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Financial Transactions > Consumer Fraud > Flashcards

Consumer Fraud Flashcards

1
Q

In credit repair scams, the fraudster promises to “erase” or “doctor” an applicant’s credit history, but in reality there is no way to erase bad credit. (TF)

A

True

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2
Q

What is the primary difference between a Ponzi scheme and a pyramid scheme?

A. A pyramid scheme promotes itself as a pyramid whereas a Ponzi scheme promotes itself as an investment opportunity.
B. In a pyramid scheme, old investors are paid with money from new investors.
C. A Ponzi scheme is promoted by encouraging victim members to recruit new members.
D. All pyramid schemes are legal whereas all Ponzi schemes are illegal.

A

A. A pyramid scheme promotes itself as a pyramid whereas a Ponzi scheme promotes itself as an investment opportunity.

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3
Q

Which of the following types of elder fraud schemes often involves property that does not exist or is significantly different than promised?

A. Vacation scheme
B. Grandparent scheme
C. Tech-support scheme
D. Home improvement scheme

A

A. Vacation scheme

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4
Q

Maria, a successful restaurateur, has been informed of an unusually attractive investment opportunity by a recent acquaintance and decides to invest in it. Several months and a couple of underwhelming payments later, Maria grows frustrated with the diminishing disbursements and attempts to withdraw her money. After several weeks of delay, she realizes that the promoter seems to have vanished, along with her investment. Maria is the victim of which of the following fraudulent ploys?

A. A Ponzi scheme
B. An illegal pyramid
C. A fly and buy scheme
D. A dog and pony scam

A

A. A Ponzi scheme

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5
Q

A pyramid scheme is designed to pay off its earliest investors.

A. True
B. False

A

True

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6
Q

In a(n) _____________ scheme, the company that initially defrauded a consumer contacts that consumer and offers to help retrieve the lost money. However, the investigation requires an up-front fee, and the consumer is swindled again.

A. Advance-fee
B. Retrieval
C. Double-hustle
D. Scavenger

A

D. Scavenger

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7
Q

Unscrupulous debt consolidation schemes include each of the following EXCEPT:

A. The debt consolidation company writes a letter to the debtor’s creditors and arranges a payment plan.
B. The debt consolidation company charges an up-front processing fee and then disappears.
C. The debt consolidation company collects payments but does not appropriately forward them.
D. The debt consolidation company guarantees the debtor will receive a loan or credit card regardless of the debtor’s credit ratings.

A

A. The debt consolidation company writes a letter to the debtor’s creditors and arranges a payment plan.

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8
Q

Which of the following is a common red flag of elder fraud schemes?

A. New friends who appear suddenly and without prior mention
B. Large bank account withdrawals with no explanation
C. The discovery of signed or forged legal documents
D. All of the above

A

D. All of the above

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9
Q

A pyramid scheme is promoted by encouraging victim investors to recruit new members. The more members recruited, the higher the investor rises in the ranks of the enterprise and the more money the investor is supposed to make.

A. True
B. False

A

True

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10
Q

A confidence scheme designed to part victims from their money by falsely promising the future delivery of a product or service in exchange for an up-front payment is called a(n):

A. Scavenger scheme
B. Home-based business scheme
C. Advance-fee scheme
D. Bait and switch scheme

A

C. Advance-fee scheme

Common scenarios used to commit advance-fee scams include the following:

A home improvement contractor requires prepayment for materials.
Notice of a supposed inheritance from an unknown relative is received.
Various exorbitant fees are required prior to securing financial assistance or advice.

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11
Q

Automatic debit program schemes occur when fraudsters obtain a consumer’s bank account information and then use this information to draft money from the consumer’s bank account without that person’s consent.

A. True
B. False

A

True

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12
Q

Victims of consumer fraud are more likely to be organizations or businesses rather than individuals.

A. True
B. False

A

False

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13
Q

Telemarketing schemes target individuals, not businesses.

A. True
B. False

A

False

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14
Q

Glenn has just inherited a large amount of money from a deceased relative. Several weeks later, a colleague of Glenn’s suggests an investment in a security that is sure to generate returns of 20% every six months. Glenn is intrigued, but he is also worried that it might be a Ponzi scheme. Which of the following actions should Glenn take before investing?

A. Find out if the financial manager is licensed and if the security is registered
B. Determine if the investment’s returns have been abnormally consistent
C. Ensure that he can comprehend the details and strategy of the investment
D. All of the above

A

D. All the above

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15
Q

All organizations with a pyramid structure are illegal.

A. True
B. False

A

False

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16
Q

The MOST COMMON giveaway scheme, in which a postcard arrives in the mail telling the recipient they have already won a prize such as a luxurious vacation or cash, is known as:

A. The “Fly and Buy”
B. The “Bait and Switch”
C. The “1-in-5”
D. None of the above

A

C. The “1-in-5”

17
Q

A Ponzi scheme can BEST be described as an illegal business structure that might offer merchandise or services but generates almost all its revenues from the relentless recruitment of new members.

A. True
B. False

A

False

18
Q

Which of the following would be the LEAST LIKELY target of an affinity fraud scheme?

A. Immigrant groups
B. Large corporations
C. Religious communities
D. Professional associations

A

Large corporations

19
Q

All the following are examples of schemes that specifically target older individuals EXCEPT:

A. A fraudster convinces a victim that their computer has a virus and offers unnecessary repair services in exchange for a fee.
B. A fraudster pretends to be the victim’s grandchild and requests money to help with a difficult financial situation.
C. A fraudster offers to eliminate an individual’s credit card debt after the individual pays for the service with their card.
D. A fraudster informs an individual that they won a prize but must pay a sum of money before they can receive it.

A

C. A fraudster offers to eliminate an individual’s credit card debt after the individual pays for the service with their card.

20
Q

Which of the following is NOT a type of scheme that is commonly used by fraudsters to take advantage of older individuals?

A. Home improvement schemes
B. Sweepstake and prize schemes
C. Tech-support schemes
D. Fill-and-split games schemes

A

D. Fill-and-split games schemes

21
Q

Real estate scams are easily recognized, as the perpetrator’s pitch almost always includes an element of time pressure or an emphasis that the victim is missing a rare opportunity.

A. True
B. False

A

True

22
Q

Not every company that runs its business using a pyramid structure is operating an illegal pyramid scheme.

A. True
B. False

A

True

23
Q

Advance-fee schemes, debt consolidation schemes, and diploma mills are all examples of consumer fraud schemes.

A. True
B. False

A

True

24
Q

Which of the following is NOT considered to be a red flag of a Ponzi scheme?

A. A financial manager who puts an unusual amount of pressure on investors to act immediately
B. An investment that has a history of inconsistent returns coinciding with fluctuations in financial markets
C. A financial manager who manages, administers, and retains custody of the investment funds
D. An investment that promises extremely high or short-term returns with little risk involved

A

B. An investment that has a history of inconsistent returns coinciding with fluctuations in financial markets

25
Q

A Ponzi scheme can be characterized as an ostensibly legitimate, yet ultimately fraudulent, investment opportunity wherein the promoter pays previous investors with money gained from new victims.

A. True
B. False

A

True

26
Q

A favored device of phony charities is to send school-age children to different homes in a neighborhood to say that they are raising money for antidrug programs or for a group that takes underprivileged kids on trips.

A. True
B. False

A

True

27
Q

A financial fund operator who insists that investors continually reinvest their profits, rather than take payouts, is a red flag of a Ponzi scheme.

A. True
B. False

A

True

Financial Transactions (15 decks)

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