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FTC exposes top 10 Web scams

Internet auctions, credit card fraud rank highest

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Web cramming, unauthorized credit charges


(CNN) -- The Federal Trade Commission (FTC) Tuesday released details of its legal crackdown on numerous so-called "dot-con" operations, along with its list of the top 10 global online scams after culling together thousands of consumer complaints through a database called Consumer Sentinel.

The FTC said its efforts have culminated a yearlong coordination with five U.S. agencies, consumer protection organizations from nine countries and 23 states, all of which resulted in 251 law enforcement actions against Internet swindles.


High-tech con artists are only a click away, states an FTC press release, whether they're using mass e-mails or false promises of big earnings through shady business deals and hijacking consumers' modems.

The most recurring dot-con offenders fall under the category of Internet auction fraud, whereby there were reportedly four FTC cases filed in U.S. District Court. The defendants were charged with operating scams that bilked customers for cashier's checks and money orders and then didn't deliver the promised electronic goods.

"The Internet is revolutionizing the way we gather information, shop and do business," said Jodie Bernstein, director of FTC's bureau of consumer protection in a statement. "This collaboration with law enforcement agencies, industry and consumers will create a climate where e-commerce can be conducted with confidence. We aim to make the Net safe for consumers."

Announcement of the international law enforcement effort was made in conjunction with a meeting of the International Marketing Supervision Network, a group consisting of consumer protection enforcement authorities from 29 countries. With the cross-border nature of the Internet, an international collaboration effort is necessary to combat its miscreant elements, FTC officials said.

Participants in "Operation Top 10 Dot Cons" include consumer groups from Australia, Canada, Germany, the United Kingdom and the United States, with such organizations as the Securities and Exchange Commission (SEC), the Department of Justice and the U.S. Postal Inspection Service all taking part.

In May, the FBI established the Internet Fraud Complaint Center in partnership with the National White Collar Crime Center.

Since that time, the Web site has received more than 18,000 complaints from people in dozens of different countries, said Jule Miller, an FBI spokeswoman. The average monetary loss is $675 per complaint.

Fraudulent online auctions remain the most common grievance, she added.

The FBI will proceed with an investigation if it falls within its jurisdiction, said Miller, or they will turn the case over to other authorities.

Meanwhile, a new report being prepared by the National Consumer League's Internet Fraud Watch states that 79 percent of Internet fraud occurred through online auctions in the first nine months of 2000, compared with 87 percent in 1999 and 68 percent in 1998. The league contributes to a substantial part of the FTC database with its list of complaints.

Susan Grant, director of the league's telemarketing and Internet fraud program, said that while unreported cases make tracking the exact number of online scams difficult, she categorized it as a "growth industry."

"Not everything you see on the Net is as it appears," said Grant. "People have to be really careful ... especially when dealing with individuals who are basically strangers."

Major online auction sites like eBay have tried to counter fraud by sharing feedback about traders and establishing an in-house support team to combat illicit activity.

Web cramming, unauthorized credit charges

Other top 10 Internet rip-offs include Internet service provider scams and cramming, which surreptitiously bills consumers who visit a particular site.

In a case announced Tuesday, the FTC described a situation in which the defendants mailed a $3.50 "rebate" check to consumers. But when consumers cashed the check, they allegedly unwittingly agreed to have the defendants as their ISP, and long distance charges soon began to appear on their phone bills. It was apparently almost impossible to cancel future monthly charges.

A variation on cramming involves billing consumers for a specially designed Web page they didn't know they had. Targeting small businesses and non-profit organizations, the scammers offer a "free" Web page and then start charging phone bills without permission. According to the FTC, five settlements with defendants have resulted in barring the practice, with a sixth defendant expected to pay more than $3 million in consumer redress.

Adult-oriented sites have also been charged after consumers were billed for services they didn't authorize. The FTC has asked the courts to shut down several Web sites and freeze its assets, pending trial.

Medical scams were also prevalent, as well as get-rich-quick scams that targeted day traders, pyramid hoaxes and travel fraud.

This year, the participants of the law enforcement initiative have brought 251 cases, including 77 by the SEC and a total of 54 FTC cases.

The FTC's Internet warning to consumers is to be wary of extravagant claims of earnings potential, get promises in writing, read the fine print, look for a privacy policy and be skeptical of a company that doesn't divulge its corporate profile.

CNNdotCOM cover story: Internet fraud
October 2, 2000
Gateway sued over claims of 'free' Internet access
October 13, 2000
FTC slams alleged U.K. porn scam
October 10, 2000
Visa, MasterCard plan anti-fraud initiatives
August 21, 2000

Federal Trade Commission
National Consumer's League
International Marketing Supervision Network
U.S. Securities and Exchange Commission
U.S. Department of Justice
U.S. Postal Inspection Service
The National Fraud Information Center

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