Scams that ensnare the largest number of victims involve social media and online purchases, according to a just-released study from the FINRA Investor Education Foundation.
Of the survey of 1,408 Americans and Canadians who were targeted and reported a scam, nearly half (47%) did not engage with the fraudster and so were not victimized.
Thirty percent engaged but did not lose money, yet the 23% that did engage and ultimately lost money engaged in online purchases.
Survey respondents who engaged and became victims were more likely to report being exposed to those scams on a website or through social media than via telephone, mail or email.
When phone and email were used by scammers to target consumers, relatively few consumers engaged with the scammer or lost money. However, when exposed to a scam on social media, 91% engaged and 53% lost money. Similarly, 81% of consumers who were exposed to a fraud via a website said they engaged and 50% lost money.
The 24-page report, “Exposed to Scams: What Separates Victims from Non-Victims,” was issued in concert with the BBB Institute for Marketplace Trust and the Stanford Center on Longevity, in recognition of World Investor Week, which started Monday.
Social isolation and low levels of financial literacy were also associated with engaging and losing money, with the research also noting that prior knowledge of scams and fraud can reduce susceptibility.
“Despite the enormous personal and financial costs of fraud victimization, few studies have explored the process of fraud victimization and the factors associated with losing money,” said FINRA Foundation President Gerri Walsh in releasing the study. “Our goal is to better understand the conditions under which scam targets do not become victims in order to develop more focused and effective public education tools and strategies to protect consumers.”
Approximately one in 10 U.S. adults are victims of fraud each year, and self-reported fraud loss complaints to the Federal Trade Commission’s (FTC) Consumer Sentinel Network increased by about 34% from 2017 to 2018, the FINRA survey notes.
The FTC received more than 372,000 fraud complaints with more than $1.5 billion in direct losses in 2018, and another 1.1 million fraud complaints with no reported losses.
Other key findings of FINRA’s survey:
- Those who engaged scammers and lost money were less likely to be married and more likely to be widowed or divorced. Generally, those who engaged, and those who lost money, reported significantly higher feelings of loneliness.
- The likelihood of victimization for this sample is greater for individuals who are under financial strain, are younger adults, or have low levels of financial literacy.
- Nearly half of those surveyed said the news media was their primary source of information about scams. Word of mouth was the next best form of protection and awareness.
- Prior knowledge of fraud helps decrease the chances of victimization. One-third of consumers who were targeted by a scammer, but did not engage, already knew about the specific type of scam. In addition, consumers who understood the tactics and behaviors of scammers did not engage with the fraudsters.
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