Who is Victimized by Fraud? Evidence from Consumer Protection Cases
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Who is Victimized by Fraud? Evidence from Consumer Protection Cases D. Raval1 Received: 7 October 2019 / Accepted: 6 July 2020 / © This is a U.S. Government work and not under copyright protection in the US; foreign copyright protection may apply 2020
Abstract This paper examines how fraud victimization varies across communities using data on victims from 23 consumer protection law enforcement actions. These cases span several different types of fraudulent activity, including payday loan, student debt relief, health care, and business opportunity scams, providing evidence on how demographics vary across types of fraud. For these cases, victim rates are higher in more heavily black, higher income, older, and more urban communities and are lower in more heavily Hispanic, higher household size, higher credit score, and more college-educated communities. Keywords Victimization · Fraud · Demographics · Consumer protection Fraud is a persistent feature of the commercial landscape. The Federal Trade Commission (FTC) has found that about 16% of Americans are victimized yearly in its latest survey (Anderson, 2019), with similar rates of victimization internationally (Dijk et al., 2007). In order to combat fraud, consumer protection authorities would like to identify which types of consumers are more likely to be victimized by different types of fraud. Such information can assist consumer education efforts by targeting information on fraud to likely victims, and help law enforcement target enforcement efforts. However, regulators are typically unaware of the demographics of consumers in any given legal case, or type of fraud, and how they differ from the US average. For example, the FTC in a recent report to Congress stated that: [T]he FTC has not generally collected demographic information about the victims in its enforcement actions. Therefore, as part of its Every Community Initiative, the FTC is undertaking new research to help the agency assess how its law enforcement actions and its work to remediate harm protects these communities.
D. Raval
[email protected] 1
Federal Trade Commission, Washington, DC, USA
D. Raval
In particular, the FTC was interested in racial and ethnic demographics, as it promised to “[p]erform additional research to help the FTC identify and target frauds affecting African American and Latino communities” (Federal Trade Commission, 2016). One way to examine how demographics affect victimization from fraud is through surveys, which the FTC and other organizations conduct regularly (Anderson, 2013, 2019). The main advantage of such surveys is that they examine a nationally representative sample of the overall population. However, sample sizes are often small—for example, Anderson (2019) had 3700 respondents, and so significantly less than 1000 fraud victims—which can make it difficult to examine the demographics of specific types of fraudulent activities. Another approach is to examine consumer complaints; the FTC and partner organizations receive millions of consumer complaints per year (Rava
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