Consumer fraud: analyzing the problem and ways to solve it

Important: this article was written by an author residing in Russia. When reading it, it is recommended to take into account the specifics of local conditions, including the peculiarities of people's lives, public institutions, social and legal relations, legislation, as well as the activities of the law enforcement system.
Explanation: by the term «consumer fraud» the author means such a type of criminal activity as selling people equipment, other goods, or providing repair or other household services at multiply inflated prices. At the same time, criminals who sell such goods or provide such services do so through deception and abuse of trust (and in some cases, threats of physical violence), using the vulnerable social status or state of health of the victims. The majority of victims of such fraudsters are single people (most often women) aged 60 years or older with health and social communication problems. Fraudsters use many different criminal schemes, with a few of the most common ones given as examples.
Situation 1: an elderly single woman has a broken water faucet. She is not a very experienced Internet user, so she takes information about companies and private masters from the most easily accessible sources: she looks in Internet search engines, on bulletin boards in the entrance of the house (where information is usually placed by the management company or organizations that supply utility resources), on flyers that are regularly placed in mailboxes. The victim calls the phone number specified in the advertisement, she is politely spoken to by a good-natured dispatcher who promises to send the most professional specialist as soon as possible. A little time passes, and comes the master plumber, briefly examines the faucet, says that everything is very bad, that it is necessary urgent and very serious repair, otherwise there will be terrible consequences. Fraudster actively uses in conversation various technical terms and names, little understood by the average person, gives as an example of various situations where people with a similar breakdown of the plumbing system suffered serious physical and material damage. At the same time, he exerts active psychological pressure, giving the victim no time to think. The frightened woman agrees to do the work, and even on a direct question about the cost of such work she will not get an answer from the criminal, he will avoid answering in every possible way. At first, the fraudster will say that he needs to buy a new crane and other spare parts for repair, and asks to give him part of the money in cash (without any receipts) to buy spare parts. He leaves, but after a little time he comes back with the purchased part (as a rule, it is a part of dubious quality and low price category, at a price of 15-20% of the amount he received in advance from the victim). He does not provide any checks or receipts for the purchased part. Then he changes the old faucet to a new one, tells a lot of unnecessary technical information, and then gives the victim a form in which a list of allegedly performed works is written in small and hard-to-read font; often it is 10-15 items, the content of which will not tell a person without technical education. At the same time, the document does not specify the final cost of the work; the fraudster himself says that it is just a list of works he has done and it must be signed to confirm the fact that he has done the work. When the bewildered woman signs the form, it turns out that it is an invoice for services rendered, where the fraudster writes the price, and the price of these services is 10 - 15 times higher than the usual price for such services in any service company or a real master. If the victim becomes indignant, threats of police, courts, bailiffs, and sometimes even direct threats of bandits and reprisals are used. A frightened woman gives money, in return at best receives an incomprehensible piece of paper, where something faintly and illegibly written. After a while, with the help of relatives, neighbors, social workers, etc., the woman realizes that she has become a victim of fraud, that the «master plumber» who came to her house was not an employee of the management company or an official service, that she paid many times more for the replacement of the faucet than such a service costs in reality.
Situation 2: an announcement is posted in the entrance of the building or put in the mailboxes of the residents that allegedly all residents need to install or replace metering devices: water, gas, heat or electricity in the near future. The announcement, in appearance, is very similar to an official notice from the company-supplier of communal resources, uses various names and abbreviations similar to the official ones (but are not them), references to various normative-legal acts are indicated, as well as information about large penalties for failure to comply with the requirements of the law. Outwardly, the document looks very similar to the official one, but it is not. The ad contains a phone number with an indication that it is necessary to call as soon as possible, otherwise the deadline will expire and the person will be forced to pay large fines. As in the previous situation, the main calculation is made on the elderly and lonely people, who, thinking that they have read an official document from the company-supplier of communal resources, get lost. The victim calls the phone number indicated in the ad, he is very politely spoken to by a good-natured dispatcher who promises that everything will be done quickly and reliably, in accordance with the law, and even promises a discount on services. A little time passes, and a dispatched worker arrives to change the installed metering devices to new ones, which supposedly meet the requirements of the law. Further, as in the first case, the victim is given to sign the alleged act of completed work, after signing which it turns out that it is an invoice for services rendered and equipment purchased, the cost of which is ten times higher than the price of such services in any service company. If the victim begins to resent, threats of the police, courts, bailiffs, and sometimes directly gangsters and reprisals are used. Frightened people give money to the swindlers, and only then it turns out that they have become a victim of swindlers, that they have paid ten times more for metering devices and service for their replacement, and they did not need such service, because in fact no one demanded any emergency replacement of metering devices from them.
There are many such fraudulent schemes in different variants of situations similar to the above two. As I said earlier, they have one thing in common: in most cases they are all committed against elderly people living alone. Criminals take advantage of their poor physical and mental health, unstable moral and psychological state, low level of social communications and poor access to information resources. In addition, the low level of legal literacy of such people is actively used, as well as, importantly, their potential sense of fear of young, physically and morally strong people displaying psychological aggression.

