Meet the top ten scams – #1 fake check fraud

This is part one of our 10-part series taking a closer look at the top scams of 2012. The number one scam reported to NCL’s Fraud Center in 2012 was the fake check scheme. To see an overview of our complete report on the top scams of the year, visit our Web site at nclnet.org.

Sandra LatouffBy Sandra Latouff, NCL Public Policy Intern

“Congratulations! You’ve won the lottery!”

“You can earn a large salary just by working at home!”

“Get paid for doing what you love, earn a large salary just for shopping!”

Sounds great, right? There is one catch: all you have to do to get your reward is deposit a check and wire the money to the sender to pay the taxes and fees.

There’s another catch, which consumers aren’t told – The checks are fake and the “great opportunity” is actually a scam that could cost you big-time. On average, consumers who fell victim to these schemes lost an average of more than $2,400! That’s serious cash for most of us.

Scams involving counterfeit or fake checks were the number one scam reported to NCL’s Fraud.org campaign in 2012. The scams comes in a number of variations, including foreign lottery scams, check overpayment scams, internet auction scams, and secret shopper scams, just to name a few.

The scams works like this: a scammer contacts a potential victim, either by email, phone, through the mail, or by some other means. The original communication may or may not include a realistic-looking check made out to the victim. If the victim responds to the outreach, usually by replying to an email or by calling a phone number operated by the scam artist, she is instructed to deposit the check into her personal bank account and wire all or a portion of the proceeds from the check to the scam artist or an accomplice via a money transfer service like MoneyGram or Western Union. The scammer gets cash in hand, often within minutes. Depending on how long it takes the bank to recognize the fake check, the victim may not find out about the fraud until days or weeks later. By that time, the scam artist is long gone and the victim is left owing their bank for the proceeds from the fraudulent check.

Regardless of the type of fake check scam the scammer employs – the “mystery shopper,” the “overpayment,” and the “lottery/sweepstakes winnings” variations are popular – the common thread involves the deposit of a check into a personal bank account and then having money wired to the scammer or a third party, such as a fictional “escrow service.”

It is not unusual for a scam artist to use social persuasion techniques to gain a victim’s trust. When being contacted, the scammer may disclose some personal information such as the victim’s name, address, or email address in an effort to convince their mark that the offer is legitimate. Such personal information is widely available online and does not make the alleged company or organization legitimate or trust-worthy.

Tips to keep in mind:

  • If someone gives you a check or money order and asks you to send money somewhere in return, it’s a scam.
  • If you are asked to pay money to collect lottery or sweepstakes winnings, it’s a scam. If you have really won, you will pay taxes directly to the government after you receive your winnings. Be especially wary of claims that you have won well-known sweepstakes such as Reader’s Digest or Publishers Clearing House.
  • Legitimate mystery shopper or account manager jobs don’t involve using money transfer services to send money. Be especially cautious of offers to mystery shop Western Union or Moneygram locations, or the retail stores that house them, such as Walmart, 7-Eleven, or local drug stores.
  • The check or money order may be fake even if your bank or credit union lets you have the cash. You have the right to get the cash quickly, usually within 1-2 days, but your bank or credit union may not be able to tell if there is a problem with the check or money order until it has gone through the system to the person or company that supposedly issued it. That can take weeks. By the time the fraud is discovered, the crook has pocketed the cash.
  • Even if a consumer is defrauded in a fake check scam, she may still be required to pay the bank back for the losses.

For more tips about avoiding scams involving fake checks, please visit NCL’s FakeChecks.org campaign site or NCL’s guide “Avoid Fake Check Scams: Five things you should know.” For more information on scammers misusing the Publishers Clearing House name, click here. For more information on the Reader’s Digest fake check scam, click here. Western Union’s Consumer Protection Web site is also a good resource for information on these scams.

Turn the Tables on Scammers this April Fool’s Day

By John Breyault

The first day of April often brings with it a raft of pranks, jokes, and other silliness. Unfortunately, scammers consider every day to be April Fool’s Day – and the joke’s on unwary consumers.

This year, we urge consumers to turn the tables on scam artists and get educated about new scams. Scammers frequently tailor their scam’s pitches to an approaching holiday or significant event. For example, every year around the December holidays, we see an increase in charity scams. Similarly, we expect an upswing in reports to NCL’s Fraud Center about scams related to Tax Day as we approach April 15.

Tax Day scams come in many forms, so consumers should be sure to be on the lookout for them. Some of the more common variants include:

