Do You Understand What Consumer Fraud Is?

Consumer fraud is the use of deception or manipulation to persuade someone to do something against their interests – as well as against good morals. The fraud may be perpetrated by a business, a government organization, or an individual. It is most often driven by greed and the desire for monetary gain.

What Are The Common Types of Consumer Fraud In the USA

There are various types of consumer fraud that happen in the United States. Some of the more common types of consumer fraud in the United States are:

1. Advertising Fraud

The target consumer is often the one who is defrauded because he got ripped off by a fraudulent ad. Often, those ads are sold for hundreds of dollars. The company that creates these ads are the perpetrators, and the consumers are their victims; not only does it happen in print ads, but also on television and radio commercials.

Unsuspecting consumers are also ripped off when they are unaware of the guarantees on products. A product’s guarantee is a certain amount of time when the product must be replaced or repaired should it fail under normal conditions.

Some products do not come with a guarantee, and therefore the consumers assume that it is guaranteed never to fail. Another type of advertising fraud is using false endorsements by celebrities and other influential people to deceive consumers about the quality of a product or service.

1. Financial Fraud

Financial fraud is one of the most common types of consumer fraud. The list includes identity theft, credit card fraud, account takeover, check to cash, and private label credit card fraud.

Identity theft is the use of a stolen or fake identity to gain access to someone else’s bank account and steal their money. Credit card fraud involves using legitimately-issued credit card numbers to purchase items without paying for them. Account takeover fraud involves using stolen account numbers and passwords to access someone’s bank account and overdrawing the account.

Check to cash fraud involves depositing a fake check into a bank account to get the funds from that check before the bank determines it is fraudulent. Private label card fraud involves using a fake credit card that has been created from another retailer’s logo but with a different name of the owner on the card.

2. Warranty Fraud

A warranty is any assurance or guarantee obtained by the consumer in exchange for paying a certain amount of money for the product or service. If a product fails to perform as promised, the consumer can send it back to the manufacturer for repair at a discounted rate, or he can choose not to do anything and keep the product.

However, the warranty is only valid for a specific time, and the consumer cannot return the product without incurring additional charges. If the consumer chooses to repair the product, he must pay an additional fee. If he chooses not to repair it, he may have to forfeit certain rights under warranty.

3. Product Defect Fraud

A product defect is an element of a product that breaks or is not working as it should be and has been noticed by consumers before using it. A product defect is a problem or a deficiency in the consumer’s judgment of the quality and performance of a product.

Product defects can be caused by manufacturing problems, poor design, improper use or misuse, or other factors. When consumers complain about a product defect, they are often encouraged to return it to the store where they purchased it from. However, some product defects are not apparent to the consumer, and he may not notice them until after consuming the product and experiencing side effects.

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4. Debt Collection Fraud

This type of consumer fraud is a part of financial fraud and involves any misrepresentation or deceptive practices used by debt collectors to collect someone’s debt. Debt-collection agencies are supposed to use fair and legal means to collect debts. Still, they often overstep their boundaries and use unethical means and even illegal actions to get that money.

5. Insurance Fraud

The state regulates insurance companies, and each state has its own rules and regulations for how an individual or business can obtain insurance. Some states have very high requirements for who can obtain insurance; others have meager requirements. There are also different types of insurance coverage available to consumers: homeowner’s insurance, auto insurance, health insurance, life insurance, and accidents.

If a consumer has health insurance, he may be required to have specific medical tests performed by a licensed doctor. These tests are necessary to determine if the consumer needs health insurance coverage. However, these doctors will not perform these tests many times unless the insurance company pays for them.

In this case, the testing is considered a type of fraud because it is not truly necessary and should be paid directly by the consumer and not by the company; therefore, this is called “billing fraud.” Billing fraud is also associated with health insurance when a doctor is double billing. This most commonly happens when the insurance company pays for an office visit. Still, the doctor then asks the consumer to pay for “additional charges” related to that office visit and can charge two or three times the amount of money they requested from the insurance company.

6. Sweethearting

Sweethearting is a type of consumer fraud that involves defrauding a company or corporation due to the actions of one employee. For example, if an employee gives some customers discounts and free services that he does not give to other customers, this employee is engaging in sweethearting and committing consumer fraud. The goal is usually to attract more customers and sell more products; however, sweethearting can also make a few dollars extra on the side.

7. Mortgage Fraud

Mortgage fraud is committing fraudulent activities to obtain a home loan. This type of fraud can be motivated by greed, desperation, or both. Many people who commit mortgage fraud may have the necessary income and credit score to qualify for a loan. Still, they falsify documents (such as their tax returns and bank statements) to obtain the loan they want.

How To Handle Consumer Fraud

For victims who can prove that they are the victims of consumer fraud, they can do a few things to get the right help. An embezzlement lawyer may be able to help with that.