What are some common types of scams?
Scammers are constantly finding new ways to try and steal money. You can protect yourself by knowing what to look out for. Here are some of the most common types of fraud and scams. Learn what to watch for and what steps to take to keep yourself, your loved ones, and your money safe.
Common Types of Fraud and Scams
Fake Check Scams
“Fake checks are simply counterfeited checks, usually copies of business checks from real companies. Three different types of financial documents are commonly involved in fake check frauds: regular checks, cashier’s checks, and money orders. Some appear to be created in the U.S. and Canada, but many are shipped in from overseas and then sent to victims.
• The regular fake check purports to be from a business, and usually contains a real account and routing number. These are not handwritten, and they look quite professional. The name of the business will appear on the check, and they often include a phone number as well.
• Fake Cashier’s checks look like they are from a bank or financial institution. A genuine cashier’s check is a check guaranteed by a bank, drawn on the bank’s own funds and signed by a cashier. Cashier’s checks are treated as guaranteed funds because the bank itself, rather than an individual, is responsible for paying the check amount. These are commonly required for real estate and brokerage transactions. Most financial institutions have seen counterfeit cashier’s checks using their information. The Office of Comptroller of the Currency has issued an alert about fake cashier’s checks.
• Money orders are issued by banks and the United States Postal Service. These are effectively a cash substitute. Money orders can be cashed at a bank and postal money orders at a post office. They are printed on special paper with watermarks to make them difficult to counterfeit. The Postal Service has issued an alert on how to detect a fake money order or a money order scam. Fake checks are used in a variety of frauds such as mystery shopper or nanny “jobs”, as well as prize and sweepstakes scams. What the scams have in common is that victims have to send money to the fraudsters. After depositing the check, victims are asked to quickly wire money or buy gift cards that eventually make their way to the fraudsters before the checks bounce.
Regardless of the format, the checks usually look professional and convincing. Fraudsters have been known to obtain the names and account information of legitimate businesses by fishing inside mailboxes with sticky tape or even stealing entire mailboxes off the street, hoping to find business checks inside. Crooks then scan and Photoshop checks.” -Better Business Bureau
A charity scam is when a thief poses as a real charity or makes up the name of a charity that sounds real in order to get money from you. These kinds of scams often increase during the holiday season as well as around naural disasters and emergencies, such as storms, wildfires, or earthquakes. Be careful when any charity calls to ask for donations, especially ones that suggest they’re following up on a donation pledge you don’t remember making.
What to do: Ask for detailed information about the charity, including address and phone number. Look up the charity through their website or a trusted third-party source to confirm that the charity is real. Learn more about how to avoid a charity scam.
Debt Collection Scams
Most debt collectors will contact you to collect on legitimate debts you owe. But there are scammers who pose as debt collectors to get you to pay for debts you don’t owe or ones you’ve already paid.
What to do: Don’t provide any personal financial information until you can verify the debt. Read more about the warning signs.
Debt Settlement and Debt Relief Scams
Debt settlement or relief companies often promise to renegotiate, settle, or in some way change the terms of a person’s debt to a creditor or debt collector. Dealing with debt settlement companies, though, can be risky and could leave you even further in debt.
What to do: Avoid doing business with any company that guarantees they can settle your bets, especially those that charge up-front fees before performing any services. Instead, you can work with a free or nonprofit credit counseling program that can help you work with your creditors. Learn more about the risks of working with a debt settlement or relief company.
Foreclosure Relief or Mortgage Loan Modification Scams
Foreclosure relied or mortgage loan modification scams are schemes to take your money or your house, often by making a false promise of savings you from foreclosure. Scammers may ask you to pay upfront fees for their service, guarantee a loan modification, or ask you to sign over the title of your property, or sign paperwork you don’t understand.
What to do: If you are having trouble making payments on your mortgage, a HUD-approved housing counselor can help you assess your options and avoid scams. If you think you may have been a victim of a foreclosure relief scam, you may also want to consult an attorney. Read more about foreclosure relief scams.
If you get a call from someone who sounds like a grandchild or relative asking you to wire or transfer money or send gift cards to help them out of trouble, it could be a scam.
Imposter scammers try to convince you to send money by pretending to be someone you know or trust like a sheriff, local, state, or federal government employee, or charity organization.
What to do: Remember, caller ID can be faked. You can always call the organization or government agency and ask if the person works for them before giving any money. Read more about imposter scams.
Mail fraud letters look real but the promises are fake. A common warning sign is a letter asking you to send money or personal information now in order to receive something of value later. Examples of mail fraud might include notices of prizes, sweepstakes winnings, vacations and other offers to claim valuable items.
Money Mule Scams
A money mule is someone who receives and moves money that came from victims of fraud. While some money mules know they’re assisting with criminal activity, others are unaware that their actions are helping fraudsters.
Money mules may be recruited through online job or social media posts that promise easy money for little effort. They may also agree to help a love interest, who they’ve met online or over the phone, by sending or receiving money, as part of a romance scam.
What to do: Don’t agree to receive or send money or packages for people you either don’t know or haven’t met. Also, be aware of jobs that promise easy money. Learn more about the red flags and what to do if you’re a victim of a money mule scam.
Mortgage Closing Scams
Mortgage closing scams target homebuyers who are nearing the closing date on their mortgage loan. The scammer attempts to steal the homebuyer’s closing funds- for example, their down payment and closing costs-by sending the homebuyer an email posing as the homebuyer’ real estate agent or settlement agent (title company, escrow officer, or attorney).
What to do: These schemes are often complex and appear as legitimate conversations with your real estate or settlement agent. When you’re about to close on your home, take several steps, including identifying trusted individuals to confirm the process and payment instructions and writing down their names and contact information so you can reach out to them directly. Learn more about what steps you should take to help protect your closing funds.
Lottery or Prize Scams
In a lottery or prize scam, the scammers may call or email to tell you that you’ve won a prize through a lottery or sweepstakes and then ask you to pay an upfront payment for fees and taxes. In some cases, they may claim to be from a federal government agency.
What to do: Avoid providing any personal or financial information, including credit cards or Social Security numbers, to anyone you don’t know. Also, never make an upfront payment for a promised prize, especially if they demand immediate payment. Learn more about lottery or prize scam red flags.
A Romance scam is when a new love interest tricks you into falling for them when they really just want your money. Romance scams start in a few different ways, usually online. Scammers may also spend time getting to know you and developing trust before asking you for a loan or access to your finances.
What to do: Be smart about who you connect with and what information you share online. Don’t share sensitive personal information, such as bank account or credit card numbers or a Social Security number, with a new love connection. Learn more about how to avoid romance scams.
Wire or Money Transfer Fraud
Scammers use money wire transfer fraud is the “grandparent scam,” where a scammer poses as a grandchild or a friend of a grandchild and say they’re in a foreign county and need help. Once the money transfer is picked up, there is very little you can do to get your money back.
What to do: Never transfer money to someone you don’t know. If you made a money transfer to a scammer, contact the bank or company immediately and ask if it can be reversed. Learn more about wire transfer scams.
Reporting a Fraud and Scam
If you’re a victim of a scam, you can report it to the authorities by:
- Submitting a compliant online with the Federal Trade Commission
- Contacting your local police or sheriff’s office
- Reporting it to your state attorney general