Deceptive Practices, Fraud, and Consumers' Legal Rights
Consumers may encounter misrepresentations or fraud during their interactions with various types of businesses. Professionals in specialized industries have a knowledge advantage over the ordinary person, which they may exploit. If you have been defrauded or deceived by an unscrupulous professional or business, you should know your rights under federal and state law. You may be able to bring a civil claim for damages in addition to reporting the matter to the appropriate government agency for investigation.
The situations in which consumer fraud can arise are nearly endless, but this is an overview of some common examples.
Securities Fraud and Broker Fraud
If you have investments in the market, you may have retained a broker or other investment adviser to assist you. They likely know far more about how the market functions and how a certain stock is likely to perform than you do. As a result, they have a high fiduciary duty of care to their clients. A broker may breach this duty and act in their own interest by “churning” your account to generate more commissions, trading without authorization, or recommending unsuitable investments, among other inappropriate actions. If you suffer losses as a result, you can sue the broker or their firm for securities fraud or broker fraud.
Credit Card Fraud
Similar to identity theft, credit card fraud can involve the theft of your personal financial information or the theft of specific credit cards. Thieves may steal tangible cards, or hackers may breach the computer systems of businesses that store the financial information of their customers. This can result in debts based on purchases that you did not make, as well as damage to your credit. Under a federal law, the Fair Credit Billing Act, you will not be held accountable for inaccurate or fraudulent credit card charges if you promptly dispute them.
Auto Dealer Fraud
“Lemon laws” are state and federal laws that protect consumers who purchase defective vehicles.
A manufacturer may be held accountable for defects in a car or a car part, but auto dealers may deceive consumers regarding the condition or price of a car. You should make sure to carefully examine any new or used car that you are considering buying and make sure that you are satisfied with the integrity of the dealer. Some dealers may deceive consumers by including hidden fees, using bait and switch schemes, selling a used car as a new car, claiming that a car has features that it does not have, or hiding information about a car that a reasonable consumer would want to know. Other auto dealer fraud may relate to financing the purchase of a vehicle.
Entities in the healthcare industry sometimes engage in false advertising to boost sales of their products or justify high prices to consumers. If a product is defective or contains serious risks, a manufacturer likely should recall it from the market or at least warn consumers about the risks. Otherwise, an injured consumer may be able to hold a manufacturer liable for marketing a dangerous drug by bringing a products liability claim. Healthcare fraud also can occur in the health insurance industry, such as when consumers pay premiums based on a fraudulent policy or receive fraudulent denials of their claims under a policy. This can result in bad faith claims against insurers.
Your home carries immense financial and emotional value, and you may invest your hard-earned money in improvements or repairs to it. However, general contractors, specialty contractors, and even builders or architects may engage in construction fraud or misrepresentations. They may attempt to charge clients for services and products that were not covered in a contract, deceive consumers about the materials used or permits required, or file fraudulent mechanics' liens, among other examples. Many state laws protect homeowners from these practices and allow them to recover damages if they have been subjected to scams. Other scammers unfortunately take advantage of people whose homes have been damaged or destroyed in natural disasters.
Mortgage fraud may be perpetrated by lenders or by third parties.
Lenders sometimes try to exploit homeowners who are concerned about paying off a mortgage. Predatory lending may involve requiring unaffordable loans based on a borrower’s assets, making misrepresentations to borrowers, or encouraging a borrower to refinance a loan so that the lender can receive additional fees. However, some forms of mortgage fraud are perpetrated not by lenders but by third-party scammers. They may try to convince a homeowner who fears foreclosure that they can save their home by transferring the property to a third party and then buying it back. Or they may tell a homeowner that they can negotiate a loan modification in exchange for a fee, only to take no action, which can result in foreclosure.
You probably are familiar with unsolicited phone calls from representatives of companies trying to sell you something that you do not want. (You also may receive spam emails in your inbox and junk mail in your mailbox each day.) A federal law known as the Telephone Consumer Protection Act has placed certain restrictions on telemarketers. The National Do Not Call Registry allows consumers to remove their phone numbers from the call lists of telemarketers, although it exempts certain types of callers. You can sue for violations of the Telephone Consumer Protection Act and related laws.
Stay Alert to Red Flags
In general, consumers should be aware of the possibility of false advertising, undisclosed fees, or fake offers or contests in any sort of marketing materials that they receive or during interactions with a company’s representatives. If something sounds like it is too good to be true, it probably is. While you can potentially recover damages if you fall victim to a scam, staying alert to likely red flags can help you avoid scams entirely.