Fraud: A Boomer Growth Industry

The recession and the Internet are fueling a surge in consumer fraud, and America’s seniors are a big target.

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Famed bank robber Willie Sutton was credited with saying decades ago that he selected his particular line of work "because that's where the money is." Sutton said he never uttered the famous phrase, but it rings true today with the nation's rising numbers of seniors: They are where the money is. They are also often perceived as easy marks. And with the rise of the Internet and online transactions, everyone's computer or mobile app may look like an open bank vault to a cyber crook.

The Federal Trade Commission recently released its annual report on consumer complaints. The overall volume of complaints in 2011 jumped by more than 24 percent from 2010 to more than 1.8 million. Identity theft topped the list of complaints for the second straight year, accounting for about 15 percent of all complaints. About a quarter of identity theft complaints involved alleged tax or wage fraud.

Here are the top 10 types of complaints received in 2011 by the agency, and their share of total complaints:

Identity theft: 279,156 (15 percent)

Debt collection: 180,928 (10 percent)

Prizes, sweepstakes, and lotteries: 100,208 (6 percent)

Shop-at-home and catalog sales: 98,306 (5 percent)

Banks and lenders: 89,341 (5 percent)

Internet services: 81,805 (5 percent)

Auto-related: 77,435 (4 percent)

Imposter scams: 73,281 (4 percent)

Telephone and mobile services: 70,024 (4 percent)

Advance-fee loans and credit protection/repair: 47,414 (3 percent)

The Center for Retirement Research at Boston College picked up on the trend in a recent report, "The Rise of Financial Fraud." It notes that consumers may be more susceptible to financial fraud these days because they are more likely to be seeking solutions to unusually tough financial problems.

"People face serious financial problems ranging from stagnant incomes after the 2008 stock market crash to skyrocketing medical costs and house values that are less than the mortgage amount," the report says. "Any one of these can make an individual more vulnerable to get-rich-quick schemes."

Citing research by the Center for Retirement Research and others, the report also says the declining cognitive skills of aging Americans puts them at special risk of being defrauded. "Between ages 71 and 79, one-fifth of individuals are impaired but that rises to half of those between ages 80 and 89," it says.

Here is a list in the report of 10 "red flags" that should alert consumers to consider either walking away from the deal or making their own complaint to consumer authorities.

1. The offer looks too good to be true. Scam products or investments usually appear far more lucrative than standard products on the market.

2. Offers a high or "guaranteed" return at "no risk" to the investor. This is virtually impossible.

3. Requires an urgent response or immediate cash payment. Legitimate business deals never require such a response.

4. Charges a steep upfront fee in return for the promise that you will make even more money at some unspecified date. Run, don't walk, from such a deal.

5. Suggests recipients do not tell family members or friends about the offer. Why would any legitimate business person make such a request?

6. Lures prospective investors with a "free lunch." If you attend such a lunch, never agree to any deal or sign anything until you've gone home and done a lot more homework.

7. Sends unsolicited Internet email deals. These should go directly to your delete folder.

8. Tries to instill fear that failure to act would be very costly. As with item No. 3, no ethical person does business this way.

9. Resists being questioned or checked out further. Con men, like roaches, scatter when the lights go on.

10. Pitches a deal so complex that it is difficult or impossible to understand. A good rule for any financial transaction: If you don't understand it, don't do it.

Twitter: @PhilMoeller