Mail-Order Sales on Rise, but So Is Fraud

Attracted by the convenience of shopping by telephone, U.S. consumers have made the mail-order business a booming industry.

But it is also attracting the watchful eye of regulators, who say that, although most mail-order firms are legitimate, the potential for fraud is increasing along with the $85-billion-a-year industry’s popularity.

“We’re . . . here to protect the American public.” said Jim Harbin, a regional U.S. Postal Service inspector attorney in San Francisco. “(If) the company is misleading to the public, it may get sued (for felony mail fraud) by the Postal Service.”

The mail-order industry is as convenient for the businessman as it is for the consumer, according to Howard K. Goldsmith, a professor for the California State University and Colleges system and a former mail-order businessman.

Mail-order companies don’t need a storefront to display merchandise, and don’t need to hire security to ward off shoplifters. They also don’t have to hire salespeople, and can work out of a house or garage, said Goldsmith, who led a seminar at UC San Diego Saturday on starting a mail-order business.

Harbin said most mail-order businesses--which now account for 15% of all the goods sold in the country--are legitimate. But mail-order fraud accounts for about half of the workload of the Better Business Bureau.

The agency “can’t legally do anything to a company we receive a complaint on,” said Christine Boggs, a BBB administrative assistant. But if the BBB receives several complaints about a particular company, it will report the company to the Federal Trade Commission for investigation.

The agency also sends a copy of the complaint form to the company involved and asks for its comment. According to Boggs, the BBB receives some type of comment from 80% to 85% of those companies.

Harbin said there are three basic types of mail fraud: income opportunity, where “people think they’re going to make a lot of money” with very little work; medical fraud, such as diet pills and hair-growing solutions, and prize winnings, where a mail-order company falsely advertises prizes and other winnings.

To get a mail-order company on its feet takes hard work, planning and patience, Goldsmith said.

“It takes a while to get started. The seller usually doesn’t get an initial response (from advertisements) for a long while,” he said.

The mail-order businessman may have to wait one to two months for an initial response, according to Goldsmith. But the seller can be successful if he first does extensive research on the marketplace and his product, he said.

The main reason people are using mail-order services appears to be convenience. “We’ve got a society where people don’t have the time to go shopping,” Harbin said. “All (a customer) has to do is leaf through a catalogue.”

Goldsmith claims that one can buy practically anything through the mail these days. Many companies have toll-free numbers, and the customer can order by credit card.