Chapter 15
1. Which of the following statements correctly describes consumer fraud?
a.
Any fraud that is committed by a consumer.
b.
Any fraud that targets individuals as victims.
c.
Any fraud that is committed against an organization.
d.
Any fraud that is instigated from a separate country.
b
a.
b.
Correct. Consumer frauds are committed against consumers, as opposed to organizations.
c.
d.
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2. According to the Federal Trade Commission, what is the largest type of consumer fraud?
a.
Identity theft
b.
Ponzi scheme
c.
Magazine fraud
d.
Telephone fraud
a.
Correct. Identify theft is the largest type of consumer fraud.
b.
c.
d.
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3. Which of the following is NOT a common identity theft method?
a.
filing for bankruptcy under the victim’s name.
b.
opening new bank accounts in the victim’s name.
c.
changing a victim’s mailing address.
d.
destroying personal property, such as a home or car.
d
a.
Incorrect. This is a common identity theft method.
b.
Incorrect. This is a common identity theft method.
c.
Incorrect. This is a common identity theft method.
d.
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4. Which of the following identity theft actions listed is considered to be part of the first dimensional actions?
a.
efforts to gain victim’s personal information.
b.
larger thefts, often involving personal interaction, without much chance of getting caught.
c.
largest thefts committed after perpetrators have confidence that their schemes are working.
d.
small thefts to test the stolen information.
d
a.
5. Which of these is a second dimensional action in the trial stage of the identity theft?
a.
Larger thefts, often involving personal interaction, without much chance of getting caught.
b.
Smallest thefts that lay down a solid foundation for the perpetrator to commit identity theft.
c.
Largest thefts committed after perpetrators have confidence that their schemes are working.
d.
Small thefts to test the stolen information.
a
a.
b.
c.
d.
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6. Which dimensional actions are the most risky for the identity thief?
a.
Third dimensional actions
b.
Second dimensional actions
c.
First dimensional actions
d.
Fourth dimensional actions
a
b.
c.
d.
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7. Which stage is considered to be the most critical stage of the identity theft cycle?
a.
Action stage
b.
Trial stage
c.
Discovery stage
d.
Cover-up stage
b
a.
b.
Correct. This is where the fraudster’s work starts to pay off.
c.
d.
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8. A fraudster changes the physical address or e-mail of the victim so that credit card statements are sent by the financial
institution to the perpetrator rather than the victim. Which stage of the identity theft cycle is being discussed here?
d.
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a.
Verification stage
b.
Trial stage
c.
Discovery stage
d.
Action stage
d
a.
b.
c.
d.
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9. Which of the following statements defines shoulder surfing?
a.
Criminals physically confront consumers forcing them to reveal their valuable information.
b.
Criminals follow consumers to discover their buying habits.
c.
Criminals sneak into victims’ homes and steal their information.
d.
Criminals watch consumers from a nearby location as they give credit card information over the phone
d
a.
b.
c.
d.
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10. Which of the following involves the use of Internet to steal important information?
a.
Shoulder surfing
b.
Phishing
c.
Skimming a credit card
d.
Dumpster diving
b
a.
c.
d.
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11. Which of the following is NOT an action to minimize your risk of identity theft?
a.
opting out of pre-approved credit cards.
b.
shredding mail that contains detailed information.
c.
using strong passwords and changing them often.
d.
using Social Security number on visiting cards.
d
a.
Incorrect. This is a way to minimize identity theft risk.
12. Which of the following is the limit set on consumers’ credit card fraud liability by Federal law?
a.
$50
b.
$100
c.
$150
d.
$200
a
a.
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13. What is the term for when fraudsters contact potential identity theft victims and act as a representative of a business to
verify previously gathered information?
a.
trashing
b.
pretexting
c.
mail stuffing
d.
skimming
b
a.
b.
c.
d.
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14. How do fraudsters use “cookie” type software?
a.
to automatically remove web histories after one closes the web browser.
b.
to initiate pop-ups to unknown sites to gather valuable consumer information.
c.
to show the status of a Web site to be secure.
d.
to gather personal and confidential information from consumers’ hard drives.
d
a.
b.
b.
Incorrect. This is a way to minimize identity theft risk.
c.
Incorrect. This is a way to minimize identity theft risk.
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15. Which of the following is NOT a symptom of potential investment scams?
a.
pressures to get in early on the investment.
b.
a business with a history of bankruptcy or scandals.
c.
use of a special tax loophole or a tax avoidance scheme.
d.
promise of returns comparable to those of treasury bonds.
d
a.
b.
c.
d.
Correct. Unreasonable promised rates of return are characteristic of investment scams.
