Consumer fraud refers to a wide range of crimes that revolve around purchases, where people pay money for things they don’t want or don’t get what they paid for, both products and services. Fraud against consumers can take place in person, by telephone, or online. It can come in forms of false and misleading advertising, misleading financial transactions, investment fraud, identity theft or identity phishing fraud. According to the Federal Trade Commission (FTC), consumers report nearly $350 million in losses from consumer fraud annually. Anybody who buys things or pays for services can be a victim of fraud, when they find themselves paying for things that are not credibly delivered or when they lose control of their property or cash.
Crimes of Persuasion:
Fraud is related to theft because victims of both have something taken from them. The fundamental difference between theft and fraud is that theft is the taking something by force or by stealth and fraud is the taking of something by purposeful misrepresentation of facts. Most fraud is considered a felony crime and can be punishable by jail terms and fines. When a person is accused of criminal fraud, the case is prosecuted by local, state, or federal prosecutors (depending on the jurisdictional boundary of the fraud). Cases can be prosecuted even if the fraud was not successful and nobody was actually harmed.
However, criminal prosecution does not help the victim of the fraud, unless the sentencing requires the convicted fraudster to provide compensation to the victim, which is rare. To gain compensation, victims of fraud must pursue a civil action, and must prove that the defendant materially misrepresented facts to falsely persuade. The victim must prove that the defendant that he or she knew the claims or statements made as fact, were actually not facts–were misrepresented as facts. Victims must also prove that they suffered damage or loss because of the misrepresentation.
Large Scale Consumer Fraud:
Sometimes, consumer fraud is a major criminal undertaking with many thousands or even millions of victims. Sometimes the extent of the crimes is murky and unclear and sometimes it’s a matter of well-documented public record. When Volkswagen promised
consumers a low emissions diesel engine, announcing special technology, they had actually invented software that deceived the emissions tests. The technical staff that concocted this software committed consumer fraud against the government system of emissions testing and the eleven million members of the public who bought VW vehicles under misrepresentation. The independent West Virginia University that uncovered the deception forum that real emissions from the engines was up to 30 times what was allowed by law. The magnitude of the sentence against the car company and the employee deceivers is yet to be pronounced. Civil lawsuits and the powerful effect of consumer pressure (not criminal sentences) have forced VW into promising generous compensation to customers. However, as of last year, the kind of compensation had not been announced. They may offer cash, by-backs, repairs or replacement cars.
Large-scale consumer fraud has occurred in a wide range of industries.
In finance, Ponzi schemes where investors pour their savings into non-existent enterprises can absorb the savings of many thousands of families.
In areas of medicine or nutrition, products that widely advertise as health aids can contain thirty-times more empty calories than is actually nutritionally advisable.
A lot of attention has been paid to the abuses of telemarketers. Not only are unsolicited sales calls obnoxious to many, but often the products they offer do not meet claimed quality standards, and sometimes lead to identity theft or extortion. The Telemarketing and Consumer Fraud and Abuse Prevention Act is a set of standards and rules that provide the Federal Communications Commission grounds for criminal conviction for fraud in telemarketing. However, there is no provision for consumer compensation in the act.
Aiman-Smith & Marcy is a California law firm committed to eradicating unethical business practices that large corporations too often inflict on consumers as well as their own employees and other businesses. Our practice is dedicated to upholding consumer rights.