The FINRA Investor Education Foundation issued a new research report, Non-Traditional Costs of Financial Fraud, which found that nearly two thirds of self-reported financial fraud victims experienced at least one non-financial cost of fraud to a serious degree—including severe stress, anxiety, difficulty sleeping and depression. While the Stanford Financial Fraud Research Center estimates that $50 billion is lost to financial fraud every year, the FINRA Foundation’s innovative research examines the broader psychological and emotional impact of financial fraud.
“Fraud’s effects linger and cause distress well after the scam is over. For the first time, we have data on the deep toll that fraud exerts on its victims, and the results are sobering. This new research underscores the importance of the FINRA Foundation’s work with an array of national, state and local partners to help Americans avoid fraud, and assist consumers who have been defrauded,” said FINRA Foundation President Gerri Walsh.
The research report found that:
- nearly two thirds (65 percent) reported experiencing at least one type of non-financial cost to a serious degree; and
- most commonly cited non-financial costs of fraud are severe stress (50 percent), anxiety (44 percent), difficulty sleeping (38 percent) and depression (35 percent).
- Beyond the psychological and emotional costs, nearly half of fraud victims reported incurring indirect financial costs associated with the fraud, such as late fees, legal fees and bounced checks. Twenty-nine percent of respondents reported incurring more than $1,000 in indirect costs, and 9 percent declared bankruptcy as a result of the fraud.
Additionally, nearly half of victims blame themselves for the fraud—an indication of the far-reaching effects of financial fraud on the lives of its victims.
For more information, click here.
- Ask students to list a few suggestions to protect themselves from financial fraud.
- Explain how FINRA can assist consumers who have been the victims of financial fraud.
- What are a few indirect financial costs associated with funds?
- Why nearly half of victims blame themselves for being victims of financial fraud?
- How and where should you report financial fraud?
A current email scam invites people to take advantage of “a little known Social Security contract” which enables you to receive “little known benefits.” Think that sounds too good to be true? It should—there is no “little known Social Security contract.”
What are some clues that scams might not be legitimate? Scammers insist that the situation is urgent and issue warnings. They try to convince you to act now to avoid dire consequences. They promise a deal or secret that the public doesn’t know about. They come from organizations unknown to you. They offer things the government doesn’t want you to know, but they don’t come from a .gov website.
The Federal Trade Commission’s website maintains a list of scams in the news. You can sign up to be notified by an e-mail when new scams appear. You can also get free consumer education materials and read the latest from consumer protection experts. Stay well informed by visiting the FTC scam alert page. It’s in your best interest to find out about the scams and how they work so you won’t fall a victim to one yourself. Protect yourself by learning how to avoid scams and fraud. You can search for “identity Theft” or “phishing scam” on Social Security website, www.socialsecurity.gov to learn more about how to protect yourself. Then you’ll be the one who knew it sounded too good to be true.
For more information, click here.
- Ask students what they would do if they received such enticing offers.
- Ask students to make a list of agencies where they can file a complaint against these scammers.
- How can you determine if the offer is legitimate?
- What can you do to protect yourself from such bogus offers?
Many people in our society are not able to save. They are barely able to cover their monthly expenses. However, there are some actions that can help you get on a path to saving.
In the first month, open an online bank account and deposit a minimum amount, such as $5. This is a very important first step. In month two, save $15 (or more) in your online savings account. One way to do this is with Paribus, an online tool that searches various retailers to determine if you are owed money for past purchases as a result of a price drop.
Your goal for month three is to work toward savings $100. This could be accomplished by signing up with market research companies to participate in providing opinions. Or, you could try selling old items online. By consistently using various ideas for earning extra money, you should be able to save $100 a month.
For additional information on starting a savings program, click here.
- Have students to talk various people to determine actions they take to reduce spending or earn extra money.
- Have students create a summary presentation describing actions that might be taken to increase a person’s savings.
- Describe attitudes and behaviors that might result in people not being able to save for the future.
