Exercises: Consumer Protection and Fraud

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.

Define "phishing." Then give two warning signs that a text message claiming to be from your bank may be a scam.

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.

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.

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 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 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.

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.