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16. Which of the following is a true statement regarding The Gramm-Leach-Bliley Act?
a.
The act gives financial institutions the right to share personal information for a profit.
b.
The act expressly requires financial institutions to protect against identity theft.
c.
The act allows financial institutions to share personal information, as long as it is not for a profit.
d.
The act protects confidentiality of customer information.
a.
b.
c.
d.
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17. Which act gives individuals the right to opt–out of having their information sold?
a.
Identity Theft and Assumption Deterrence Act
b.
Family Education Rights and Privacy Act
c.
The Gramm-Leach-Bliley Act
d.
Fair Credit Reporting Act
a.
b.
c.
d.
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18. Which act limits consumers’ liability for fraudulent credit card charges?
a.
Identity Theft and Assumption Deterrence Act
b.
Fair Credit Billing Act
c.
d.
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c.
Family Education Rights and Privacy Act
d.
Fair Credit Reporting Act
b
a.
b.
c.
d.
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19. Which act makes it illegal for any agency that receives federal funding to disclose privacy information about
individuals?
a.
Identity Theft and Assumption Deterrence Act
b.
Family Education Rights and Privacy Act of
c.
The Gramm-Leach-Bliley Act
d.
Fair Credit Reporting Act
b
a.
b.
c.
d.
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20. Which is the primary agency responsible for helping victims of identity theft?
a.
Social Security Office
b.
Federal Bureau of Investigation
c.
Permits Department
d.
Federal Trade Commission
d
a.
b.
c.
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21. TransUnion, Equifax, and Experian are examples of what type of agencies?
a.
identity theft investigation agencies
b.
credit reporting agencies
c.
money transfer agencies
d.
credit billing agencies
b
a.
b.
Correct. They are the principal credit reporting agencies.
22. A Nigerian money offer email is a form of which of the following scams?
a.
foreign advance-fee scam.
b.
purchase of real estate scam.
c.
clearing house scam.
d.
multilevel marketing scam.
a
a.
b.
c.
d.
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23. A clearinghouse scam:
a.
involves a victim receiving a letter that claims he or she has inherited a significant amount of money.
b.
involves a victim receiving a mail from a known party who claims to have access to large sums of money or
assets.
c.
involves a victim receiving a letter that falsely claims the writer represents a foreign bank.
d.
involves a victim receiving an email containing the Social Security number and/or credit information.
c
a.
b.
c.
d.
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24. Which of the following is false regarding a Nigerian money offer scam?
a.
States the need for urgent assistance.
b.
Makes the victim feel like he or she is the only recipient of the special opportunity.
c.
Involves someone trying to sell a piece of prime African real estate.
d.
The e-mail is the promise of money and asks for help.
c
a.
b.
c.
d.
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25. All of the following are types of foreign advance schemes, EXCEPT:
a.
Disbursement of money from wills.
b.
Multi-level marketing scams.
c.
d.
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c.
Sale of crude oil below market price.
d.
Purchase of real estate scam.
b
a.
b.
Correct. Multi-level marketing scams are work-at-home schemes.
c.
d.
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26. Which of the following is a variation of fraudulent MLMs, in which an organization sells illusionary products and
profits, instead of real products?
a.
ponzi scheme
b.
foreign advance scheme
c.
identity theft scheme
d.
shoulder surfing scheme
a.
Correct. Ponzi scheme is one kind of fraudulent multi-level marketing scheme.
b.
c.
d.
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27. Which of the following is the term for a fraudulent process whereby even representatives of legitimate MLMs are
required to buy large, expensive amounts of inventory.
a.
forward pricing
b.
snake oil
c.
front loading
d.
opportunity meeting
a.
b.
Incorrect. Snake oil plans claim to sell miracle products.
c.
d.
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28. Snake oil plans are plans:
a.
that make their money by getting new people to buy property in exotic locations.
b.
that promise enormous earnings or claim to sell miracle products.
c.
that motivate the purchase of unusually overpriced goods or services.
d.
that make people believe that they will make money simply because they are one of the earliest investors.
b
a.
Incorrect. This is a ponzi scheme.
b.
c.
Incorrect. This is front loading.
29. Which federal statute protects the privacy and confidentiality of patient information?
a.
Family Educational Rights and Privacy Act
b.
Identity Theft and Assumption Deterrence Act
c.
Gramm-Leach-Bliley Act
d.
Health Information Portability and Accountability Act
d
a.
b.
c.
d.
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30. Product testing is a fraud:
a.
that request the consumers to review the products presented in the brochures and send their commentaries to
the supplier for review.
b.
where consumers respond to an advertisement that promises income simply for stuffing envelopes.
c.
that promise victims a job that involves strolling through stores, enjoying the displays, shopping for
merchandise, and then filing reports on the experiences they have had.
d.
where perpetrators promise high pay for working on different projects.
a.
b.