- What are actions you have taken to reduce spending and to earn extra money for savings?
All buying decisions fall into two categories: (1) items we need; and (2) items we want. Financial difficulties often occur when the categories are blurred. People try to convince themsleves that things they WANT are things they NEED, when often that is not the situation. Our true needs involve a fairly short list: food, air, water, shelter, health care (including health insurance), clothing, and maybe…Internet access.
However, Internet access can be basis of our financial troubles. Time spent browsing online can result in many unneeded purchases. How might you avoid this? The following suggestions are offered:
- Don’t buy an item right away. Delaying a purchase allows you to consider the value more carefully.
- Review the purchases you delayed for at least a month to determine if the urge to buy the item still exists, and if the money is available.
- Delete from your “wish list” any items that you no longer desire to buy.
- Consider returning an item, as allowed, when the purchase does not meet your expectations.
For additional information on reducing impulse buying, go to:
- Have students describe purchases that might have been avoided using the suggestions above.
- Have students talk to others to create a list of methods to reduce impulse buying.
- Why are some people continually involved with impulse buying?
- What are the short-term and long-term financial consequences of impulse buying?
Online shopping makes it easy and convenient to search for – and buy – the must have items on your wish list. Before you buy, follow these tips on avoiding hassles, getting the right product at the right price, and protecting your financial information.
To make sure you’re getting the best deal, compare products. Do research online, check product comparison sites, and read online reviews.
Confirm that the seller is legit. Look for reviews about their reputation and customer service, and be sure you can contact the seller if you have a dispute.
Pay by credit card to ensure added protections, and never mail cash or wire money to online sellers.
Keep records of online transactions until you get the goods.
Report online shopping fraud.
For more information, click here.
- Ask students if they have shopped online. If so, what have been their experiences?
- Why is it important to confirm the online seller’s physical address and phone number?
- If you return an item, who pays the shipping costs or restocking fee?
- What should you do if you get an e-mail or pop-up message that asks for your financial information while you are browsing?
- Why is it important to read the seller’s description of the product closely, especially the fine print?
- Why is e-mail not a secure method of transmitting financial information, such as, your credit card, checking account, or Social Security number?
- Where can you file a complaint to report online shopping fraud?
Pokémon Go has resulted in a loss of money and other concerns. In this popular game, users interact virtually with Pokémon characters placed in real world settings. The app is free to download, however there are in-app purchasing opportunities. Players are encouraged to pay for hints and tips for a competitive advantage.
In addition to financial losses, the Pokémon Go app has been used to lure robbery victims. Other players have been robbed of their phones. Police departments caution players to be aware of their surroundings.
Be warned that “free isn’t the same as no cost.” Users may pay in the form of data use, legal confrontations, injuries, and reduced work productivity. Higher insurance costs can also occur when playing the game while driving, which might result in an auto accident. Social concerns include disturbing church services and other occasions with players capturing creatures during the events.
For additional information on the cost of Pokémon Go, click here.
- Have students suggest ways that an app game might be used for improved learning or assisting others in need.
- Have students describe safety precautions when playing Pokémon Go.
- Why are people attracted to the game, often with a personal or financial cost?
- What actions might be taken to avoid the financial and personal dangers of the game?
Based on a recent study, chip-enabled cards used without appropriate technology and tax ID theft are the fastest-growing and most costly consumer complaints. People are often contacted by someone claiming to be from the IRS, a utility company, or a tech-support company, and asked to send money or provide personal information. This is a common danger sign of fraud as reported in a recent study of consumer complaints by the Consumer Federation of American and the North American Consumer Protection Investigators.