What happens next?
After coming to her senses a little and realizing that she was a victim of fraud, the victim starts calling the phone number where she received the request and sent a master. At the other end, the same dispatcher, but not politely at all, but in a rather rude manner, replies that everything was done according to the law, the service was rendered, she signed the report, agreed with the price, and if she does not like something - write a complaint and send it to a non-existent address.
The victim turns to the police and the supervisory service (in Russia the most common name used is Rospotrebnadzor) - they grudgingly accept the application, question her and finally honestly say that there will be no result on this application, as the situation is in the sphere of civil law relations, and this is not their competence. Several weeks pass and the victim receives two letters in the mail: one from the police and the other from the supervisory service. The content of both documents is approximately the same: in the actions of these persons no offenses are not seen, there are no grounds for response, and if you believe that you were deceived - go to court. However, even in court the chances of finding justice are negligible, because for effective judicial defense you need a competently collected and documented evidence base, properly drafted documents, claims, statements and petitions, good knowledge of civil law in terms of consumer protection. You need good lawyers, and their services are expensive, an elderly single person who has already been deceived, often deprived of the last savings, there is no money for this.
Scammers know all this, and therefore feel great, because the statistics are in their favor. Out of 100 people deceived by them in the police and supervisory authorities to address about 50-60, will be effective at best 1 or 2 appeals, hire competent lawyers and appeal to the court 2-3 more people, that's all. Out of 100 deceived people will get their money back at best 4-5 people. Thus, the efficiency of the fraudulent scheme is about 95%, it is a very high indicator, net profit of about 1000%, and most importantly - the minimum risk of liability, which, if it comes, it will be civil or administrative; cases of bringing to criminal responsibility for such acts - are few in tens of thousands of incidents.

