Consumer Protection and Fraud
Your phone buzzes: "Your bank account is locked. Tap here to verify." Your heart skips. Is it real? Scammers count on you reacting before you think. In this lesson you will learn who protects consumers, how scams work, and what to do the moment something feels off. At the end, you will answer that text for yourself.
Who Protects Consumers
In the US, several agencies share the job of keeping buyers safe. You do not need to memorize every law. You need to know who to call for what.
| Agency | Main role |
|---|---|
| FTC (Federal Trade Commission) | Stops unfair or deceptive business practices (false ads, scams) and collects fraud reports at ReportFraud.ftc.gov. |
| CFPB (Consumer Financial Protection Bureau) | Protects consumers in financial products: credit cards, loans, bank accounts, mortgages, debt collection. Takes complaints at consumerfinance.gov. |
| State attorney general / consumer affairs office | Enforces state consumer laws and takes complaints about local businesses. |
| Your bank or card issuer | First stop for unauthorized charges. |
Describe in one or two sentences each the main role of the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) in protecting consumers.
Describe in one or two sentences each the main role of the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) in protecting consumers.
Phishing and Other Scams
Phishing has cousins: smishing (by text message), vishing (by phone call), and identity theft (using your personal information to open accounts or buy things). Skimming means a device on a card reader copies your card data.
Warning signs of a fake message:
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Urgency or threats: "Act now or your account will be closed."
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A link or number you did not ask for. Real companies rarely ask you to log in through a text.
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Odd sender or web address (for example, bank-secure-login.com).
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Requests for a password, PIN, or full card number. Real companies never ask for these.
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Spelling mistakes or a generic greeting like "Dear customer."
Define "phishing." Then give two warning signs that a text message claiming to be from your bank may be a scam.
Define "phishing." Then give two warning signs that a text message claiming to be from your bank may be a scam.
Olivia gets an email saying her streaming account is suspended and she must click a link and enter her password and card number. Explain three steps she should take to…
Olivia gets an email saying her streaming account is suspended and she must click a link and enter her password and card number. Explain three steps she should take to check whether the message is real, and one step she should take if she already entered her information.
Scam Patterns: Prizes, Fake Deals, and Family Emergencies
Different scams use the same few tricks. Learn the tricks, and you can spot new scams.
Advance-fee / prize scams. You "won," but must pay a fee first. Real prizes do not cost money to collect.
Gift cards, wire transfers, cash, and crypto. Scammers demand these because the money is almost impossible to trace or get back. No real business or government agency demands payment in gift cards. That is a bright red flag.
Too-good-to-be-true online deals. Limited-edition sneakers that normally cost $\$220$ listed at $\$60$, with payment only by wire transfer, is a classic fake store. A credit card gives you the right to dispute a charge. A wire transfer does not.
Family-emergency (grandparent) scams. A caller pretends to be a grandchild in trouble and begs for secrecy and fast cash.
Scammers use psychological tactics:
| Tactic | What it sounds like |
|---|---|
| Urgency | "You must pay right now." |
| Fear | "You will be arrested." |
| Secrecy | "Don't tell anyone." |
| Authority | "This is the IRS." |
| Greed or excitement | "You won a free prize!" |
A caller says you won a prize but must pay a $\$200…
A caller says you won a prize but must pay a $\$200$ "processing fee" with gift cards first. Identify this type of scam and explain in one sentence why the request for gift cards is a red flag.
Liam sees an online ad for a limited-edition pair of sneakers at $\$60$, while the usual price is $\$220$. The site only accepts payment by wire transfer. Identify at…
Liam sees an online ad for a limited-edition pair of sneakers at $\$60$, while the usual price is $\$220$. The site only accepts payment by wire transfer. Identify at least three warning signs of fraud, and explain which would concern you most and why.
A man in his 70s receives a call from someone claiming to be his grandson, saying he is in jail and needs $\$3,500…
A man in his 70s receives a call from someone claiming to be his grandson, saying he is in jail and needs $\$3,500$ in cash sent right away, and begs him not to tell anyone. Analyze the situation: identify the type of scam, list the psychological tactics being used, and describe the steps the man should take before sending any money. Then recommend two sources of help if he already sent the money.
Unfair Charges and Predatory Lending
Not every problem is a scam call. Some are unfair or deceptive practices by real companies, such as a charge for a service you never ordered.
If a company charges your credit card $\$9.99$ every month for something you never signed up for:
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Contact the company and ask for a refund and cancellation.
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Contact your card issuer and dispute the charge. Ask for a new card number if needed.
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Report it to the FTC, the CFPB, or your state attorney general.
Keep copies of statements and emails. Good records make a complaint stronger.
Payday loans
A payday loan is a short-term loan, often due in about two weeks, with a flat fee. The fee looks small, but the loan is so short that the real cost is huge.
Why is this seen as predatory? The fee equals a very high APR, borrowers often cannot repay in two weeks, so they renew and fall into a debt cycle. A consumer can file a complaint with the CFPB or the state attorney general.
A company charges $\$9.99…
A company charges $\$9.99$ every month to Chloe's credit card for a service she never signed up for. Explain which two places she should contact first, and name one government agency where she could also report the problem.
A lender advertises a "payday loan" of $\$400$ with a "simple fee of $\$60$" due in 14 days. Calculate the fee as a percent of the loan. Then, assuming the loan is…
A lender advertises a "payday loan" of $\$400$ with a "simple fee of $\$60$" due in 14 days. Calculate the fee as a percent of the loan. Then, assuming the loan is renewed every 14 days for a year (26 periods) and the fee is paid each time without reducing the $\$400$, calculate the total fees paid. Explain why this is considered an unfair or predatory practice and which agency a consumer could contact to file a complaint.
Summary
Back to the start: the "bank locked your account" text is a smishing attempt. Do not tap the link. Open your bank's official app or call the number on your card, then report the text.