Best Practices

FTC’s New Rule Against Impersonation Scams Takes Effect

The FTC's new rule allows legal action to protect consumers against impersonation scams, effective April 1, 2024. Learn how to avoid scam operations.

On April 1, 2024, the new Federal Trade Commission (FTC) Government and Business Impersonation Rule officially went into effect. The new rule was finalized last month and gives the agency stronger tools to combat scammers who impersonate businesses or government agencies by enabling the agency to directly file federal court cases to force scammers to return the money they made from government or business impersonation scams.

The rule came about due to the dramatic increase in government and business impersonation scams over the past few years, especially in 2023, in which 40% of money lost to criminals was attributed to scams impersonating the government or a legitimate business. The criminal enterprises behind these scams have developed sophisticated techniques designed to trick their hapless victims into sending them money via gift card purchases, Western Union transfers, and bank wires. In 2023, total losses from impersonation scams reported to the FTC $1.1 billion, and the actual losses are likely considerably higher.

In 2023, there were approximately 330,000 reports of scams involving the impersonation of legitimate businesses such as banks and other financial institutions, alongside nearly 160,000 reports of scams involving the impersonation of government entities like the IRS and even the FTC.

Telemarketing Methods Used During Impersonation Scams

FTC reports from 2020 through 2023 reveal a significant shift in the communication channels utilized by scammers to contact consumers. The past few years have witnessed a significant decline in the prevalence of phone call-based scams. While this is of course welcome news, during the same period a there was a significant surge in text and email-based scams.

FTC’s New Rule Against Impersonation Scams Takes Effect
Photos created by Sura Alzaidy

During this period, reported losses through bank transfers and cryptocurrency transactions surpassed losses incurred through any other payment method used by scammers.

Takeaway for Businesses

The evolving nature of scam tactics, including the utilization of alternative communication channels and payment methods, presents ongoing challenges for businesses seeking to protect their customers and uphold their reputation. Thus, while heightened awareness may offer some protection, businesses must remain vigilant and adaptable in mitigating the risks posed by impersonation scams.

To effectively navigate the landscape of scam operations and address consumer apprehensions regarding engagement, businesses are encouraged to adopt strategies characterized by trustworthiness and reassurance while remaining compliant with the law.

Employing approaches that prioritize transparency and reliability in customer interactions can foster a sense of confidence and security among prospective clients. Moreover, demonstrating patience and providing assistance is crucial, particularly considering that certain individuals may harbor apprehensions stemming from past negative encounters.

Legitimate businesses must acknowledge and handle these concerns with sensitivity and attentiveness, recognizing the potential impact of prior traumatic experiences on consumer trust. Therefore, adopting a compassionate and empathetic approach becomes imperative for businesses aiming to cultivate enduring relationships with their clientele.