ITS 4450 - Fraud Risk Assessment Tools and Investigation

Chapter 15, Consumer Fraud

This lesson presents material from chapter 15. Objectives important to this lesson:

  1. Consumer fraud
  2. Identity theft
  3. Type of consumer frauds
Chapter 15

The text begins this chapter with an explanation that consumer fraud concerns schemes to take money away from individual investors, like the schemes that were run by Charles Ponzi. The fraud perpetrator seems to be after a much smaller target, but the reality is that the scam is conducted against a large number of targets, making the scheme attractive to the scam artist.

The text quotes a survery of fraud victims conducted by the FTC in 2013. It makes several observations about victims, such as their being more likely to have experienced a serious negative life event. The implication seems to be that a person who has had hard luck will be more open to a scheme that offers to change their luck. Consider the list of frauds on page 535. These were the top five frauds identified in the survey:

  • weight loss products - worthless products are sold to desperate people
  • prize promotions - if you will just send us a small fee, we can award you the grand prize
  • buyers clubs - the victim is talked into joining a club to save money, then bills are generated in the victim's name
  • Internet charges - purchases are made in the victim's name, and the perpetrator collects the goods
  • work at home scams - as this site explains, scams about remote work often lead to a pyramid scheme or identity theft

This link will take you to the FTC's page about scams in 2018. The list seems shorter, but each item contains a lot of variety.

The next major topic is identity theft, which can mean several different things. The most common feature may be impersonation. The scammer obtains personally identifying information (PII) about the victim. The scammer then applies for credit cards, loans, mortgages and more in the victim's name. The victim is usually unaware of the crimes being committed until the scammer is done with the stolen identity.

Starting on page 538, the text presents examples of actions an identity thief might take to profit from stolen PII. As you can see, an identity thief must know other scams to actually generate profit from the theft. Of course, if the thief is only good at stealing PII, the stolen information can still be sold to others who will use it. In either case, the victim's credit rating and reputation are typically ruined.

The text has a good introduction to the concept of skimming. Unlike the definition in the previous chapter, this time a skimmer is a device that collects credit/debit card information. No personal contact with the victim is needed by the criminal. The video below shows one kind of device used to skim card information. Be aware that the concept could be applied to any terminal that accepts payment cards.

The text continues with several bits of advice about guarding your PII. They are all good, and you may avoid trouble by following them. Or you may not. Are you afraid yet?

In case you don't get it yet, the author provides a victim's story that starts on page 545 and continues for several pages. Read that, then imagine it happening to a million people in just this country each year. There are many cases in the book about stealing money from a company that takes years to notice the theft. They feel very different from the ones about ruining the lives of people who can't afford the personal disaster that an identity thief delivers.



  1. Continue the reading assignments for the course.
  2. Complete the assignments and class discussion made in this module.