Predatory scams are one of the most common ways thieves attempt to part people with their hard-earned money. The National Consumers League (NCL) recently released the top scams of 2014, ranking the overall top ten scans as well as the top scams by category. These scams should serve as a road map for consumers to safeguard against losing money to crooks in 2015.
These scams were ranked based on analysis of more than 10,000 consumer complaints submitted to the NCL in 2014.
It should come as no surprise that Internet scams featuring general merchandise sales took the top spot with 26.32% of total scams in 2014. People fall victim to this rouse when crooks offer the sale of a good and item is paid for and never delivered or misrepresented.
Prize, sweepstakes and free gifts come in a close second to Internet scams. These scams are perpetuated by telling a consumer he or she won a prize, but needs to pay a handling fee or service fee in order to receive the gift. Consumers should never pay upfront for something they supposedly won and taxes on lottery winnings should always be paid directly to the IRS.
Phantom Debt Scams are On the Rise
Refund and recovery scams (also known as phantom debt) are in the rise. The trend started in 2013 as the fastest-growing telemarketing scam reported to NCL and continued in 2014 to place fourth on the top ten list.
Fraudster phones a consumer to demand payment on an old debt (aka phantom debt), which likely never existed in the first place. The crook will threaten jail time and legal action.
If you receive this call and are unsure if it could be real, hang up and look to see if you have an item in collections.
You can check your credit reports via annualcreditreport.com to see if an item has been sent to collections. These items are often also reported on sites like Credit Karma, Credit Sesame and Quizzle – and you’ll also see a big drop in your credit score.
If it’s legitimate, the collections agent will certainly be calling back and you should be prepared with these 7 tips for dealing with an item in collections.
A Scam Being phased out
The old fake check scam reigned king on the NCL’s top ten list for years, but has now dropped to the number three spot.
Check scams work like this:
- You receive a letter saying you won a prize and a check is attached as a portion of the prize, perhaps to taxes.
- You’re instructed to cash the check and wire the money back to prize sponsors.
- The deposited check will bounce because it’s fraudulent and the wired money is already in the hands of the fraudsters. You will be responsible for the bounced check and the wired money. If you don’t have enough money to cover the loss, it can result in negative bank account balance, derogatory marks on your ChexSystems report or even litigation with your bank.
If an unexpected check comes in the mail from someone you don’t personally know, don’t cash it, especially if the request is to wire money! Even if it is from someone you know, don’t cash it and wire money until funds have cleared.
Shift in How Scammers Were Paid
The NCL report unearthed a positive trend in scams – credit cards are becoming a more common form of payment, with 48% of people reporting they paid a con artist with a credit card instead of wire transfer. Fortunately, it’s far easier to recover lost funds made on a credit card thanks to fraud protection from most banks and credit card issuers. However, this protection doesn’t extend to wire transfers or prepaid debit cards.
You can read the full report from the NCL here.
Don’t be the victim of a phishing scam! We provide actionable steps to protect yourself (and your money) against scams in this blog post.