The first thing to remember when it comes to consumer fraud is that not everyone realizes they have been a victim of fraud. This can be because they are too embarrassed or do not realize what has happened. Fraudsters use tactics like fear and guilt to make victims agree with their requests.
Since there are so many frauds, it would be impossible to list them all and study them individually. Instead, YourLawyer.com will look at some of the most common frauds and discuss how they play out in real life.
Types of Consumer Fraud
There are many different types of fraud. Some of the most common frauds that YourLawyer.com has helped to stop are:
1. Identity Theft
The major purpose of identity theft is obtaining money, property, or personal information. Identity thieves steal the personal information of an individual and use that information to commit fraud against the individual being victimized.
Personally identifying information (names, birthdays, SSN) and financial account numbers can all be used for this purpose.
2. Counterfeiting Goods
Counterfeit goods are any item that has been illegally reproduced and distributed as the real thing. This can be anything such as clothing, artwork, food, electronics, and even pharmaceuticals. Counterfeit goods, like everything else in our world today, continue to grow and vary in their forms of distribution.
The high turnover rate in counterfeit goods does not deter these products from being extremely profitable for scammers.
3. Mortgage Fraud
YourLawyer.com has encountered a more recent type of mortgage fraud called “repair and flip.” This involves buying a run-down home, repairing it, and then selling it before it is paid off to the original homeowner to make a profit. In some cases, this can involve the scammer obtaining mortgages on multiple properties that can be turned into rental properties for an immense profit.
4. Medical Scams
Medical frauds are one of the most common types of frauds that arise today. The main purpose of a medical fraud is to induce a victim into paying for some type of medical treatment that they do not need. The scammer will use fear, guilt, or any other form of pressure that they can use to make the victim pay them before they have ever received any type of service.
YourLawyer.com has dealt with other medical frauds such as dentistry and pharmaceuticals. The scammer induces the patient into buying overpriced, unnecessary, or even counterfeit goods or services.
5. False Advertising
False advertising is a broad term that has a myriad of different meanings depending on the type of fraud involved. The most common meaning of false advertising involves using a product or service, normally in an unlicensed manner.
Examples of false advertising would be advertisements for weight loss pills or pills to replace the use of prescription drugs.
Effects of Consumer Fraud in the Market
1. Industry impact
Consumer fraud can lead to distorted markets in which fraudsters acquire a competitive advantage over legitimate businesses. As a result, it influences service delivered, exposing other businesses and consumers to further fraud instances. Charity organizations and community services that help fraud victims can also experience greater burdens.
2. Environmental impact
Consumer fraud can lead to significant environmental impacts, such as wastage of resources, pollution, and greenhouse gas emissions. It can also lead to significant clean-up costs as consumers are asked to pay more for services and some companies shut down or reduce business operations, resulting in job losses.
3. Security impact
In light of the nation’s current financial and economic crises, consumer fraud has increased and become more frequent in recent years. Public trust in the government is at an all-time low. Consumers have lost faith in their legislative bodies, as well as their institutions, banks, and financial services.
Moreover, they have little faith in government and law enforcement agencies to protect them from identity theft or other financial crimes such as credit card fraud. YourLawyer.com has seen instances where victims of fraud report that they were afraid to contact law enforcement because they thought the officer was going to defraud them.
4. Financial impact
Loss of money is the common and devastating result of consumer fraud reported at YourLawyer.com. Consumer fraud can have a significant negative impact on the financial sector, including government entities, banks, credit card companies, and other financial institutions. No one seems to escape fraud. It is estimated that every year, millions of people fall victim to consumer fraud, resulting in billions of dollars in losses.
5. Societal Impact
Consumer fraud also has a profound effect on society. It undermines consumer confidence, distorts free markets, and threatens the viability of our democracy by weakening its free-market principles and social contract.
6. Business impact
Consumer fraud can harm businesses and companies. Costs are passed on to customers and employees, resulting in lower revenues and profits. Companies that are especially susceptible to fraud could eventually lose market share, become vulnerable to competitors more easily, or face liabilities related to fraudulent activity.
7. Reputational impact
Consumer fraud also has a significant impact on reputations. When the public learns of fraudulent activity, they lose trust in business and government. They don’t believe what they read in the news, and they don’t believe what companies tell them. Consumer fraud can destroy a company’s reputation—no matter how reputable or established it is—when consumers learn of these practices.
YourLawyer.com has experienced instances where consumers did not trust their electrician, roofer, plumber, etc. because they thought they were a fraud or that the business would not honor their contract.
8. Government outcomes impact
Government is not exempt from the negative outcomes of consumer fraud. At the federal level, every government agency that provides a service to consumers is losing money by having to deal with the consequences of consumer fraud. It can also result in higher taxes and higher public debt, as tax dollars are used to finance programs such as Medicare and Medicaid.
Conclusion
Consumer fraud has severe consequences for consumers, businesses, governmental entities, and society as a whole. Consumer fraud can have a profound effect on the headlines today.
The effects of consumer fraud on the economy are endless. It’s hard to trust sellers and contractors when you learn that they’re making false advertising claims. This results in a decline in consumer spending, which affects the economy greatly. In case you are suspecting or experiencing any form of fraud, do not hesitate to contact YourLawyer.com for help or advice.
