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INSURANCE, OVERSIGHT URGED TO FIGHT INTERNET FRAUD

Nader, industry players debate how to protect but encourage digital commerce.

Source: PCWorld.com

Posted on January 14, 2001

      A global consumer protection group modeled after the World Trade Organization and automatic insurance for any Web transaction are among proposals to protect you from being scammed in cyberspace.

      But the U.S. Federal Trade Commission wants to leave well enough alone, continuing to focus on its ongoing Internet fraud investigation units. The role of public and private sectors in fighting Internet consumer scam was bandied about recently in a panel in Washington D.C. Participants included consumer advocate Ralph Nader; Piyush Gupta, chief executive officer of auction site LiquidPrice.com; and IBM E-Business Strategy Director Dave Allison.

      "We can't let this medium get the reputation that a used car salesman has," Gupta said. To avoid fraud, the public needs to read the fine print and the industry has to create a mechanism that insures every transaction.

      "What the industry needs to do is make [insurance] a nonissue, something you don't need to think about," he told the National Press Club audience. "Everything should be insured. The premium should be factored in so supplier, buyer and seller all share the cost."

      And while he's optimistic about commerce on the Web, Gupta said online fraud is not a new problem. From the high-profile scams of international modem dialing to pyramid schemes outlined in the Federal Trade Commission's list of the top ten dot-com frauds, Gupta noted that hundreds of cases fall below the radar of public awareness. Enforcement a Challenge

      LiquidPrice.com is one example of the type of site where consumers can fall prey to fraud. The Internet Fraud Complaint Center lists auction fraud as its top category, garnering 48.8 percent of the more than 19,000 complaints since May. Other dangers include securities fraud, credit card fraud, and identity theft.

      "The potential for fraud is enhanced by the global nature of the Internet, which escapes federal jurisdiction," Nader said. "The technology of the Internet is way ahead of legal and ethical framework, even of public awareness."

      But instead of relying on insurance for consumer protection as Gupta advocates, Nader recommends a democratically run "world consumer protection organization" to encourage and enforce standards between nations.

      "Nations react to corporate desires rather than consumer needs," Nader said. "It's a big fight. And the key is that right now there aren't any international sanctions that can be imposed. We need a parallel group to the World Trade Organization that will be more open and accountable. Otherwise, who is fighting for the consumer?"

      Federal Trade Commissioner Mozelle W. Thompson argued that plenty of people are already doing battle on this issue.

      "We have Internet fraud group training units in 22 states and ten countries on how to target and ferret out fraud," Thompson said. "The last thing we need to do is create a super-bureaucracy. We don't want to take consumer protection out of the hands of people on ground zero. I think that that kind of response is not only misinformed but misguided."




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