This site will help with some of these questions.
And to answer your last question, nothing. Unless the LCO steals one of my customers that I'm friendly with. I would then inform the customer about the dangers of using a contractor who is not operating legitimately. If I was friendly with the kid I would tell him what he's getting into. Otherwise, I'm a contractor not an IRS agent. I don't have time to police the hundreds of LCO's operating in my service area.