Consumer FraudAugust 11, 2021

Consumer Fraud: What Is It and How To Protect Yourself Or Your Business Against It

Consumer Fraud. This familiar, catch-all phrase describes business schemes aimed at unsuspecting consumers. Resulting in financial or other loss for the victim while enriching the perpetrator. It evokes an ominous sense of exposure.

Many of us feel vulnerable to the dark side of online engagement and its world of hackers and other unscrupulous characters.

So what exactly is consumer fraud, and what sort of practices fall under that vague category? More importantly, how can we protect ourselves and our businesses against it?

What Is Consumer Fraud?

According to newly released data, the Federal Trade Commission received more than 2.1 million fraud reports from consumers in 2020, with imposter scams being the most common type of fraud reported.

With the ever-expanding offerings and reach of the world wide web, consumer fraud is at an all-time high.

The adoption of 5G across great swaths of the nation and around the world, while changing the landscape with its increased capacity for speed and data transfer, is also creating new vulnerabilities that could contribute to increased consumer fraud.

Victims of this practice, while believing that they have been engaging with legal and valid business entities, fall prey to a variety of schemes involving:

  • False promises
  • Inaccurate claims
  • Deliberate misrepresentations, or
  • Direct, straight-on cheating.

What Does Consumer Fraud Look Like and how are we Protected?

Some of the most common schemes under the consumer fraud umbrella include:

  • The notorious Nigerian and debt elimination scams
  • Frauds involving dubious cashier’s checks for payments
  • Mortgage scams
  • Phishing
  • Identity theft

The US and other governments have enacted regulations and protections against consumer fraud. The US Federal Trade Commission established the Bureau of Consumer Protection and passed the Federal Trade Commission Act to protect American consumers.

In the case of a mortgage or other real estate frauds, certain laws act as safeguards to prevent losses from occurring. Anyone who has ever purchased a home in the US is familiar with the TILA, or Truth in Lending Act, which ensures that all credit gathering details, calculations, and fees are disclosed to buyers in a clear and upfront fashion ahead of the sale.

Some other governmental interventions include the Fair Debt Collection Practices Act, which addresses tactics employed by the debt collection industry; the Fair Credit Report Act, which relates to credit reports and ensures that every American is entitled to a free copy of their report at least once a year; and the Magnuson-Moss Warranty Act, which deals with warranties on retail products purchased. And for those not covered by these Acts, consumers can lean on their individual states, the majority of which have their own UDAP (Unfair, Deceptive Acts and Practices) laws on the books.

Most states define consumer fraud as:

  • An affirmative misrepresentation
  • Knowing omission, or
  • Violation of specific consumer protection

Collectively cover a broad range of consumer fraud activities. When faced with consumer fraud or attempts thereof, the best practice would be to contact one of these agencies to file a report for official follow-up, investigation and in the best case scenarios, corrective action through civil litigation.

While reassuring, many of these remedies are reflective and apply only to the aftermath of a fraud violation. There are steps individuals and businesses can take to stymie fraud attempts that they face proactively.

How To Protect Yourself Or Your Business Against Fraud

Let’s say you purchased an item online. What if it arrives and it does not reflect the description or image of what you ordered? Some vendors subscribe to a seal or trustmark insurance program that often will provide a money-back guarantee in situations like this. Some programs even offer an ADR (alternative dispute solution) service, which relies upon a third party to resolve all disputes.

Businesses that refuse to participate in the ADR process run the risk of losing their seal certification; the purpose is to provide consumers with a significant level of confidence while shopping. For increased peace of mind, it is worthwhile to verify if the vendor you are planning to purchase from participates with any of the most established seal and trustmark programs and ascertaining their policies in advance.

Another service that is gaining traction in the retail arena is the utilization of escrow services. This simple feature employs a third party to hold a customer’s money until they are in receipt of the goods or services they paid for and are satisfied with. Sometimes, there are minimal fees associated with this service, but this is an excellent option for those who are nervous about making online purchases for fear of consumer fraud.

Beware of Phishing

Many of us have heard of the disconcerting homophone phishing. This is a practice that quite literally baits unsuspecting targets by posing as legitimate entities for the sole purpose of extracting personal information, banking details, or passwords.

The solution to this is simple.

  • Reject or delete all unrecognized communications that request your private information.
  • When in doubt, verify manually by calling your bank or credit card company.
  • Install an anti-phishing toolbar, which most browsers now offer, as well as anti-phishing pop-up blockers.

As with everything, especially in our break-neck evolving electronic world, keeping abreast of new developments, following the latest news, and remaining current make good sense.

Good sense is key to avoiding the pitfalls of consumer fraud. When in doubt, make a call, do some homework, such as a background check, verification of credentials or licenses, and getting all agreements down in writing. If something or someone sounds suspicious, they very well maybe, and it is worth going the extra mile to ascertain their legitimacy and right intentions.

Beware Of AI Voice Cloning Softwares

A current trend that is increasingly worrisome is the use of AI voice cloning software by unscrupulous agencies. The ability to almost perfectly copy a person’s voice, tone, and inflection to create dialogue that is fabricated for nefarious reasons are almost unthinkable, yet it’s real and has already been employed in ransom demand attempts and other identity theft efforts. With little recourse at present, other than manual verification with the cloned subject and potentially law enforcement involvement, this is a troubling new reality worth keeping an eye on.

Reputable Anti-fraud Providers

Finally, a critical component of any consumer fraud protection strategy is engaging with a reputable anti-fraud provider who offers a proven anti-fraud solution suited to your specific business or concern.

An ideal program will automatically detect discrepancies in behavior or data, contain a repository of threat intelligence on known bad actors to run checks against, and provide excellent communications in a proactive and consumer-forward manner.

The market is saturated with an array of sub-par offerings that are heavy on promotion and light on substance. A little extra due diligence will go a long way, and with a mixed approach, your exposure to consumer fraud will be significantly diminished.

For more information on how you can prevent consumer fraud, visit

Join Our Newsletter

Subscribe to Our Newsletter for Exclusive Content

Ready to learn more?

Book a demo and see our accurate real-time fraud screening for eCommerce in action.

Ready to learn more?

Book a demo and see our accurate real-time fraud screening for eCommerce in action.

We offer Starter Plans for even the smallest sized businesses, including a free plan and plans that include chargeback protection for companies that process less than $50,000/month.

Businesses that process more than $50,000 in revenue/month qualify for custom pricing. Book a demo and see our accurate real-time fraud screening for eCommerce in action.

— or —
complete the form for us to reach out to you