Consumer Fraud

Types of Fraud

The mail fraud statute, first enacted in 1872, enabled the government to prosecute undesirable activity (e.g., securities fraud, real estate scams, etc.) years before such behavior was specifically outlawed by other laws. In 1994, Congress amended the mail fraud statute by adding the words “any private or commercial interstate carrier” to the mail fraud statute. As a result, delivering communications or merchandise via [Page 423]carriers such as FedEx and UPS as part of their fraudulent scheme will now violate the law.

The wire fraud statute was patterned after the mail fraud statute, and judicial analysis of one applies with equal force to both. When combined with wording in the mail fraud statute that prohibits fraudulent schemes involving interstate transmission of “wire, radio, or television communication … writings, signs, signals, pictures, or sounds,” these provisions give the federal government virtually unlimited jurisdiction to regulate direct marketing activity through mail and wire fraud legislation.

Telemarketing fraud is a term that refers generally to any scheme in which the persons carrying out the scheme use false statements carried over the telephone. Most typically, fraudulent telemarketers will include current business trends or widely publicized news events as references in their attempts to solicit victims. Types of telemarketing schemes include charity schemes, credit cards, investment schemes, lottery schemes, office supply schemes, prize promotion schemes, and so on. The Federal Trade Commission (FTC) indicates that sweepstakes and lottery fraud were among the top 10 complaints filed in 2004. An AARP study, based on a survey, indicates that lottery victims are likely to be older, with an average age of 74.5 years, and more likely to be women living alone.

Internet fraud refers to any type of scheme involving the Internet, such as chat rooms, e-mail, message boards, or Web sites, to present fraudulent solicitations to perspective victims, to conduct fraudulent transactions, or to transmit proceeds of fraud to financial institutions or to others connected with the scheme. Consumers are increasingly worried about becoming victims of online fraud. Among the complaints and accusations is “shell bidding” in online auctions, which involves sellers bidding on their own items to heighten interest and competitive bidding. Another problem is sellers not delivering promised items after receiving the buyers' funds. Phishing is a general term for criminals' creation and use of e-mails and Web sites that are designed to look legitimate but deceive Internet users into providing personal data.

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