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Common Scams, Cons, and Fraud Schemes

People are tricked out of their hard-earned money every day.  Don't be one of them.  Be alert to these common types of fraud:

Telemarketing Fraud

Warning Signs:

  • High-pressure sales tactics are used such as: "Act now or the offer won't be good anymore."
  • You are required to send money often by a wire transfer before you have time to carefully consider the offer.
  • You've won a "free" gift, but are required to pay the postage/handling or other fees.
  • The caller assures you that you do not need to check the credentials of his company.

Tips for Avoiding this Fraud:

  • Screen your phone calls; do not answer calls from numbers you do not recognize.
  • Don't buy anything from a company that you do not recognize, especially if the offer is unsolicited.
  • Always ask for written information and wait for it to arrive.  Read it.  Ask a trusted individual to explain it to you if you do not understand it.  Remember that just because something is written down it is not necessarily true.
  • Ask for the salesperson's name and contact information and check them out before sending any money.
  • If you are asked to give money to a charity, ask for information to be sent to you in the mail.  Check out the organization at http://www.charitynavigator.org/.
  • Don't pay in advance for any service; pay after you have received it.
  • Always take your time before you make the decision to spend your hard-earned money.
  • Never agree to pay a fee for a "free" prize.
  • Never give out personal identifying information (birth date, social security number) to salespeople over the phone.
  • Join the Do Not Call registry at https://www.donotcall.gov/

Nigerian Letter or “419” Fraud

Warning Signs:

  • You receive a letter or e-mail from Nigeria that offers you the opportunity to share in a percentage of millions of dollars that the author (a government official) is trying to transfer illegally out of Nigeria.
  • You are encouraged to send information to the author:  blank letterhead stationery, bank name/account numbers, etc.
  • You are asked to send money to the author of the letter in Nigeria in several installments of increasing amounts.

Tips for Avoiding this Fraud:

  • If you receive such a message, do not respond to it.  Instead, forward it to the U.S. Secret Service, your local FBI office, or the U.S. Postal Inspection Service. You can also register a complaint with the Federal Trade Commission’s Complaint Assistant.
  • Don't believe individuals who say they are Nigerian or foreign government officials asking for your help in placing large sums of money in overseas bank accounts.

Advance Fee Schemes

Warning Sign:

You are asked to pay money to someone in anticipation of receiving something of greater value than what you paid (a loan, a contract, an investment, or a gift) and then you receive nothing.

Tips for Avoiding this Fraud:

  • Understand whom you are dealing with by visiting the business location, checking with the Better Business Bureau, or consulting with your bank, an attorney, or the police.
  • Read and understand the contract that you are being asked to sign.  If there is anything that you do not understand consult an attorney.
  • Check for a legitimate business address and business phone number.  Be suspicious of P.O. Box numbers and phone numbers that automatically go to voice mail.
  • Be wary of businesses that require you to sign nondisclosure or non-circumvention agreements.  These are designed to prevent you from independently verifying the credentials of the people with whom you intend to do business.

Phantom Debt

Warning Sign:

You receive a phone call or email that you owe money and must pay this debt or face serious consequences.  This scheme is often initiated by online or telephone inquires about payday loans or other forms of short-term credit.

Tips for Avoiding this Fraud:

  • If a caller claims you owe money and asks you to wire payment or provide personal financial information such as your bank routing and transit number, account numbers, or credit or debit card numbers, hang up the phone.  This is a scam.
  • If you receive a call from a debt collector, ask for them to contact you by mail and provide written proof of the debt.
  • If you receive a call from someone claiming to be from a government agency or any official-sounding organization that says you owe money, hang up.  This is probably a scam.  Call the organization directly yourself to follow up if you have any questions.
  • Be wary of applying for payday or other short-term loans via the Internet.  You could unknowingly be providing personal information to identity thieves or other fraudsters.
  • If you are unsure about the status of a loan you have, contact the lender directly.  You can also check your credit reports.

Scholarship Scams

Warning Sign:

While you or your child is looking into ways to pay for college, you get offers from scholarship and grant search companies.  These companies often claim to be able to find money for college for a fee.

Tips for Avoiding this Fraud:

  • If the search service guarantees results, this is likely a scam. There are no guarantees regarding the receipt of scholarships or grants.
  • If the search service cannot provide detailed written explanation about how the service works and its refund policy, it’s best to avoid that company.
  • Use unbiased free resources first, such as http://studentaid.ed.gov.
  • Do your own search for scholarships and avoid paying any fees.
  • Do not pay for the FAFSA.  It’s called the Free Application for Federal Student Aid for a reason.  It’s free.

Government Grants

Warning Sign:

You receive notice via email, phone, or even letter that you have received a government grant redeemable when you pay a fee or provide personal financial information.

Tips for Avoiding this Fraud:

  • The government does not telephone, send letters, or send emails to offer grants.  Hang up, throw away, or delete any of these communications.
  • Government grants require applications and are made for specific purposes.  If you did not fill out an application, then any offer for a grant is a scam.
  • When someone does qualify for a government grant, there will never be a required fee to access the money.  If a fee is required, it’s a scam.
  • Avoid search services that charge a fee to help you search for “free government money.”  Instead, use a reputable public benefits screening tool.  To find out if you are eligible for food assistance, visit: http://www.snap-step1.usda.gov/fns/.  To find out if you are eligible for Social Security Administration Programs, visit: http://ssabest.benefits.gov/.  To check on federal benefits more generally, visit: http://www.benefits.gov/.

Credit Repair

Warning Sign:

You are given promises from a business or individual that your credit will be fixed for a fee.

Tips for Avoiding this Fraud:

  • No one can erase negative information if it is true.  Claims to the contrary are a scam.
  • Credit repair companies cannot ask you for payment until they have delivered on their promises to you.
  • Any credit repair company that explains it will create a second credit file for you should be avoided—this practice is illegal.
  • Finally, the best way to fix your credit is to get and review your credit report annually, dispute and get any errors corrected, and then follow the principles of keeping good credit.

Health Care Fraud or Health Insurance Fraud

Warning Signs:

  • Medical Equipment Fraud: You are offered “free” products and then your health insurance is charged for products that you did not need and/or were not delivered.
  • “Rolling Lab” Schemes: Unnecessary or fake tests are offered to you at health clubs, retirement homes, or shopping malls and then billed to insurance companies or Medicare.
  • Services Not Performed: Providers bill insurance companies for services never rendered by changing bills or submitting fake ones.

Tips for Avoiding this Fraud:

  • Never sign health insurance claims forms that haven't been completely filled out.
  • Never give any type of health provider complete permission to bill for any service rendered.
  • Ask your medical provider what will be covered by your health insurance and what you should expect to pay yourself.
  • Read your health insurance explanation of benefits and call and ask if you have questions.
  • Do not believe salespeople who tell you that medical equipment is free.
  • Keep your health insurance number private and only share it with trusted medical providers.
  • Keep records of your health care appointments.

Redemption / Strawman / Bond Fraud

Warning Signs:

  • Companies conducting this fraud wrongfully claim that the U.S. government or the Treasury Department control bank accounts (“U.S. Treasury Direct Accounts”) for all U.S. citizens that you can access by submitting certain paperwork with state and federal authorities.
  • Salespeople will charge you large fees for “kits” that teach you how to conduct this scheme.
  • They will claim that if you are not successful it is because you did not follow the instructions in a specific order or you did not file the paperwork at the correct time.

Tips for Avoiding this Fraud:

  • Be suspicious of companies that claim that they can teach you how to access money from secret bank accounts.
  • Do not believe that the United States Treasury controls all of the bank accounts in the country.