This report identified the following as the top ten most common sources of consumer complaints:
- Motor vehicle misrepresentations in advertising along with sales of new and used cars, lemons, faulty repairs, leasing and towing disputes
- Home improvement, such as inferior work, and failure to start or complete the job
- Utility service problems and billing disputes
- Credit and debt concerns, such as billing and fee disputes, mortgage fraud, credit repair, debt-relief services, predatory lending, abusive debt-collection tactics
- Retail sales problems related to deceptive ads, defective goods, problems with gift cards and certificates, rebates and coupons
- Services with poor or incomplete work, lack of licensing
- Landlord-tenant concerns, such as unsafe or unhealthy conditions, lack of repairs, and unfair eviction
- Furniture, appliances, and household products that are faulty or not properly repaired
- Health products and services with misleading claims
- Fraud and scams, such as phony sweepstakes, work-at-home schemes, deceptive online sales
Two additional recently reported scams are the “grandparent scam,” in which a phony grandchild calls an older person claiming to need quick cash for an emergency. With the CEO scam, employees are contacted with what appears to be an email from their company asking them to wire money to a foreign supplier for a deal that needs to close immediately with a promise to be reimbursed.
For additional information on current frauds and scams, go to:
- Have students present a talk with actions that might be taken to avoid consumer scams.
- Have students create a list of common consumer complaints among their friends.
- Why are people often victims of consumer frauds?
- What are common suggestions for avoiding various consumer scams and frauds?
To save money and help improve the environment, 20SomethingFinance.com suggests that you:
- grow your own food and buy from local sources.
- replace meat in meals with beans and vegetables.
- bring your own containers to buy bulk items.
- use refillable drink bottles.
- ride a bike instead of driving.
- use a low-flow showerhead.
- sell items not being used; buy used items instead of new.
For additional information on saving the environment and money, click here.
- Have students ask people to describe environmental-saving actions commonly used.
- Have students create a promotional plan to create awareness of money-saving actions that are also environmental friendly.
- What are benefits and drawbacks of environmental-saving actions?
- What factors might be considered when taking actions that save money and improve the environment?
“Falling gas prices have put consumers in a good mood.”
According to a survey conducted by the National Association of Convenience Stores (NACS), more than 4 in 5 Americans indicate falling gas prices impact their feelings about the nation’s economy and as a result they will spend more during the upcoming holiday season. In fact, more than one in four consumers (26 percent) expect to increase their spending during the 2015 holiday season–a 7-point jump over the past month and the highest percentage this year. Also the survey finds that women are more optimistic than men. For retailers, this statistic is even more encouraging because women do more holiday shopping when compared to men.
For more information, click here.
You may want to use the information in this blog post and the original article to
- Discuss how holiday spending impacts a family’s budget.
- Describe methods that consumers can use to save the money and budget for holiday spending.
- Does the price of gasoline affect your spending on other items such as food, clothing, medicine, luxury items, and gifts?
- How can you avoid spending “too much” during the holiday season?
- What steps can you take to save the money needed for gifts and other holiday expenses?
How many people are scammed into sending money or giving personal information each year?
Types of Internet Fraud
- Internet auction fraud—involves the misrepresentation of a product advertised for sale on an Internet auction site, or non-delivery of merchandise.
- Credit card fraud—the unauthorized use of credit/debit card, or card number, scammers fraudulently obtain money or property.
- Investment fraud—an offer using false claims to solicit investments or loans, or providing purchase, use, or trade of forged or counterfeit securities.
- Nigerian letter or “419” fraud—named for the violation of Section 419 of the Nigerian Criminal Code, it combines the threat of impersonation fraud with a variation of an advance fee scheme in which a letter, e-mail, or fax is received by a victim.
Tips for Avoiding Internet Fraud
- Know your seller – If you don’t know who you are buying from online, do some research.
- Protect your personal information – Don’t provide it in response to an e-mail, a pop-up, or website you’ve linked to from an e-mail or web page.
For more information, click here.
- Bring to class Internet-related problems and examples of individuals or families. Suggest ways in which these problems might be solved.
- Compile a list of places and organizations where a person can call to report Internet fraud.
- While the Internet makes everyday tasks faster and more convenient, like stopping, banking, and communicating, why it’s important to be safe, secure, and responsible online.
- What are some basic precautions we can take to protect our computer and personal data from theft, misuse, and destruction?