What to Do?
With such initial data, the criminal scheme of illegally taking money from the population (and the most legally and socially unprotected part of it) will work and develop. This is a kind of, as it is fashionable to say nowadays (by the way, the name is quite appropriate) - a criminal ecosystem, in which a favorable in all respects, and most importantly, a nutritious environment for criminals is created; there are all the conditions for comfortable life and reproduction.
The main task of applied criminology is to destroy this idyll. To make the habitat of these species hostile, aggressive and unsuitable for life and development, turning the harmonious existence of these «parasites» into a daily struggle for survival.
Can this be done? I believe that yes.
Is it difficult, will it require serious political decisions at the level of the country's leadership, changes in the basic legal acts and large material costs? I think not.
Everything necessary for this, for the most part, is already in place; all we need to do is to use the available opportunities correctly.
According to the analogy with the «criminal ecosystem» mentioned in the first part, in which criminal elements live and develop in a favorable environment. Everything here is organized as in ordinary nature: a comfortable habitat means good climatic conditions, abundance of food and absence of dangerous predators. The main task is to destroy this system.
Let's start by launching predators into it. In this role should be the police, although in a somewhat unconventional (rather unusual) for themselves. It will not be necessary to create a new element in the structure of the Ministry of Internal Affairs (MIA) for this purpose, it is only necessary to restore one of the old ones, which was liquidated during the «police reform» of 2010. We are talking about one specialized unit that previously existed in the structure of the public security police, namely, the Department for Combating Offenses in the Consumer Market (hereinafter I will use the abbreviated name - DCOCM). Even just by the name it is easy to guess that the employees of these departments were engaged in the detection of offenses (mostly small, large ones are handled by the Department of Economic Security) in the consumer market of goods and services. The division was created in 1999 and liquidated (in its original purpose) in 2011.
I will not argue with the assertion that one of the reasons for the liquidation of the DCOCM was the frequent abuse of power by its employees, but this point should be taken into account, how and why, about this just below.
Now let's consider both situations described in the first part: from the formal side we are dealing with violations of consumer rights, albeit in a highly veiled form, which was clearly worked on by professional lawyers. The criminals counted on the complexity of this scheme in terms of proving the illegality of their actions on the part of the victim, who has neither the knowledge nor the means to do so. It means that specialized specialists in this field should counteract the fraudsters, and for this purpose it is necessary to restore in the system of the MIA a subdivision of the DCOCM, but in a modified form.
What these changes should be:
1. Objectives.
The reconstituted DCOCM should not, as in the past, be engaged in control and supervision of retail trade, inspections of retail outlets, because in this case they will simply drown in bureaucracy or, even worse, return to abuse of office with all the negative consequences that follow. They should have one task - prevention and suppression of offenses in the consumer market, committed by deception and breach of trust. Now all small frauds in the consumer market are their main profile.
2. The principle of work organization.
It should be declarative, exclusively in response to victims' applications or to direct, official, written instructions from the management of the police, prosecutor's office or other supervisory bodies. This will not completely exclude, but will significantly reduce the opportunities for abuse by the officers themselves and partially reduce the negative impact of the system of imposing planning and statistical indicators that exists in the MIA.
3. Structure.
It is best if such units will be separate, with direct subordination to the chief of the city police department, this will reduce opportunities for pressure on them from «interested» officials and misuse of their capabilities.
4. Numbers.
There is no need for a large staff, even for a city with a population of one million inhabitants, one department of 2-3 specialized departments within the police department of the city is enough. The total number of such a department will be 20 - 25 employees. At the same time, a part of employees (about one third) will be uncertified (without special police ranks).
5. Powers.
This service should be referred to the subjects vested with the right to carry out operational and investigative activities, this is due to the fact that its employees will have to officially use and submit to the court the results of some operational activities of a covert nature, which require a special legal status.
6. Some peculiarities of organization and activity.
This is where a really serious innovation is to take place. It is important to understand that if a real result is needed, then the work on such applications should be conducted not formally, «for reporting» (we responded, and then it's not our concern), but to the final point, which in this case is not a refusal material, not a protocol on administrative offence, but an enforceable court decision in favor of the applicant.
How should this happen? Let me explain using a hypothetical example:
- Let's continue the story given in the above situation #1, but let's imagine that the DCOCM unit within the police department of the city has already been established and is working. Let's return to the moment when the victim applied with a statement to the police, now instead of reluctantly accepting the statement with a prediction of futility of this action (as it happens now), DCOCM officers are immediately involved in the case. The victim is questioned in detail, all the nuances are found out: from where she received information about «services», where she called, with whom she spoke, what they said, in general, the chronology of events is reconstructed in detail. Then all the necessary statements are taken from her, relevant protocols and other documents are drawn up. After the invited specialist (or a commission of several specialists), in this case it is a master plumber of the highest grade with duly confirmed qualifications and work experience, under the appropriate protocol and filming makes the dismantling of the installed crane with an explanation of what on the obvious signs of the work here performed and what quality they are (or appointed the appropriate expertise, it all depends on what legal procedure will be accepted as a working, based on judicial and supervisory practice). In accordance with their conclusion, the compliance of the documents issued to the victim about the allegedly performed work is checked, during which it is found out that most of the actions specified in the «act of performed work» were simply not performed, and some of them could not be performed at all, because the design simply does not provide for them. The type of the used spare part, in this case the mixer, its average cost and other relevant circumstances are also established, and the evidence base under Articles 14.7. and 14.8. of the Administrative Offenses Code of the Russian Federation* is collected.
At the same time the work with information is carried out, the data on «advertising», phone numbers, names, etc. is checked, the involvement of these persons in other episodes is worked out, victims are identified, interviewed, and an additional evidence base is formed. If there are several such episodes, it simplifies everything, the court works with such «series» more willingly and makes tougher decisions.
If necessary, a «control purchase» is organized and conducted, where all illegal actions are recorded.
Next, the executor is identified; the very «master plumber» performed these works, it will not be difficult for police officers to find out his identity (although in some cases not quickly). He is brought to the department, interviewed, building two lines of communication:
1. If the suspect states that he works independently, then there are questions about whether he is registered as an individual entrepreneur or self-employed? If no, then this is another offense (14.1. of the CAO RF*), if yes, then where are the issued receipts for services rendered, where is the documentary evidence of receipt of funds received for services? If no (and as a rule, there are none), it is another offense (129.13. Tax Code of the RF**), and if several such episodes are proved, it is no longer an administrative offense, but a criminal case under article 199.2. of the Criminal Code of the RF***.
2. If he states that he is employed, applications were received at the direction of the «employer», prices were also assigned by his employer, and he himself is only a hired employee. If this information is confirmed and there is proof in the form of an employment contract and other evidence (transferred applications, records of calls, money transfers, messages, instructions, and much more), then here to work involves already employees of the Department of the MIA for economic security - this is their profile. But I will say at once that such a situation is rare, 5-7% of the total number.
You will have to deal with the first category. There are two possible options here:
Variant 1: the fraudster himself, voluntarily, compensates the victim for the damage, gets punished for an administrative offense, with a minimal (at first) fine, and that's the end of it;
Variant 2: the suspect does not admit anything, considers himself right, refuses to cooperate and reimburse the damage. As stated above, in addition to certified officers in the DCOCM should be and employees without police special ranks (freelance staff) - these are lawyers, specialization: consumer protection. They turn all the collected material into the form of a civil suit and send it to the court. In court, they also act as a representative of the plaintiff (the victim in the case), claim the full package of requirements: material and moral damage, the cost of the cost of expert services and other specialists involved in the case.
It is important to note that the result in this case is considered not only a won case in the first or next instance and the court decision entered into legal force and bringing the figure to administrative responsibility, and the receipt of an enforcement document and sending it to the appropriate division of the Bailiff Service. Only after that the task is considered accomplished.
This is the unconventionality of the approach, unfortunately, the MIA is already accustomed to work on the final result, everything is reduced to a formal response, «for reporting», with a coefficient of efficiency in the error of zero. This is a serious vulnerability, which is used by criminals for illegal enrichment, realizing that the risk of liability is minimal. Because there is no specialized law enforcement service that has a direct interest in countering this phenomenon. This is the first step in turning a favorable ecosystem for criminals into a hostile one. As I wrote at the beginning, this is not an easy task, and the solution requires a comprehensive approach.
The above-mentioned measures alone are not enough; we need other measures as well.
At the first stage, we launched predators into the criminal ecosystem. This is undoubtedly an effective measure, and it can make life more difficult for crooks, but it is not enough. The goal is to make it unbearable. In order for the habitat from comfortable to aggressive and hostile, in addition to the threat of predators, it is necessary to reduce to an extreme minimum sources of food and eliminate a favorable climate. To do this, we move on to the second step.
The main direction of the second stage is prevention, which should be developed in several directions:
1. Informing potential victims:
1.1 It is necessary to develop a detailed, but easy to understand by people of any age and level of education memo on «Consumer fraud», where in an accessible form to provide information on common types and methods of such crimes, recommendations on how to distinguish fraudulent advertising from ordinary, what to pay attention to in a conversation on the phone, how to behave when meeting, how to act if the criminals have shown themselves, where to call, what to say. These informational brochures should be actively distributed among the population and periodically updated taking into account new cases and methods used by fraudsters.
1.2 Conduct ongoing work through the media: television, radio, newspapers, and the Internet. They should contain public service announcements and other informational materials with examples and information about the ways of committing fraud and, most importantly, information on how to respond in such cases.
1.3 Establishment of fraud hotlines. This can be done at the municipal or district level by so-called public law enforcement organizations. Members of these organizations can undergo special training, including with the involvement of the police and DCOCM officers, and then consult people on the phone, collect information, process it and pass it on to the police.
2. information counteraction:
2.1 Criminals very often place their advertisements in a way that resembles official information from management companies or resource supplying organizations. They hang their advertisements on their boards, use letterheads, logos and names of similar type, misleading people.
The police should oblige the companies managing residential buildings and supplying them with communal resources (the MIA has such a right) to make an indication on all their information boards that any other information is prohibited. This is necessary so that in case (although very rare) it would be possible to bring to responsibility those who hang these «announcements» there. Also to oblige management companies to check their information stands on a daily basis for the presence of inaccurate information, and to fix and remove it if found. This task of identifying and removing fraudulent advertising can also be assigned to public law enforcement organizations. Let them make periodic rounds of the residential sector and destroy fraudulent advertisements.
2.2 Periodically conduct active preventive calls to potential fraudsters. As already mentioned in item 2.1, all illegally placed advertisements of fraudsters should be destroyed by employees of management companies and public employees. But what should be done with those advertisements that are placed without violations? Often it is only placed without violations, but a detailed examination reveals that the services offered in it are illegal in full or in part.
The public should be tasked to find and photograph suspicious advertisements and pass the information to the DCOCM. There, police officers assigned to the line of preventive work will make calls to the phone numbers indicated in these ads, where they find out the answers to the questions:
- Is this your advertisement?
- What kind of services do you provide?
- What status (company or individual entrepreneur)?
- What is the business address?
- Is the price agreed with the client before the service is rendered?
These and other questions (in essence) are asked with a warning that the conversation is recorded, and if necessary, the record will be attached to the case file and submitted to the court. If the other end denies the very fact of such advertising, this is a reason to instruct the public and employees of management companies to remove all «unreliable» advertising as soon as possible and hand it over to a recycling center.

