Consumers were defrauded to the tune of more than a half billion dollars last year, with the Internet emerging as a major tool to commit fraud that can affect your ability to buy or keep a home.

The Federal Trade Commission's "National And State Trends In Fraud And Identity Theft January - December 2004" said Consumer Sentinel, the federal complaint database, recorded 635,173 complaints last year costing consumers a total $547,854,781.

Defrauded consumers lost an average $1,848, but 41 consumers each reported losing $1 million or more.

Among the complaints, 61 percent represented fraud and 39 percent were identity theft complaints.

The report reveals that early fears about Internet security were misdirected. Internet technology can be used to thwart some forms of fraud, but more often it's the major tool of scam artists who use the Web both to run scams and to snare unsuspecting dupes.

The FTC and other consumer advocates repeatedly warn consumers to be wary of Internet originated offers, come-ons and hard-sells.

Fraud Complaints

Internet Auctions accounted for most of the fraud complaints, representing 16 percent of complaints overall followed by Shop-at-Home/Catalog Sales (8 percent); Internet Services and Computer Complaints (6 percent); Foreign Money Offers (6 percent); Prizes/Sweepstakes and Lotteries (5 percent); Advance-Fee Loans and Credit Protection (3 percent); Business Opportunities and Work-at-Home Plans (2 percent); Telephone Services (2 percent); Debt Management and Credit Counseling (1 percent); and Travel Vacation and Timeshares (1 percent).

Advance-fee loans and credit protection/repair offers include the promise of a loan that requires you to pay a fee first; worthless credit card loss protection and insurance programs; and the promise that accurate negative information can be removed from your credit report for a fee.

Debt management/credit counseling scams include unfulfilled promises by credit counseling organizations to provide free services, send payments to creditors in a timely manner, or reduce interest rates on credit card debt, eliminate late and over-the-limit fees, etc.

In both cases, the frauds can leave your credit report tainted for years or in worst case scenarios, hurl you into foreclosure.

When it comes to your credit report, debt management and other financial matters, consumer experts advise working only with known professionals with a track record of honesty you can verify through regulatory agencies.

As well as spawning the largest individual fraud category, the Internet also has become the greatest initial source of come-ons seeking to rip you off. The FTC says 57 percent of fraud complaints indicated the method of initial contact was either electronic mail (35 percent) or a website (22 percent).

Apparently, if it appears too good to be true, especially when it's on the Internet, it probably is.

The highest per capita rates of consumer fraud were reported in the Washington, D.C. area followed by San Jose, CA; Las Vegas, NV; Columbus, OH; and Phoenix, AZ.

Identity Theft

Identity theft has become consumer's No. 1 complaint, accounting for 39 percent of all fraud. ID theft occurs when someone misappropriates your personally identifying information (Social Security number, credit card account number, even your telephone number or address) to commit fraud or theft.

It appears in a host of forms including credit card fraud (28 percent), phone or utilities fraud (19 percent), bank fraud (18 percent), and employment fraud (13 percent). Other significant categories of identity theft reported by victims were government documents/benefits fraud and loan fraud. Also, the number of complaints about electronic fund transfer related identity theft more than doubled between 2002 and 2004.

The areas with the highest per capita rates of reported identity theft are Phoenix, AZ; Riverside, CA; Las Vegas, NV; Dallas and Houston, TX.

Ironically, experts say, that same technology that has created a platform for fraud and for delivering fradulent pitches can help take a bite out of the crime of ID theft. Using electronic payment and transaction systems can help consumers avoid ID theft, experts say.

Identity thieves are not unlike burglars or other personal property thieves in their methods of operation. They want an easy mark. It requires much more sophistication to break into online systems protected by encryption software than to snatch a piece of paper from mailboxes, trash bins or your desktop.

If you think you've been a victim of fraud immediately report it to your local police and file a complaint with the appropriate trade group, consumer advocate or local, state or federal regulatory authority.

The FTC offers additional fraud complaint information.