This type of mail, known as deceptive mail, includes sweepstakes and other types of mailed material, such as lotteries and chain letters. Finally, I will provide information on initiatives in which various federal agencies and other organizations have participated to address consumers’ problems with deceptive mail marketing practices and help educate consumers about potential problems that could occur with such practices. Also, we obtained updated available information on efforts by various federal, state, local, and nongovernmental organizations to address consumers’ deceptive mail problems and educate them about possible problems that could occur with deceptive mail marketing practices. We obtained comments on a draft of this testimony from the Federal Trade Commission (FTC) and the U.S. Extent and Nature of Consumers’ Problems With Deceptive Mail

Comprehensive data that could indicate the full extent of consumers’ problems with deceptive mail were not available. Various officials from the agencies and organizations we contacted told us that such data were unavailable mainly because consumers oftentimes did not report their problems and no centralized database existed from which comprehensive data could be obtained. The results of the survey, which was conducted in November 1998, indicated that 51 percent of the survey respondents believed that within the preceding 6 months, they had received mail involving sweepstakes or documents resembling cashier’s checks, known as cashier’s check look-alikes, that appeared to be misleading or deceptive. The total amount of money these consumers said they had paid was about $4.9 million. We recently learned from a Postal Inspection Service official that additional fraud complaints were contained in a third FCS category called “consumer complaint program.” According to the official, for the period October 1, 1997, through March 31, 1999, the category included a total of about 48,000 complaints, which generally involved such matters as fraud, bad business practices, or misunderstandings between consumers and companies. The four were (1) lotteries, (2) telemarketing, (3) investment schemes, and (4) work-at-home plans. In fiscal year 1998, FTC, the Postal Inspection Service, and Attorneys General offices for various states initiated 203 law enforcement actions that targeted specific organizations, companies, and individuals that allegedly attempted to deceive, mislead, or defraud consumers through various mail marketing practices. However, FTC, the Postal Inspection Service, and various state Attorneys General offices estimated that about 10,400 consumer complaints led to or initiated the 101 law enforcement actions. For example, FTC: established, on July 7, 1999, a national toll-free hotline (i.e., 1-877-FTC- HELP or 1-877-382-4357) that consumers could use to file complaints on various topics, including deceptive mail. These efforts focused on telemarketing fraud, but have also involved discussions about deceptive mail, including sweepstakes.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed matters related to deceptive mail marketing practices, focusing on the extent and nature of consumers' problems with deceptive mail and the initiatives various federal agencies and other organizations have made to address deceptive mail problems and educate consumers.

What GAO Found

GAO noted that: (1) examples of deceptive mail include sweepstakes, chain letters, cashier's check look-alikes, work-at-home schemes, and fraudulent charity solicitations; (2) officials in various agencies and organizations said that comprehensive data on the full extent of consumers' deceptive mail problems were not available mainly because consumers often did not report their problems and no centralized database existed from which such data could be obtained; (3) however, data GAO collected from various sources suggested that consumers were having substantial problems with deceptive mail; (4) based on a GAO sponsored November 1998 statistically generalizable sample of the U.S. adult population, GAO estimates that about half of the adult population believed that within the preceding 6 months, they had received deceptive mailed sweepstakes material or cashier's check look-alikes; (5) officials from the Federal Trade Commission (FTC), Postal Inspection Service, and state Attorneys General offices estimated that in fiscal year (FY) 1998, about 10,400 deceptive mail complaints led to or initiated about 100 law enforcement actions; (6) for the period October 1, 1997, through March 31, 1999, FTC received over 18,000 deceptive mail complaints, of which about 2,700 reported consumer payments of about $4.9 million; (7) also, the Postal Inspection Service received over 16,700 complaints on fraud and chain letters, of which about 3,000 reported consumer fraud losses of about $5.2 million; (8) the Inspection Service also had over 1,800 open investigative cases on deceptive mail during FY 1998; (9) various federal agencies and other organizations have undertaken efforts to address consumers' deceptive mail problems and educate them about such problems; (10) for example, FTC established a national toll-free hotline for receiving deceptive mail and other complaints; (11) one joint effort was Project Mailbox, which involved such organizations as FTC, Postal Inspection Service, and various state Attorneys General; and (12) these organizations initiated over 200 law enforcement actions against companies and individuals that used the mail to allegedly defraud consumers.