Telemarketing fraud

Telemarketing fraud is fraudulent selling conducted over the telephone. The term is also used for telephone fraud not involving selling.

Telemarketing scammers communicate with potential victim by telephone. They pitch products or services in order to persuade consumers to make a purchase, getting the victim to hand over credit card details and other information. This allows criminals to commit identity theft, assuming the identity of a consumer to make unauthorized purchases.

Telemarketing fraud is one of the most persuasive deceptions identified by the Federal Trade Commission (FTC).^[1] Telemarketing fraud often involves some sort of victim compliance: the victim may initiate contact with the perpetrator, or they may voluntarily provide private information to the offender. Thus fraud victims may experience feelings of shame and embarrassment that could prevent them from reporting their victimization.

Older people are disproportionately targeted by fraudulent telemarketers and make up an estimated 80% of victims affected by telemarketing scams. Older people may be targeted because scammers assume they are more trusting, are too polite to hang up, or have a nest egg.^[2]

How to Detect Telemarketing Fraud

Detecting telemarketing fraud can be difficult, as it can be hard for victims to distinguish between a scammer and a legitimate company, since both use telemarketing to conduct business. Typically, telemarketing fraud is targeted at the elderly, the poor, younger individuals and immigrants who do not have strong English skills (Tehrani, N.; 1996).

Scammers often use certain stereotypical methods to persuade victims to purchase products or services. One such method is the ‘Advance-fee scam,’ which occurs when a victim receives assurances that if they advance a large sum of cash, it will generate a large return (“Phone and Telemarketing Fraud,” 1992).

Another common method that criminals use is the ‘Pyramid Scheme’, in which victims are required to pay an initial amount of money with the fraudulent assurance that they will gain large sums of money from different individuals later on (“Phone and Telemarketing Fraud,” 1992).

Alternatively, fake telemarketers can phone victims posing as charities and requesting donations by credit card. The scammer uses the victim’s credit account to make fraudulent purchases.

Types of fraud

• Advance fee fraud – They will typically require upfront payments in exchange for goods and services. This is also a popular technique used in lottery and student scholarships scams.^[3] Once you have provided your personal information, the fraudsters will ask you to pay various fees – for example: taxes, legal fees, banking fees, etc. – so that they can release your non-existent winnings.^[4]
• Pyramid Schemes – Work by recruiting “members” to invest into a scheme. Most of the money is made by recruiting new members and a prime characteristic of the scam is the product is of little value. The people at the bottom of the pyramid pay the people at the top. Inevitably they will run out of new recruits and the scheme will collapse.^[5] Some individuals may profit from pyramid schemes, but the vast majority of those who join later on in the scheme will not.^[6]
• Credit Card Fraud – Fraudsters will call with promises to repair their credit ratings, provide credit options or credit facilities, credit cards with zero or very low interest, or instant and unlimited loans without credit checks or security. Such offers, if followed up, tend to come at a considerable cost to victims in terms of high interest rates or exorbitant fees. It is common for scammers to target people who have bad credit and are therefore more susceptible to take the offer in hopes to pay off debts or to increase their credit rating.^[7]
• Overpayment fraud - One of the most popular scams making the rounds. A generous overpayment is made to the victim typically using a fake cheque. This can vary in goods but is popular among online auctions or classifieds. But before the cheque has been cleared by a bank and the victim discovers that the cheque has bounced, the scammer will request to have the difference refunded ^[8] Usually through an online banking transfer, pre-loaded money card, or a wire transfer such as Western Union. Therefore, victims lose both the money they send along with the item itself ^[9]
• Charity Fraud – Telemarketers claiming to represent charities call asking you for a donation. Fake charities try to take advantage of people’s generosity and compassion for others in need. Scammers will steal the money by posing as a genuine charity They may even try to use recent events, such as natural disasters, to make their phony pleas for donations sound more believable.^[10] These scammers use aggressive high pressure techniques made to make the victim feel guilty or selfish if they do not want to donate.
• Cramming – Small charges that are secretly inserted into customer’s credit card bills for services they did not order, buried so deep in credit card bills that many do not notice,^[11] usually with fake fees by vague financial services. Sometimes a one-time charge for entertainment services will be crammed onto phone bills. Other times it may be a recurring monthly charge. Cramming of recurring charges falls into two general categories: club memberships, such as psychic clubs, personal clubs, or travel clubs; and telecommunications products or service programs, such as voice mail, paging, and calling cards.^[12]
• Summer Jobs Fraud – Much like an advance fee fraud, these scams are aimed at teenagers or young adults looking for work over the summer period. Telemarketers seek out the victims by scanning student job searches. The telemarketer will then claim the victim has been singled out and specially selected to be hired for a particular job. But before they can start work they are told to have to pay various fees to cover training, materials and insurance. When they eventually realize the job is a scam, it is already too late, they have lost the money they paid for in fees as well as the time it would take to find a new job.^[13]
• Office supply scam – A very common scam where a telemarketer will target business managers responsible for purchasing office supplies,^[14] falsely representing their identity and the cost of office supplies – the most popular being toner.^[15] The caller might mislead a company’s employees into thinking that an order for office supplies has already been placed, either by an existing or former colleague, and that they are calling to chase up a signature for the order form to help them keep complete records. The company is then invoiced for unwanted, and overpriced, stationery and office supplies.^[16]
• Magazine Subscriptions Scam - Scammers call victims with an intriguing offer and that for a small payment they can get a yearly subscription to their favorite magazine, even though they have no affiliation with the magazine's publisher. When victims agree, the scammers will send random magazines with grossly inflated prices. Another way they extract money is by falsely telling callers it is time to renew their magazine subscriptions in an attempt to get their credit or bank account information.^[17]

