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2005 Consumer Sentinel Annual Report

Be wary when someone tries to sell you the idea that credit card debt is illegal

Each year, the Federal Trade Commission's Consumer Sentinel issues a report on the top scams of the year, based on the number of complaints filed to watchdog organizations like the FTC and the National Consumer's League.

Here are the top scams for 2004

This list of top frauds came from more than 635,000 complaints filed with the FTC and the National Consumer's League. The lists have been fairly stable for years now. Identity theft has reigned at No. 1 for the last five years, and Internet auctions have dominated Internet-related frauds for quite some time.

1. Identity theft (39%)
2. Internet auctions (16%)
3. Shop-at-home/catalog sales (8%)
4. Internet services and computer complaints (6%)
5. Foreign money offers (6%)
6. Prizes/sweepstakes and lotteries (5%)
7. Advance-fee loans and credit protection (3%)
8. Business opportunities and work-at-home plans (2%)
9. Telephone services (2%)
10. Other (miscellaneous) 12%

Consumer Sentinel's top Internet-related scams for 2004:

1. Internet auctions (48%)
2. Shop-at-home/catalog sales (17%)
3. Internet-access services (10%)
4. Foreign money offers (6%)
5. Internet info and adult services (3%)
6. Computers: Equipment and software (2%)
7. Business opportunities and work-at-home plans (2%)

Among online frauds, Internet auctions have topped the Consumer Sentinel list every year, followed by online shopping/catalog sales, Internet-access scams, foreign money offers and variations of the same old same old. A fraud may move around on the list - the Nigerian scam was No. 5 among Internet scams in 2003 and No. 4 last year. But the status quo seems to prevail year after year.

It appears that the same scams just keep being uses year after year after year.

Common Tactics of Con Artists

The four main steps:

1. They lure you with something tempting.
2. They gain your trust.
3. They sweeten the pot.
4. They close the deal.

They can employ any number of strategies as they guide you through their con.

To lure you in initially, the scammers will generally use "phantom fixation" -- the promise of something tantalizing that never materializes. The Nigerian scam is a great example of this. In exchange for the use of your bank account to move funds out of another country, you're told you'll receive millions of dollars. People become so distracted by the notion of instant wealth that they're willing to throw their usual caution to the wind. The scam is closed when people fork over money for "incidental fees" to move the money to their account or divulge private bank account information that can be used to move money out of the account.

At step 2, gaining your trust, scammers will often use what has been described asl the "command of authority" and the premise that your help is direly needed. Again, the Nigerian scam utilizes both of these: The scam is in the form of a personal plea for help, often from a supposed former high-ranking official from a foreign government. The official-sounding titles and ranks sprinkled throughout are meant to wrap a cloak of legitimacy around the plea. You have probably received an email with this solicitation practice.

And the plea for help is more than an appeal to your conscience, it's meant to mistakenly give you the feeling that you're in control of the situation and can walk away at any time. Other tactics used to gain your trust include friendly persuasion, which is just what it sounds like, and the "expert snare," where the con artist tries to make you feel like an expert who should be able to recognize a great opportunity when you see one.

Making a scam appear too good to pass up is critical. There are five tactics that can be used here:

• Limiting information: A scammer will try to limit your use of outside information to investigate the scam. Some victims are told they're being given a secret opportunity that would be jeopardized if others found out. With Internet scams, there is often ample opportunity to investigate them before taking the bait, of course this sometimes is easier said than done. With the foreign money offers, so many of the names and stories change that unless you know you're looking for information on the "Nigerian scam," it can be difficult to track down the real story.
• Everyone is doing it: A scammer will try to make it sound as if lots of people have already benefited from this scheme, so that you might think, "If everyone is doing it, it must be good."
• Planting the Seed: this is a softer approach than some of the other tactics, the perpetrator plants an idea but lets you use your own imagination to fill in the gaps.
• Limited Participation: If we thing that few have the opportunity then it will start the process of inner conflict and will make us thing we are special if we jump into this opportunity.

By the time the professional con artist is ready to close the deal, they may try to take advantage of the notion that if, "I've done something for you, you should do something for me". The con artist may have given you something of perceived value or done something for you in order to create a feeling of obligation.

Other strategies for closing the deal include:

• Closed Door Approach: This is when a scammer proposes something farfetched, such as sending them a large sum of money, which causes you to turn them down. The scammer will then approach with a much smaller request you're more likely to grant.
• Reverse psychology: Instead of pressuring you, the con might say something like "it's completely up to you what you want to do" or "I wouldn't blame you at all if you wanted to just say no. A lot of people have trouble with making a lot of money."
• Relying on your word: With this strategy, a con will ask for a seemingly easy "commitment" up front. It may feel like no more than agreeing with a statement like "You want to make money, don't you?" But when you later try to bail on the deal at hand, the con will bring up your earlier commitment to make you feel you're caught being inconsistent.

All of these tactics are meant to put the consumer in a specific role, says Pratkanis. And because the con is orchestrating the role you're in, he has tremendous control over the outcome.

These strategies also tend to be successful because we're used to seeing many legitimate businesses use them. Car sales people, real estate sales associates and many other employ these techniques daily. Most people are looking for easy ways to make decisions and these tactics exploit our human tendency to want to take decision-making shortcuts by blindly agree to these con's tactics and pressure. The con is counting on it and know human nature and vulnerability.

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