured we need to keep this place informative.
End the flaming now!
December 11th, 2001, 07:12 PM
everyone should step in harmony and not discord with one another! I agree with you Ennis, let's all just get along and provide each other with constructive criticisim.
December 11th, 2001, 08:57 PM
Make love, not war, man...
December 11th, 2001, 09:03 PM
I knew you couldn't stay away
Thanks for this Info. ( and your other posts)
December 11th, 2001, 09:33 PM
Thanks guys, theres no keeping me away....
December 11th, 2001, 09:41 PM
Interesting post, rock on....\m/ºº\m/, Hehe. Welcome back.
[shadow]Prepare ship for ludicrous speed![/shadow]
December 12th, 2001, 01:26 AM
Thanks 4 the informative post...and i'll back u up in emphasising "no more flaming"
hostility is not what i wake up for....
December 12th, 2001, 02:56 AM
Interesting scams...I've heard of the nigerian money transfers before...man, some people must really be desparate for attention to fall for some shite like that.
Now, as for the flaming...ever been in traffic and said "You know, if we ALL drove at 55 miles an hour TOGETHER, nobody'd be stuck in traffic!"? All it takes is one 1/10th of a second tap-on-the-brakes and EVERYONE bails, hehe....
We the willing, led by the unknowing, have been doing the impossible for the ungrateful. We have done so much with so little for so long that we are now qualified to do just about anything with almost nothing.