|Reprint permission from the December 4, 2000 issue of Crain's Chicago Business.
The Federal Trade Commission is spearheading a new international network of consumer protection agencies to crack down on "dot.cons."
Everyone who uses the Internet to gather information, to do business or to shop will benefit from the Federal Trade Commission's (FTC) leadership in sharing evidence and coordinating the fight against cross-border fraud.
The FTC's initiative comes not a moment too soon. Consumers are becoming more comfortable doing business online, and they are letting their defenses down. As confidence in electronic commerce gradually builds, legal authorities throughout the world are challenged to stay one step ahead of criminals who would exploit it.
The FTC is clearly doing its part. The agency has filed suit against more than 250 online scammers this year and recently identified a "Top 10" list of Internet con games the public needs to know about.
Consumers are falling for some age-old scams, re-engineered for big digital payoffs — and some brand-new ones, too.
There are e-auction sites that take in payments but never deliver the goods. There are something-for-nothing artists who flood the mails with "rebate" checks that, when endorsed by unsuspecting payees, sign them up for long-term Internet service provider contracts.
And then there are con artists who prey on the greed or desperation of consumers. A work-at-home billing scam attracted people to buy its $369 package of "training, software and clients," enticing them with unrealistic earnings expectations.
But perhaps the most insidious scam is identity theft, a crime under both federal and state law, yet often unavoidable and seemingly unstoppable.
The scam involves turning a victim's personal information into a new identity. All the tech-savvy thief needs to do is pay an information broker to learn one's Social Security number. He can then secure the hapless victim's address from an online database and his mother's maiden name from public documents. That's all it takes to expropriate the victim's credit.
The identity thief might go on to open a new credit card account in his victim's name, order merchandise without paying for it and allow the delinquent account to be flagged on the victim's credit report. Or the thief might set up a bank account in his victim's name and cavalierly proceed to write bad checks on that account.
The Internet not only provides the means to access identity information, it also empowers the identity thief to buy goods and services from e-merchants everywhere.
The FTC is the nation's central repository for identity-theft reports. This year, it is likely to receive more than a half-million such complaints.
The commission is doing a good job of educating consumers and assisting dot.con victims. And its collaboration with other countries' consumer protection agencies makes perfect sense.
But our laws need to be tightened, too. Let's help consumers help themselves by requiring credit issuers to advise a consumer of any request to change the address on a credit account and to send consumers copies of their credit reports once a year at no charge.
And let's authorize the FTC to refer identity-theft complaints to the three national consumer reporting agencies — sparing victims the pain and cost of reporting the crime separately to each agency and all their creditors, and getting a jump on the crooks, who need to be stopped if public confidence in digital commerce is to be earned.
Marc J. Lane ([email protected]) is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University School of Law.
Copyright © 2000 by Crain Communications Inc.