Conclusion:
In this article, I have presented my thoughts on this issue, formed on the basis of my professional and life experience. Despite the fact that it is not exactly my profile, such a method of applied criminology as the destruction of the criminal ecosystem by creating a hostile environment for it is universal and can be applied to crimes of any nature.
In my publication I have outlined what, in my opinion, lies on the surface. If you wish, if you study the problem more deeply, the proposed solutions can be supplemented and significantly improved, but this requires practice. I am confident that all of the above measures will have a lasting positive effect over time and significantly reduce fraud, but under at least two conditions:
- If they are applied comprehensively and actually, rather than what is often the case - formally and partially;
- If the proposed format will not be applied immediately and universally, but will first pass the stage of experimentation in one separate region (or a large city) with a duration of at least 2 (or better 3) years. During this time, all processes will be analyzed and adjusted taking into account the realities of life, legal practices, countermeasures of the opposite side (and they will undoubtedly be), identified vulnerabilities and shortcomings. As a result, in a few years a workable and effective format will be formed, which can be implemented nationwide.
I will be glad to receive suggestions, comments and constructive criticism from those to whom the topic is close and interesting. I do not claim to be the truth in the last instance, I simply set out my vision of the problem and the way to solve it, as they say: «Feci quod potui, faciant meliora potentes» (Latin - I have done what I could; let those who can do better).

