The Government has failed to install the proper mechanisms to protect citizens from online scams, MPs have warned.
The Commons Public Accounts Committee said the enforcement system for dealing with scammers both on and offline was "inadequate."
"It was established to deal with single instances of trader malpractice, such as selling short measures, and has not kept pace with the rise of mass market scams, often perpetrated online," said Margaret Hodge MP, chair of the Committee of Public Accounts.
Enforcement bodies need to be equipped both to detect and remedy existing problems, and to prevent new problems from emerging.
"Too often cases of consumers being ripped off fall through the cracks between enforcement bodies."
The Government has failed to keep legislation and law enforcement up to standard when tackling modern scams, such as those on the web, the committee's report claimed.
"The kinds of problems experienced by consumers are changing rapidly, with, for example, a lot of goods and services now being purchased online," it read. "Enforcement bodies need to be equipped both to detect and remedy existing problems, and to prevent new problems from emerging."
MPs said the Trading Standards Services used to take on scammers at a local level did not have enough funds. Cracks in the enforcement system have cost consumers at least 4.8 billion, MPs said.
"Most Trading Standards Services are too poorly resourced to take on regional work," Hodge added. "In 2009-10, the Department [for Business, Innovation and Skills] provided 8 million of funding to tackle scams and malpractice that occurred at a regional level. This funding has now ended."
The committee urged the Government to increase funding so cases can be escalated to the right enforcement body. This would mean "progress of cases is assured and can be tracked," the report read.
It also claimed enforcement bodies were not able to issue harsh enough penalties.
A recent report from the UK Cards Association revealed online bank fraud had actually dropped 32 per cent in the first half of 2011, in comparison to the same period last year.
However, phone banking rose by 50 per cent.
