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Tracey S. Roth

Dot Com Commerce

Managing Editor, C@LL CENTER CRM Solutions

[November 1, 2000]

Busting The Dot Cons

Fighting cyber crime just isn't like old-fashioned crime fighting. No shoot-em-outs, no lurking gumshoes, no car chases. (Makes for a good mental chuckle, though, doesn't it? I like the idea of the Federal Trade Commission's Online Crime branch bursting into a busy saloon full of hackers, online pyramid-scheme scammers and credit card thieves, all of whom freeze and put their laptops down in horror to a background of tinkling piano music.) The fun part is that this is exactly what the FTC did this week, albeit minus so much drama. The agency issued a report and follow-up legal actions called "Operation Top Ten Dot Cons." The scams were pulled and ranked from the FTC's database, called Consumer Sentinel, which was created to maintain and categorize customer complaints. The database is shared by more than 240 U.S. consumer protection organizations, each of our 50 states' attorneys general, Canadian and Australian cyber law enforcement agencies, the UK's Department of Trade and Industry and the Office of Fair Trading. The result is a comprehensive collection of scams and scammers which has helped the FTC draft their dot con "most wanted list" and initiate 251 legal actions against the most rabid offenders.

The FTC's cleverly presented Dot Con Web site breaks down each category of crime and gives a brief explanation of the nature of the illegal activity, along with examples. In the spirit of Mr. Letterman, here are the Top 10.

Internet Auction Fraud
The sting: A buyer bids on an object in good faith, and either receives an inferior item or never receives it at all. By some estimates, online auction fraud accounts for as much 80 percent of online criminal activity.

The solution: When purchasing items from online auctions, always use either a credit card with fraud protection or an online payment service such as PayPal. Never send personal checks or cashier's checks.

Internet Service Provider Scams
The sting: Unscrupulous ISPs mail a "rebate" check to consumers, who then cash them. What consumers don't realize is that by cashing the check, they are agreeing to use that ISP as their provider, usually at ridiculous fees and with little possibility of canceling or getting refunds.

The solution: Be extremely wary of "rebate" checks and make sure you read the fine print. Take your mother's advice no one gives you something for nothing.

Web Cramming
The sting: A company will offer to design a Web site for free for a trial period (or even worse, design a sub-standard Web site for a company without their knowledge), then begin billing the organization's phone bills even though the company never accepted the offer or agreed to continuation of the service.

The solution: Use a professional firm to design your company's Web site. Check their credentials first, and always make sure you read your company's telephone charges carefully. Many scammers make a lot of money off the fact that companies often do not check the itemized charges on their phone bills.

Travel And Vacation Fraud
The sting: You buy a travel package off the Internet for a really, really good price, and pack your bags expecting good hotel rooms, reputable airlines and top-quality resorts (as the advertising promised.) Yet you arrive at your destination via Generic Airways to find that your room is in the hotel basement, revolutionaries are living in the hotel's lobby and the beach's resort is next to a chemical waste dump.

The solution: Get as many references as possible about travel companies before you agree to anything. Check out the hotels and airlines independently. But most important, get all the details in writing first so you have some redress if things don't go as promised.

Investment Schemes
The sting: These types of scams usually involve a promise of huge returns on your initial investment. The operators will usually tell you that their firm is able to predict the market's behavior down to the last penny.

The solution: Realize that any company that can predict market behavior down to the last penny would hardly need to resort to cheesy spam marketing via e-mail to acquire business. Educate yourself about how day trading and online trading work, and recognize that huge returns usually mean huge risk. Check the firm out with state and federal commodities regulators.

International Modem Dialing
The sting: This one is usually practiced by the operators of porn Web sites. They promise free photos, which can only be accessed by downloading a "free" viewing or dialing program. The sites then disconnect your modem and reconnect you to the Internet using an international telephone number. The result is you are viewing "free" photos by connecting to a number in the Netherlands or some other country, and the charges are racking up faster than you can think. The problem with enforcing this scam is that many people don't complain, because it means admitting that they were looking at naughty pictures. ("Who me? Never!")

The solution: Once again, be wary of anything that claims to be free. Do not download anything without being 100 percent sure of what it's going to do to your system, and keep a close eye on your phone bill.

Online Credit Card Fraud
The sting: This is another scam practiced by some adult sites. Free pictures and interestingly creative literature are offered, but in order to "prove" that you are over 18, you are required to produce your credit card information. Scammers then happily use your credit card to run up all sorts of fraudulent charges.

The solution: Get a credit card with fraud protection, which will limit your liability on such scams to $50 (as mandated by federal law). Many credit card companies are now offering cards specially designed to protect against online credit card fraud.

Multilevel Marketing Scams
The sting: These operations are actually like the old-fashioned (and outlawed) pyramid schemes. You commit to buying X amount of product with the goal of selling it to others, making money both from your sales and the sales of those you recruit into the program. You later find out that your "customers" are other distributors like yourself as a result, there is no real way to make money.

The solution: Avoid these types of operations like the plague. They don't work, have never worked, and are probably illegal.

"Business" Opportunities
The sting: These are often in the form of "make lots of money and work at home" scams. You're promised a great deal of money for working out of your home. You are asked to "invest" money up front, only to find there is no work for you to do and the only way to make your money back is to scam others into buying into the same program.

The solution: Check companies out thoroughly before you sign on to this one. Talk to others who have bought into the program. If the company has nothing to hide, they'll be perfectly happy to supply you with references. Also, give yourself a reality check nobody will EVER pay you $80,000 a year to stuff envelopes at home in your living room while watching daytime television.

Medical And Pharmaceutical Scams
The sting: These scammers prey on people desperate to lose weight, up their energy levels, regrow hair, etc. It's a marketing scam targeted at human insecurities. The company offers an "exclusive" herbal supplement that is available only through them. Never mind that you've never heard of it (nor has anyone else), that it may not be effective, or most importantly, that it may not be safe. These people are the cyber age's equivalent of snake-oil peddlers.

The solution: Check with your health care provider or at the very least, do some research on the Internet first. Modern science in all its high-tech glory has yet to find a cure for baldness or a quick-fix substance for weight loss. Chances are a shady marketing firm with only a P.O. box address and no phone number hasn't, either.

The FTC has stated that its lofty goal is to make the Internet safe for consumers. While I don't think it will ever be possible to eliminate cyber crime entirely (the criminals can usually think up scams faster than fair trade organizations can bust them), these con-busting practices might make shady companies think twice before leaving an electronic trail of their misdeeds all over the Internet. We law-abiding Netizens can salivate at the heart-warming thought that on Halloween day, the FTC slapped 251 law enforcement actions on some of the "entrepreneurs" that perpetuate these schemes.

The best means of preventing such cons is making sure consumers who are stung report the scams. The FTC provides an online form for registering complaints. It's available at www.ftc.gov/ftc/complaint.htm. Book mark it, use it and take pleasure in depriving these companies of a dishonest living. Look at it as your tool to play cyber Dirty Harry.

Tracey E. Schelmetic welcomes your comments at tschelmetic@tmcnet.com.

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