The Federal Trade Commission (FTC) has proposed a new rule that bans anyone from impersonating government officials and various business people. The FTC says this scam has cost consumers hundreds of millions of dollars over the past five years.
During the Covid-19 pandemic reports of fraud with these scams rose significantly. The FTC received more than 2.5 million reports of these scams from 2017 through the middle of 2022. Moreover, consumers reported losing more than $2 billion to these scams.
Here are some examples of how these scams work:
- Impersonators pose as a lottery official, a government official or employee, or a representative from a well-known business or charity.
- They fish for information they can use to commit identity theft;
- They often require an upfront payment n order to receive the proceeds.
Unbelievably, people fall for these scams. The reason is that these scammers are slick. They often use misleading domain names and URLs and “spoofed” contact information, to create an overall net impression of legitimacy.
As a result, the proposed FTC rule will ban scammers from:
- Using government seals or business logos when communicating with consumers by mail or online.
- Spoofing government and business emails and web addresses, including spoofing “.gov” email addresses or using lookalike email addresses or websites that rely on misspellings of a company’s name.
- Falsely implying government or business affiliation by using terms that are known to be affiliated with a government agency or business (e.g., stating “I’m calling from the Clerk’s Office” to falsely imply affiliation with a court of law).
These rules will also apply to the scammers' suppliers, like a supplier who manufactures a fake government credential used by scammers.
Reverb from the AMG Capital Supreme Court Ruling
The FTC says this new rule will strengthen its hand against scammers, in light of the ruling from the Supreme Court of the U.S. in June 2021 in AMG Capital Management LLC v. FTC. The FTC said that ruling significantly limited its ability to refund consumers' money taken in a scam.
Although that ruling did not completely rule out the FTC from getting refunds, it now has to meet a much higher standard of proof. In addition, there is a clear three-year statute of limitations. This is based on a post-Supreme Court analysis by the law firm Venable LLP.
Nevertheless, today's press release by the FTV says that its new proposed rule will " allow the FTC to seek important relief for consumers across a broad array of government and business impersonation cases." That may eventually be tested in the courts, though, in specific situations.
This is not the case with actions brought by the Consumer Financial Protection Bureau CFPB. Their ability to seek refunds for consumers was clearly written into their agency authorization from Congress.
This may mean that actions that the FTC takes against specific companies impersonating business or government officials may eventually also be taken by the CFPB as well. That way consumers will be guaranteed a refund from the scammer if the agencies are successful.
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Mark R. Hake, CFA, writes articles on national and local news, stocks, and market events at InvestorPlace.com, Barchart.com, Medium.com, and Newsbreak.com as well as TalkMarkets.
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