date of publication - on February 27, 2025
author Roman Grishin
photo taken from the site earth.com

(excerpts from quoted articles of legislation of the Russian Federation):

* Code of Administrative Offenses of the Russian Federation:
Article 14.7. Deception of Consumers
1. Shortchanging, short-weighting, or otherwise deceiving consumers during the sale of goods (works, services) or any other form of consumer deception, except for cases provided for in part 2 of this article.
2. Misleading consumers regarding the consumer properties or quality of goods (works, services) during the production of goods for the purpose of sale or during the sale of goods (works, services).
Article 14.8. Violation of Other Consumer Rights
1. Violation of the consumer's right to receive necessary and accurate information about the goods (works, services) being sold, the manufacturer, the seller, the contractor, and their operating hours.
2. Inclusion in a contract of terms that infringe on the rights of consumers as established by consumer protection legislation, except for cases provided for in part 2.1 of this article.
2.1. Imposing additional goods (works, services) on consumers for an additional fee by offering the consumer, prior to concluding a contract for the purchase of primary goods (works, services), to purchase additional goods (works, services) or enter into other contracts, the purchase or conclusion of which is made a condition for acquiring the primary goods (works, services), unless otherwise provided by law, as well as by including in the contract terms that make the purchase of primary goods (works, services) conditional on the purchase of additional goods (works, services), including mandatory conclusion of other contracts, unless otherwise provided by law.
4.1. Unjustified refusal to consider consumer claims related to the violation of their rights or evasion of considering such claims in the manner prescribed by law.
Article 14.1. Conducting Business Activities Without State Registration or Special Permission (License)
Conducting business activities without state registration as an individual entrepreneur or without state registration as a legal entity.

** Tax Code of the Russian Federation:
Article 129.13. Violation of the Procedure and/or Deadlines for Submitting Information on Settlements Made During the Sale of Goods (Works, Services, Property Rights)
1. Violation by a taxpayer of the procedure and/or deadlines established by law for submitting to the tax authority information on settlements made related to income received from the sale of goods (works, services, property rights), which is subject to the professional income tax.

*** Criminal Code of the Russian Federation:
Article 199.2. Concealment of Funds or Property of an Organization or Individual Entrepreneur Subject to Tax, Levy, or Insurance Contribution Collection
1. Concealment of funds or property of an organization or individual entrepreneur, which, under the procedure established by the legislation of the Russian Federation on taxes and levies and/or the legislation of the Russian Federation on compulsory social insurance against industrial accidents and occupational diseases, should be used to collect arrears on taxes, levies, or insurance contributions, on a large scale.

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