FTC Reports of Social Media Consumer Scams Surge in 2020

Published on JD Supra on October 27, 2020

In a Consumer Protection Data Spotlight dated October 21, 2020, the Federal Trade Commission released data for the first half of 2020, which indicates that consumer-reported scams originating on social media platforms increased threefold over the past year and rose drastically during the first two quarters of 2020. While there were several forms of reported scams, the majority related to unfulfilled orders associated with ecommerce transactions made by consumers after being prompted by ads seen on social media platforms.

The data covers over 24,000 complaints for a combined loss of $117 million in the first half of 2020 alone, compared to the entirety of 2019 with just over 23,000 complaints  and a total reported loss of $134 million. Moreover, reported cases nearly doubled from the first to second quarter of 2020 (rising from 8.8K to 15.9K) and more than tripled from the mid-year point in 2019 (when 4.7K cases  were reported) to the same mid-year point in 2020 (when 15.9K cases were reported).

The FTC attributes the rise to savvy bad actors that use social media platforms to present convincing advertisements and other offers to unsuspecting consumers. Social media platforms are especially attractive to would-be scammers since the time and monetary investment to access these platforms is quite low.

In addition to scams involving online shopping orders that were never fulfilled, consumers reported “romance scams” (where a bad actor poses as a friend or confidante of a consumer and tricks the consumer into giving the bad actor money) and  economic/multi-level marketing schemes. The pandemic may play a role in the increased number of complaints, as more consumers are shopping and connecting online than ever before. The FTC further noted that some consumers who had lost income due to the COVID-19 pandemic proved to be attractive targets as well.

The reported increase of scams on social media platforms comes amid increased calls to overhaul Section 230 of the Communication Decency Act (which shields online content platform providers from liability for content on their platforms that they do not generate themselves). Conservatives have increasingly called for changes to Section 230 and increased oversight and transparency in connection with content moderation practices of online service providers. This week, the Senate Commerce Commission will hold a hearing of social media platform company leaders focused on online censorship and content moderation practices utilized by those companies.

To protect against these scams, the FTC suggests certain practices, including:

  • Research any company before ordering. Since companies can edit their own posts, they can easily remove consumer comments relating to complaints or poor service. Use a search engine to look up the company along with the words “complaint” or “scam” to determine if the service is legitimate.
  • Verify all requests for money. Reach out to any person who requests funds utilizing a method other than the method by which you received the request (email, text or phone) to confirm if the request is legitimate. Many scammers are adept at copying social profiles to pose as friends and family. Never send money to anyone you have only met online.
  • Be vigilant about the information you share. Ultimately, many scammers are more interested in obtaining personal information about the target than in directly obtaining funds. Rather than accessing a vendor with whom you do business via a social media link, log directly into your main account page via the vendor’s web site to confirm you are actually dealing with the legitimate entity. Regularly check your social media privacy settings to ensure you are not publicly sharing sensitive information.
  • Be wary of offers for quick or large monetary success. The largest area of growth noted by the FTC was in the area of offers to earn money quickly, including gifting schemes and pyramid sales schemes. The FTC noted “it is always a red flag” when a service makes claims about significant earnings.
  • Use available FTC resources to research economic opportunities. The FTC provides information about known multi-level marketing schemes at ftc.gov/mlm. Identified scams can be reported at www.ftc.gov/complaint.