Area of Law: Criminal Law
Answer # 1808
Consumer fraudRegion: Ontario Answer # 1808
What is consumer fraud?
Consumer fraud involves unlawful practices specifically intended to:
- grossly overcharge people for goods or services actually provided, or
- receive payment on goods and services that do not exist or that the fraudster has no intention of providing, or it can involve
- impersonation by the fraudster to defraud consumers.
There are many types of consumer fraud scams.
Common types of consumer fraud
A common type of consumer fraud is committed by phony fundraisers claiming to represent a charitable organization that may have a similar name to a legitimate charity. They contact people through mail, email, telephone, or door-to-door. Similarly, some fraudsters perpetrate scams by pretending to be very sick and in need of money to fund medical care. They may post on social media looking for donations.
In both cases, once the victim makes a ‘donation’, it may be very difficult to get their money back.
Gift card fraud
Gift card fraud involves scammers stealing the information from unsold gift cards and using it to buy things. They do this by copying the numbers off the back of a gift card they see on a store rack. Once some time has passed, they call the customer service number that was on the gift card and ask if the card has been activated, and if so, what the balance on it is. If it’s been activated, they use the card number to buy items online.
If you buy one of these compromised cards and try to use it, you may discover that there is little or no balance left on the card.
Canada Revenue Agency & other government scams
A popular consumer scam involves threatening taxpayers or using aggressive and forceful language to scare them into paying fictitious debt to the CRA. Victims receive a phone call from a person claiming to work for the government department. The victims are told that taxes are owed and the caller requests immediate payment by credit card or convinces the victims to purchase a prepaid credit card and to call back immediately with the information. According to CRA, the taxpayer is often threatened with court charges, jail or deportation.
Similar scams involve the fraudster creating a website that looks remarkably like a federal government site, such as Canada Revenue Agency, Passport Canada, or Immigration, Refugees and Citizenship Canada (IRCC). Visitors to the site are tricked into sharing personal information, such as passport numbers and credit card information, in exchange for bogus government services.
A phishing scam is an attempt to deceive the victim (usually by email) into giving sensitive information to someone posing as an individual or company that the victim knows (e.g. your bank, electricity company, cable provider).
Similar to the CRA scam, fraudsters send text messages, emails or make threatening phone calls pretending to be from the billing and collections department of the company, demanding payment due, sometimes in the form of a pre-paid card or with a credit card.
Through emails and text messages, in another scam so-called customers are told to accept an electronic transfer credit or refund by clicking on a link, and once they do so, they are taken to a page asking for personal information, including bank accounts or credit card numbers needed in order to process the refund.
Counterfeit and pirated goods fraud
The Canadian Anti-Counterfeiting Network defines counterfeiting and piracy as the unauthorized knock-off of legitimate products. Licensed products that are often counterfeited and sold, include:
- fashion accessories, such as purses and wallets,
- electronics, such as chargers, cell phones and MP3 players,
- everyday personal products, such as shampoo and toothpaste,
- sporting goods,
- trading cards,
- men’s designer sneakers,
- medications, and
- licensed paraphernalia.
These types of products are usually found in, but not limited to markets, discount malls, dollar stores and online. While many consumers are aware the products are counterfeit, often they believe they are real. While the cost to consumers is high, counterfeit products pose many health and safety risks as well, for example toxic ingredients in counterfeit medications, or children’s clothing that is not fire retardant. They can also result in job losses and non-payment of taxes.
Real estate and rental scams
A common type of consumer fraud involves the real estate and rental market. The fraudster will charge for allegedly renting out apartments that don’t actually exist, or, sometimes already have tenants living in them. Advertisements are placed online, and they often ask for a down payment to secure the spot, usually via money transferred electronically, rarely meeting face to face. They also “sell” fictitious or already owned parking spaces. When the victim arrives to use the parking spot they believe they’d bought, or view the rental unit, they are told by the rightful owners that it was never available.
