Brits lose £3.5 billion a year to scams

According to the Office of Fair Trading (OFT), consumers in the UK lose £3.5 billion each year to increasingly sophisticated techniques used by scammers. That equivalent to about £70 per adult in the UK.

In an attempt to try and combat the growing problem of innocent Brits falling for ever ingenious scams, the OFT has made February its nationwide 2007 Scams Awareness month. The OFT aims to highlight some of the more common scams that Brits should be looking out for and to provide people in the UK with the knowledge and skill they need in order to recognize and report scams so as to minimize the threat of falling for them.

Historically, the techniques used by scammers include e-mails, text messages and internet pop-ups. In most cases, the scammer hopes to prey on either the greed of their victim to make a quick buck, or the inexperience the victim has with modern technology. Accordingly, according to the OFT, the top five most common scams consumers in the UK fall for include:

1. Bogus holiday clubs – over 400,000 people in the UK fall victim to a bogus holiday club scam every year. On average each victim will lose £3,030 – or a total cost of £1.7 billion a year to UK consumers. Essentially, the scam operates by inviting holidaymakers to a presentation where they will be told they will collect a 'prize'. They're pressurized into joining an 'exclusive' holiday club, which then fails to deliver on what it had promised.

2. Fake lotteries – fake foreign lotteries are another popular scam that 140,000 UK consumers cannot seem to stay away from. It costs them £260 million a year and is very easy to operate. Basically the scammer sends the victim a message, either by e-mail or text message, telling them they have won a prize and all they need to do to collect their prize is to send a small administrative fee. Obviously, the prize never materializes!

3. Miracle health and slimming cure – UK society is now so concerned about how we look that we are now willing to spend approximately £20 million a year on scam miracle health and slimming cures!

4. Pharming – although fairly well published now, pharming, where consumers are sent an e-mail telling them that they need to update their financial records, say on PayPal or their online bank, still costs UK consumers millions of pounds a year.

5. Stocks and shares – growing in popularity is the spam e-mail telling people that a particular stock/share (usually a penny stock) is about to explode out of tracks and returns on investment will be out of this world. In most cases these e-mails are sent looking like they should have been sent to an innocent third person and you just happen to have been lucky to have received a mis-directed e-mail. What you don't know is that the scammer has already bought shares in the penny stock and your, and millions of others, interest in the shares does exactly what they said and hoped would happen – it sends the price of the share into orbit. In the meantime they have sold out and by the time everyone else has worked out that the share is worthless, you are left with a penny share you paid a fortune for!

Commenting on the rise of scamming in the UK, Mike Haley, Head of Scambusters at the OFT, said: "Scammers are finding more ruthless and sophisticated ways to exploit modern tools, such as the internet e-mails and text messaging. These scams deeply affect individuals and families, leading to debt, depression and even suicide. Though anybody can be conned by the scammers, it is always the vulnerable, oldest or youngest who end up suffering the most."

Richard Smith
16th February 2007