Incorrect. This is mail stuffing.
c.
Incorrect. This is bogus mystery shopping scam.
d.
Incorrect. This is craft assembly.
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31. Accumulating documentation belongs to which stage of the identity theft cycle?
a.
The action stage
b.
The discovery stage
c.
The trial stage
d.
The concealment stage
b.
c.
d.
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32. Which of the following is a hi-tech method by which thieves capture personal or account information from a credit
card, driver’s license, or even a passport?
d.
Incorrect. This is ground floor opportunity.
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a.
Surfing
b.
Skimming
c.
Clawbacks
d.
Phishing
b
a.
b.
c.
d.
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33. What is dumpster diving?
a.
An activity where fraudsters use an information storage device to gain access to valuable information.
b.
An activity where perpetrator will try to build a relationship of confidence with the victim.
c.
An activity where criminals watch consumers from a nearby location as they give credit card or other valuable
information.
d.
An activity where fraudsters rummage through consumers’ trash.
d
a.
b.
c.
d.
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34. Identify the complaint database developed by the U.S. Federal Trade Commission.
a.
Consumer Watch
b.
Fraud Watchdog
c.
Consumer Sentinel
d.
Identity Theft Assistance
c
a.
b.
c.
d.
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35. What makes telemarketing fraud more effective than Internet or mail-based approaches?
a.
Reduced transaction costs.
b.
Opportunity to speak with a person directly.
c.
Increased size of the fraud.
d.
Absence of government regulations.
b
a.
36. What is the most detrimental consequence of identity theft?
a.
The loss of physical assets.
b.
The loss of credit, reputation, and erroneous information.
c.
Time lost in reporting the fraud.
d.
The actual loss of money.
b
a.
b.
Correct. This is extremely difficult to restore or fix.
c.
d.
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37. What is one of the biggest marketing campaigns of illegal MLMs?
a.
Promise of full-time work from home for huge weekly earnings.
b.
Absence of headhunter fees.
c.
A mysterious “benefactor” interested in contributing a large sum of money.
d.
Promise that investors will always make money from future downline growth.
d
a.
b.
c.
d.
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38. Which of the following observations is NOT true of foreign-advance fee scams?
a.
Perpetrators are well-known businesses and there is usually some urgency to participate.
b.
Perpetrators claim to trust the victim with their money or assets.
c.
Perpetrators are always willing to transfer money or other assets to the victims, but only after money or
information is extracted.
d.
Perpetrators claim to have access to large sums of money or assets.
a.
b.
c.
d.
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39. Which of the following is a scam in which consumers respond to an advertisement that promises income simply for
filling envelopes?
b.
Correct. This is the primary advantage of telemarketing that makes it effective.
c.
d.
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a.
Craft assembly
b.
Bogus mystery shopping
c.
Mail stuffing
d.
Skimming
c
a.
b.
c.
d.
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40. Once a fraudster has gained confidence that the identity theft is working, he or she often takes out a loan using the
victim’s identity. The most common type of fraudulent loan is for which of the following items?
a.
foreign travel.
b.
purchasing real estate.
c.
education.
d.
an automobile.
d
a.
b.
c.
d.
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41. What is the most important way to fight identity theft?
a.
By shredding mail that contains detailed information.
b.
By taking extra care of the personal valuable information.
c.
By using strong passwords and changing them often.
d.
By preventing it from happening in the first place.
d
a.
b.
c.
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42. Which of the following is a scam where perpetrators promise high pay for working on different projects like wooden
calendars, paper towel holders, hair clips, or holiday decorations?
a.
Product testing
b.
Mail stuffing
c.
Craft assembly
d.
Skimming
c
43. What percent of the population was estimated to have been victims of fraud in 2005?
a.
8.5 %
b.
13.5 %
c.
22.5 %
d.
41.5 %
b
a.
b.
c.
d.
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44. Which of the following was the top consumer fraud in number of victims identified in the U S Federal Trade
Commission report?
a.
foreign lottery scams
b.
advance fee loan scams
c.
fraudulent weight-loss products
d.
credit card insurance
c
a.
Incorrect, this had the second highest number of victims reported.
b.
Incorrect, this was listed at eighth.
c.
d.
Incoreect, this was listed as sixth.
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45. According to the text, which of the following is the best defense against becoming a victim of consumer fraud?
a.
Avoid internet offers.
b.
Register on the do-not call list.
c.
Check companies named in all print ads through the Better Business Bureau.
d.
Education.
d
a.
b.
c.
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a.
b.
c.
d.
