Travel scam artists would face bumpy road with pending government regulations


The National Fraud Information Center, a nonprofit group, ranks travel scams as the second most frequent type of fraud in the country, after sweepstakes, saying travel fraud costs consumers and legitimate companies $12 billion a year.

Travel scams underwent a growth spurt in the '80s, with the advent of fierce interstate telephone marketing of $29 cruises and other dubious offers.

Although education is the only real protection, people who have been defrauded, as well as travel agents and operators, have been hoping for a way to prosecute wrongdoers.

"Fraud is the consumer problem of the ages," said Eileen Harrington of the Bureau of Consumer Protection of the Federal Trade Commission.

"If we had a magic bullet we would have used it long ago."

It's not exactly a bullet, but the commission has now drafted regulations to help states prosecute thieves whose tool is the telephone. The regulations carry out the Telemarketing and Consumer Fraud and Abuse Prevention Law signed by President Clinton in August 1994. The regulations must be final by Aug. 16 and are due to go into effect 30 days later. A second draft is open for public comment before it becomes final.

According to Ms. Harrington, the problem of telephone sales fraud became apparent in the mid-1980s. A prominent early approach was the "vacation certificate" mailed to a consumer who was told to call back to claim a free trip, which swiftly disappeared under a stream of credit card charges needed to redeem or "verify" the certificate.

The most common outcome is that any desired date for the promised trip is reported booked up. The venerable nonprofit National Consumers League initiated a campaign against telemarketing fraud in 1988.

Passing years have only made such scams more blatant: Two friends recently sent me nearly identical diplomalike sheets they got in the mail. Along with their names was this printed message: "Pack your bags! You have been chosen for a world-class Florida/Caribbean vacation package including all accommodations and a round-trip cruise!"

Some telemarketing-fraud scripts start right out with a phone call proposing a trip at a wonderful price, but only if the consumer gives a credit card number right away; another approach might be the offer of a discount because of a drop in tourism, say, to Florida, or the like.

According to Cleo Manuel, a spokeswoman for the National Fraud Information Center, a division of the National Consumers League, one out of seven complaints concerns sales of travel.

The new law permits state attorneys general to go to federal court to prosecute fraud artists and to get judgments, including injunctions, that might be applied nationally. It is rare to grant the states "equal enforcement authority" in this way, according to David Torok, a lawyer in the division of marketing of the FTC. He added that federal courts would not grant damages to people in all states on the basis of prosecution by one state, but it was possible that a nationwide injunction might be granted. Convictions can bring civil penalties as high as $10,000.

Frequently in the past, such fraud artists, when prosecuted by one state, shut down, changed their company names and moved operations to another state, or shifted their telephone target area to another state.

An important resource for these operators is a "sucker list" of names, addresses and phone numbers of people likely to succumb to sales pitches by phone: the old, the lonely and people who seldom get outside constitute an important segment, although I hear amazing tales from otherwise sophisticated people who have fallen for some hoary ruse.

The federal regulations, as now drafted, require that a consumer be informed of certain facts before any charge card payment is put through.

"It is a deceptive telemarketing act or practice and a violation of this rule," the text says, for the seller to fail to disclose in advance in "a clear and conspicuous manner" the total cost, or any limits or conditions on the use of the goods or services; any conditions affecting a refund, cancellation, exchange or repurchase. The prospective buyer must also be told that no purchase is necessary if a prize is offered as part of a sales pitch.

The proposed rules also forbid misrepresentations about these facts and others, including whether the seller is affiliated with or endorsed by a government organization. One familiar opening is a statement that the caller wants to help insure that the victim's Social Security payments are correct.

The burden of the law falls on telephone sales calls initiated by marketing companies, but it also covers calls made in response to direct mail of the travel certificate type. Calls to order merchandise from catalogs are exempt, as are calls from nonprofit groups.

The American Society of Travel Agents, the major trade organization in this field, with 18,000 members, has long favored rules to eliminate scam artists, particularly those who use the certificate come-on. It urged the government to be specific about what information consumers should get.

For example, in a response to the first proposed rules, it noted that one "free trip" certificate did not mention where a cruise ship would call, the date of the cruise, whether prepayment was required, whether cabins were available or a description of the ship.

Ray Greenly, the travel agent group's vice president of for consumer affairs, said that agents wanted rules that would help consumers differentiate between a legitimate offer and a deceptive one.

The National Fraud Information Center, according to Ms. Manuel, gets 300 to 400 calls a day on its toll-free line, (800) 876-7060. The information given to the organization's operators is entered into a computer and referred to the appropriate agency through the national data base maintained by the FTC and National Association of Attorneys General. If an agency decides action is required, it contacts consumers who entered the complaint.

The organization also publishes "Be Smart," tips on avoiding fraud. To order, contact National Consumers League, 1701 K Street N.W., Suite 1200, Washington, D.C. 20006.

The period for comment on the FTC regulations ends June 30. A copy of the proposed regulations may be ordered from the Public Reference Branch, FTC, Room 130, Sixth Street and Pennsylvania Avenue N.W., Washington, D.C. 20580. Comments should be addressed to the FTC Office of the Secretary at the same address.

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