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Jun 7, 2018|Sweepstakes Scams

Scam Alert! Why Contest Scams Hurt Everyone

"Sweepstakes scams stole at least $117 million from US and Canadian consumers in 2017 alone!"

 

Navigating the world of sweepstakes and contests comes with challenges, and one of the most concerning is the rise of sweepstakes scams. Legitimate promotions can engage audiences and elevate brands, but malicious actors exploit, deceive, and defraud unsuspecting individuals.

Sweepstakes Scams Hurt Everyone

“Congratulations Mr. Jones, you have won $120,000. We just need you to pay $4,200 in taxes first via Western Union.” A lot of people would recognize a phone call like this as a scam. However, based on a new study from the Better Business Bureau (BBB), people are being illegally tricked out of hundreds of millions of dollars from sweepstakes scams. It is a huge international problem, and it is disproportionately affecting senior citizens, but don’t let that stop you from running your next sweepstakes.

The vast majority of people and companies running legally compliant sweepstakes and contests have an honest marketing goal in mind. There are hundreds of reasons a company could create a promotion.  From launching a new product or service to staying top-of-mind with their customer base, sweepstakes or contest can be a great marketing tactic for a brand. However, there are also criminals out there who try and take advantage of companies and their loyal customers.

The BBB study: “Sweepstakes, Lottery and Prize Scams: A Better Business Bureau Study of How ‘Winners’ Lose Millions Through an Evolving Fraud” found that these sweepstakes scams stole at least $117 million from US and Canadian consumers in 2017 alone! Senior citizens are being targeted and lose the most money to these scams. The study also showed that many of these illegal operations are international and commonly come from Jamaica, Costa Rica, and Nigeria. US and Canadian authorities collectively received over 150,000 complaints about sweepstakes/lottery fraud last year and nearly 500,000 over the past three years. Because many people are embarrassed or don’t know how to send a complaint, the Federal Trade Commission (FTC) estimates that only ten percent of all victims come forward which means the true number of people being affected could be ten times higher. Here are just a few of the findings from the study:

  • The FBI says about one-third of lottery/sweepstakes complaints they receive are about scams via social media.
  • A 2013 survey found that prize promotions were the second most common type of fraud, second only to bogus weight loss products.
  • Fraudsters are now using phone calls, text messages, and browser pop-ups with “free gift card” scams to gather even more personal information and then sell it to other scammers.
  • Some of these scams are preventable if people secure their privacy settings on their social media accounts.
  • Foreign lotteries (a lottery requires that you purchase a ticket) are illegal and last year US postal inspectors stopped over one million illegal lottery letters representing over 4,700 different scams with over $62 BILLION in counterfeit checks.

This information should not stop any company from running a sweepstake or contest for its brand. Some of these scammers lie and say they represent one of the best-known sweepstakes in the country, Publishers Clearing House (PCH). It hasn’t stopped PCH from continuing to give away millions of dollars and running even more sweepstakes. They have taken the extra step to include fraud protection information on their website (https://info.pch.com/fraud-protection-2/).

There are many moving parts to any sweepstakes or contest. First and foremost, your promotion has to comply with all Federal and state laws (see our previous posts on the subject here and here). Now that you are armed with all this information on sweepstakes scams, take the time and effort to make sure anyone interested in participating in your sweepstakes has a very clear understanding of how and when the winner(s) will be contacted. Also, consider giving away your product or service instead of money since it will appeal to your customers and be less appealing to scammers.

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