Deceitful Marketing

• Caller ID spoofing - Allows the caller to present any number they want to put up on the screen including existing numbers while keeping the real number they call from to remain private. Caller I.D. spoofing is a low cost option to help ensure anonymity.^[18] The same devices can also change voices to sound like a male or female^[19]
• Robo calls - Technology has made it cheap and easy for robo callers to make calls from anywhere in the world.^[20] Most of these calls originate overseas, many in boiler rooms in India, and they are surprisingly effective.^[21] Robocalls have been used for legitimate campaigning and public opinion polling, but have also been used for vote suppression, false endorsements, and negative campaigning that borders on fraud. The federal regulatory regime currently excludes political robocalls from most telemarketing regulations. Presidential campaigns and national interest groups have accidentally violated state laws in trying to communicate with voters by using robocalls.^[22]
• Crawler devices - The majority of fraudulent calls originate from Nigerian phone scammers, who claim a whopping $12.7 billion a year off phone scams.^[23] Some callers have to make up to 1000 calls per day. So to help with speeding things up they will sometimes use crawler devices which are computerized to go through every area code calling each and every number. If the caller does not reach, they mark the lead as "no answer" and the system change's it so they get called again a few days later. If the company does not have a large lead pool, they may get called as soon as 12 hours later. As with email spammers, they know that a certain proportion of their hits will score.^[24]
• False Identity – Fraudulent Telemarketers use aliases to cover their tracks and prevent detection from the law. Some fraudulent telemarketers are deliberately located in other countries, as it is more difficult for law enforcement agencies to pursue them. Typically, scammers will use common western names in a bid to reassure callers they are calling from the same country^[25]

Popular Scams

The Grandparent Scam

A telephone call is made to an elderly person by a scammer who claims to be a family member in some kind of trouble, usually a grandson or granddaughter. This often happens late at night or early in the morning, waking victims up when they aren’t thinking clearly. Callers assume that the person who answers has grandchildren, and the scammers usually have other people cooperating on the scam (pretending to be a bail bondsman, arresting police officer, lawyer, emergency-room doctor, or some other person).^[26] The first voice on the phone is usually that of a young person who calls the elderly victim "Grandma" or "Grandpa." They sound desperate and typically state that there are only a few moments to talk. Callers may say they have a cold if their victims do not recognize their voices. The story generally follows a familiar line: they were traveling in another country with a friend, and after a car accident or legal infraction, they are in jail and need bail money wired to a Western Union account as soon as possible for their release.^[27] The caller does not want anyone told about the incident, especially not family. Before the victim can ask too many questions about the situation, an accomplice gets on the line to issue instructions for the money transfer. Though commonly called the grandparent scam, criminals may also claim to be a family friend, a niece or nephew, or another family member.^[28]

