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FTC: Company Impersonation Scams Cost Consumers Millions of Dollars

The Federal Trade Commission said it has been flooded with reports from consumers who have been taken in by scammers purporting to represent some of today’s leading companies.

The FTC said Friday (May 24) that it received 52,000 consumer complaints in 2023 detailing scams where fraudsters claimed to represent Best Buy’s Geek Squad, which resulted in $15 million in consumer losses. Another 34,000 consumers reported losing $19 million to scam artists impersonating Amazon employees. PayPal impersonation frauds, meanwhile, cost consumers $16 million last year.

These were the three leading impersonation scams, but the FTC said criminals pretending to represent NortonAppleBank of America and Wells Fargo were also common last year.

The tactics varied per swindle, the FTC said. Emails from fake Geek Squad representatives prompted consumers to share their credit card information to renew nonexistent service plans. Bogus Microsoft staffers alerted consumers about fake security breaches that could be resolved for a small price. Fraudsters claiming to represent Publishers Clearing House urged people to pay a modest fee so their nonexistent sweepstakes winnings could be delivered.

To shield themselves from such hoaxes, the FTC said diligence is the first line of defense. Proceed with caution before paying anyone for anything or before clicking questionable links, the agency warned.

The FTC also reminded businesses they have a role to play in protecting consumers.

“At minimum, make it easier for customers to reach you to find out what communications are legit,” the FTC told merchants. “… [Look] to your workforce’s ingenuity to deploy solutions that protect your loyal customers and your good name.”

The PYMNTS Intelligence report “Fraud Management in Online Transactions,” revealed that proactive fraud prevention on the part of merchants can help reinforce customer loyalty and satisfaction.

The study found that 93% of eCommerce businesses saw improved customer experiences after integrating enhanced anti-fraud technologies.

Perceived benefits from anti-fraud toolsOf the 300 eCommerce executives who were surveyed for the report, 82% said increased consumer satisfaction would be the leading benefit following improved security measures.

While 75% said upgrading fraud-prevention tools will help circumvent future cyber and data breaches — making it the No. 2 benefit — the next two leading benefits put the focus right back on the customer. Sixty-eight percent of merchants said enhancing fraud prevention tools will help mitigate customer concerns about data privacy, while 54% said it helps minimize customer churn. Only 37% said improving anti-fraud safeguards will help prevent future fraud losses.

Merchants don’t have to go it alone. There are many third-party fraud prevention providers in the market, and PYMNTS Intelligence found that using external fraud-prevention expertise can pay off. Forty-four percent of merchants now outsource at least a portion of their fraud prevention operations to specialized third-party providers. Those surveyed in this group reported a lower average failed payment rate of 8.5% — 32% lower than the 13% rate experienced by businesses that opt to handle all their anti-fraud efforts internally.

Although partnering with specialized third-party providers won’t put a dent in the millions of dollars consumers lose due to impersonation schemes, doing so can help merchants deliver on the FTC’s request to help protect customers. By doing so, businesses can improve their own internal security — and, in turn, boost customer satisfaction.