Internet Fraud: Many Complaints, Few Repercussions

Despite receiving tens of thousands of online fraud complaints from consumers every year, U.S. states bring only a small number of Internet-related cases to court, according to research released on Tuesday.

The Center for American Progress and the Center for Democracy and Technology studied the number of complaints that state attorneys general offices receive and compared that to how many lawsuits the states bring against spammers, spyware creators and other online fraudsters. Not all states report such numbers, but the 20 that do said that they received 20,000 Internet-related complaints in 2006 and 2007, the research found. Most states included Internet-related complaints among the top 10 types of consumer complaints they receive.

During that time period, attorneys general brought 168 Internet-related cases to court, with 60 percent of those related to child porn, the researchers found.

While the Federal Trade Commission also has a role in bringing cases against online offenders, states should do more, said Reece Rushing, director of regulatory and information policy at the Center for American Progress. "We see [the FTC] as absolutely critical, but the states should be partners in this as well," he said. "If we had all hands on deck we could really make some progress in addressing this problem." Often, state laws against online fraud and abuse are tougher than federal laws, he said.

Washington and New York are considered leaders in prosecuting online crimes. There are a number of reasons why Washington has become a leader in prosecuting online fraud, said Paula Selis, senior counsel with Washington's state attorney general's office. "There must be a recognition that online fraud is a huge threat to consumers as well as a threat to online commerce," she said.

The Washington state legislature has funded a forensics lab and salaries for special attorneys and investigators to proactively look for fraud and investigate complaints, she said. In addition, Washington was one of the first states to issue antispyware and antiphishing laws, she said.

Complaints about Internet-related fraud continue to go up. In 2007, the FTC reported more than 220,000 Internet-related fraud complaints, 16,000 more than in 2006 and 24,000 more than in 2005, the groups said in their report.

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