The Microsoft Scam

A telephone caller, who typically claims to be calling from "Microsoft Technical Support," states that virus activity has been detected on the victim's computer. They assume that the victim has a computer running a Microsoft Windows Operating System (users of other operating systems, such as Linux, are a minority and are likely to be technically knowledgeable). They will get the computer owner to give the caller remote access using a genuine networking service or website like ammyy.com or TeamViewer. They will use the ‘Event Viewer’ tool on the computer to highlight the Red-X Errors and Yellow Warnings, which are supposedly signs of an infection,^[29] when in fact these are normal and harmless logs.^[30] They also encrypt the owner’s password database, preventing access to the computer without the scammers password. This essentially locks victims out of their own computers and ensures that the victims will have to cooperate and pay the scammer in order to regain control of their machines. At this stage the caller has complete control over the computer and can display further alarming displays and install malware. The caller will then offer to remove the viruses and malicious malware (some they have installed themselves), install security software and provide expensive ongoing support services (which may or may not be genuine).^[31]

Donald Trump Robo Calls

In January 2016 it was revealed that Iowa and New Hampshire state residents were receiving robo calls^[32] from a group of white Supremacists associated with the American National Super Pac.^[33] The calls were recorded by several members of the group in a bid to sway voters to vote for Republican Presidential Candidate Donald Trump in the Presidency election. In one of the 50-second robo calls, William Johnson (leader of the American Freedom Party, along with Christian talk show host Ronald Tan and white supremacist magazine "American Renaissance" founder Jared Taylor, urges listeners to support Trump.^[34] The calls start off simple enough, an automated man’s voice asking the voters age and gender, then quizzing them on which Republican candidates they like. However the calls would then become aggressive if the voter mentioned their support for another candidate other than Trump.^[35] Johnson, who describes himself in the calls as “a farmer and white nationalist, stated the robo calls were not authorized by Trump.^[36]

How to Protect Yourself from Telemarketing Fraud

Every year consumers lose billion of dollars due to fraudulent telemarketers, according to data from the ‘National Fraud Information Centre (NFIC)’ (“Congress acts on telemarketing fraud,” 1994).

If a consumer receives a phone call from a telemarketer offering a service or product that sounds too good to be true, it is likely to be a scam and the victim should hang up immediately. If the call comes at unusual times, either too late or too early in the day or night, or if the caller fails to pinpoint the origin of the call, there is a high chance the caller is a scammer. Telemarketers commonly attempt to rush victim's purchasing decisions, so if individuals feel they are being pressured into making a decision immediately, they should hang up (“Telemarketing Fraud,” 1996).

To avoid becoming a victim of telemarketing fraud, an individual should not give out personal information such as credit card or bank account details or social security numbers over the telephone. If consumers are interested in a caller’s product or service, they should request more information be sent in the mail..

What to Do If You're a Victim of Telemarketing Fraud

It is always difficult and often impossible to get the money back from a telemarketing scam.^[37] Even so, several steps can help victims minimize losses and avoid future scams. In the United States, telemarketing fraud should be reported government agencies such as the Federal Trade Commission, Federal Bureau of Investigation, local consumer protection programs, or a state attorney general. In some situations, the government agency may take action against scammers and may even get refunds. Those who report fraud should be sure their names are added to the list of victims to get any refunds that become available. In addition, federal law allows a victim to dispute charges on a credit card used by the fraudulent telemarketer if the amount is more than $50, the transaction occurred in the same state, and a good-faith effort has been made to resolve the problem with the telemarketer. If these conditions do not apply, a victim may still complain that charges are a billing error. Credit card companies are required to protect assets and provide warranties. Information on how to notify a credit card company about a billing error is included in each monthly credit card statement. If a fraud involves a 900 number or pay-per-call service, the charge will appear on the victim's telephone bill. According to federal law, telephone customers cannot be penalized or disconnected by their carriers for failing to pay these charges. The law also requires telephone companies to offer the option of blocking access to pay-per-call services and to protect consumers from cramming, the abusive and illegal practice of adding unofficial, misleading, or deceptive charges to phone bills. Consumers should check their telephone bills carefully and call their carrier if they see questionable charges.

References