In a quick-change scam, employees (often inexperienced cashiers) are taken through a series of speedy money exchanges while the fraudster distracts them with conversation.
Usually, the scammer will pay for an item that does not cost a lot with a large bill, and before the cashier can provide change, the scammer asks for a particular denomination of bills in return, confusing the cashier. This type of scam often includes two individuals, so the second party can talk to the employee during the transaction, further confusing them. The stolen cash and shortages aren’t discovered until later in the employee’s shift.
Grandparent or emergency scam
In the grandparent or emergency scam, a caller pretends to be the victim’s grandchild. The fraudster says they are in trouble and in need of money right away. They may say they are in hospital, have gotten into trouble with the law, or are stuck penniless in another country. To sound legitimate, the fraudster may have first found out personal information about the victim and victim’s family members, including names and birth dates.
Some consumer scams involve the fraudster placing a job ad that requires the victim to enroll in a company’s training or certification program, guaranteeing a job and a high starting salary with the company. While they may actually provide courses and training, if the victim tries to find work elsewhere, legitimate employers may not recognize the certification.
Phony employment agency scams
Another popular consumer scam targets people who post their résumé on employment websites. Fake employment agencies call the victim and pose as a headhunter who claims to be “screening” on behalf of an employer. They set up an interview and promise high paying jobs. Once they meet, the victim is convinced to sign a contract and pay a fee for the job placement service.
Debit card fraud
A very common and popular type of consumer fraud involves debit cards. To conduct the fraud, the fraudster must steal your PIN and the magnetic strip information on the back of your debit card. Once this information is stolen the card can be duplicated. It is then used to withdraw your money from a bank machine, or purchase items from a store.
Common methods used to steal or duplicate cards and obtain the PIN are:
- Easily identified PINs – A thief steals your purse or wallet and successfully tries a PIN based on information found in your wallet, such as your birth date.
- Card Jam – Thieves can use various devices to jam your card in the bank machine. Once this happens, the thief, posing as a helpful stranger, suggests that you try your PIN again to remove the card, but it will not work. After you leave, the thief removes your card and has your PIN. If you can prove you are a victim of this type of fraud, your financial institution will generally cover your losses.
- Skim and Clone – This is when scammers working at a business illegally collect your PIN and card information from a legitimate purchase that you make. When you hand over your card to make a purchase, they run your card through a device that sends your magnetic strip information to the financial institution. They then swipe the card a second time to record the information into a hidden device, which allows them to make a duplicate of the card. While this is happening, a camera records your PIN information. If you are proven to be a victim of such a fraud, your losses would be covered by your financial institution.
- Bogus machines – In a bogus machine scam, the machine lifts your card and PIN information and issues a transaction receipt but does not actually send the transaction to the financial institution. If the fraudster is an employee and the owner of the business is not in on the scam, the employee puts cash in the till so that the owner’s daily receipts balance. The fraudster then uses the stolen data to create a debit card and empties the funds from your bank account. In such cases, if you were given a receipt and you have kept it, the transaction will not show on your statement and this will be proof of the fraud. If you did not get a receipt or did not keep it if you were given one, you must use other evidence to show that it was not you who withdrew the money. If you are a proven victim of such a fraud, your losses would be covered by your financial institution.
- Bank and government office security breaches – Some of the biggest scams involving credit cards, debit cards, mortgages, and bank accounts are the result of:
– a bank computer hacking into the computers of banks and government offices
– employee fraudsters of financial institutions diverting large databases of information from which fake credit cards are produced, loans given, bank accounts drained etc. by using the personal financial information of real people
Popular industries in which frauds are perpetrated are:
- home improvement,
- model and talent agencies,
- motor vehicle repairs, and
- door-to-door sales.
For more information on these and other consumer issues, refer to our Consumer Law section.
If you discover you are a victim of fraud, it is a good idea to contact a fraud recovery expert for advice.
If you have been charged with a fraud or any criminal offence, contact our preferred criminal law experts, The Criminal Law Team .
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