  • Phishing Scams – The victim receives an email, fax or phone call, purportedly from the Internal Revenue Service (IRS) or state taxation authority, asking for personal information necessary to process a refund. Consumers who fall victims lose their personal information, which the scammer can use to commit identity theft or drain a bank account (if a bank account number is provided to the scammer). The reality is that the IRS and state taxation authorities will never contact filers in this way to obtain additional information. Consumers should avoid giving any personal information out when they receive such calls and do not click on links in such emails, even if they have an IRS logo (phishers are experts at making “official-looking” emails). For more information on IRS phishing scams, visit the agency’s official site.
  • Home-Based Business Tax Schemes – Promoters of home-based business opportunities (many of which are just masked pyramid schemes) sometimes claim that such businesses can be used to avoid paying taxes by listing most, if not all, personal expenses as tax-deductible business expenses. Consumers falling victim to such schemes could be liable for back-taxes owed, IRS penalties, and even imprisonment. Click here for more information.
  • Abusive Return Preparers – Tax season is a stressful time for many consumers. Difficult-to-understand forms, complicated calculations, and the ever-looming April 15th deadline lead millions of consumers to use tax preparers, most of which are reputable businesses. Unfortunately, abusive return preparers can hit unsuspecting consumers with a double-whammy. First, these scammers often charge outrageous fees and skim profits off the top of consumers’ refunds. Second, such returns often incur the wrath of the IRS. Since the consumer is ultimately responsible for his or her own return, they could be liable for IRS penalties. Click here for tips from the IRS for choosing a reputable tax preparer, and always check out the business with your local Better Business Bureau.
  • Refund Anticipation Loans – While not technically a scam, refund anticipation loans (known as RAL’s in industry jargon and often advertised as “rapid refund” loans) are used to get cash to consumers in as little as 24-48 hours after a return is filed. What is generally not well disclosed to consumers is that such “refunds” are actually loans from the tax preparer, often with hefty fees and even heftier interest rates (over 700% in some cases!). And, for consumers whose tax refunds are unexpectedly withheld from the government, they are still obligated to repay the loan, at the exorbitant interest rate. Such loans are often targeted at low-income and immigrant communities, preying on unfamiliarity with the tax system. For more information on RAL’s, click here.

Consumers who believe that they’ve been the victim of tax scams can file a complaint with NCL’s Fraud Center by using our online complaint form. These complaints are shared with more than 90 federal, state and local law enforcement and consumer protection agencies in the U.S. and Canada.

Economic Misery Increases Vulnerability to Pyramid Schemes

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Millions of Americans are out of work and millions more worried about making ends meet. In the face of this troubled economy, consumers are giving home-based business opportunities more consideration as a way to make additional money. Unfortunately, scam artists often mask their fraudulent schemes as legitimate home-based business “opportunities.” The confluence of bad economic conditions and the proliferation of such scams could be putting many more consumers at risk of falling victim to these fraudulent pyramid schemes.Who wouldn't want to make "easy money"?

These are the conclusions of a new survey released today by the National Consumers League, produced in partnership with Opinion Research Corporation. Some of the worrying findings of the survey include:

  • 31% of survey respondents said that they are more likely to consider a home-based business due to the current economic environment.
  • One third of survey respondents couldn’t identify a pyramid scheme as a scam when one was described to them.
  • Low-income Americans could be especially vulnerable to pyramid schemes. Among respondents reporting annual incomes below $35,000, 39% were unable to identify a pyramid scheme as a scam, the lowest percentage among income groups surveyed. Low-income respondents were also the most likely (42%) to consider a pyramid scheme as a good source of supplemental income when it was described to them.
  • Chain letters were the most common kind of pyramid scheme that respondents reported being approached to join (33%), followed by general pyramid schemes (21%), gifting clubs (12%), and Ponzi scheme (7%).

For more highlights from the survey, click here.

To help address the growing threat of pyramid schemes, NCL has launched a new section on our Fraud.org Web site to help consumers identify and avoid falling victim to pyramid schemes, particularly the many scams masquerading a legitimate multi-level marketing plans. We’ve included a scam-spotting checklist that consumers can take with them to the often high-pressure sales “seminars” that are frequently used to lure victims into pyramid schemes, a handy chart comparing pyramid schemes and legitimate multi-level marketing plans, and links to additional information about pyramid schemes.

Consumers who have been approached to join a pyramid scheme or those who may have already fallen victim to one should definitely report the scam via our Online Fraud Complaint Form. These reports are incredibly important to helping federal, state, and local law enforcement and consumer protection agencies take action to help bring scam artists to justice.

If you’ve been a victim, don’t be afraid to report it. You are not alone! In addition to Fraud.org, there are several great forums online, including Scam Victims United and Scamwarners, where victims can network, share their stories, and hopefully avoid becoming repeat victims.

Bitter Fruit for Consumers from the Google Money Tree

money_treeBy John Breyault, Vice President of Public Policy, Telecommunications and Fraud

When the economy goes into the tank, scammers seek to take advantage of consumers desperate for some extra cash. Unfortunately, due to trying economic circumstances, we find that consumers who would likely otherwise shy away from dubious business opportunities become more susceptible to them.

One such case involves a company advertising itself as “Google Money Tree,” which operates a site called www.googlemoneytree.com. Over the past two months, NCL’s Fraud Center has received more than a dozen consumer complaints via our online complaint form. In addition, blogs and message boards focusing on publicizing work-at-home scams have noted numerous complaints about the company.

The scam appears to work like this:

  • The victim receives an email or sees an ad offering a substantial weekly salary earned simply by “Posting on Google.”
  • The victim is then directed to a download site where they enter in their contact information to receive a “Google Money Tree Kit” for “free” (though a $3.88 shipping and handling charge applies).
  • Customers who enter their credit card information to order the kit are charged the $3.88 shipping and handling fee.

Sounds great, right? Ready for the Google Money Tree to start sprouting your riches?

Not so fast. Unfortunately, numerous consumers have reported that they receive nothing and are subsequently charged a $72.21 fee for access to the Google Money Tree. When they call to dispute the charge, they are told that they agreed to the monthly fee when they signed up to receive the kit and didn’t call to cancel within seven days.

It’s hard to believe that many consumers would have fallen for this trick if the $72.21 fee was readily disclosed. Where is this fee listed? Why, in hard-to-read grey text on a white background at the bottom of the page (above the attention-grabbing red “Check This Out!” sign pointing to photos of a Range Rover, mansion, and island retreat), of course! As stipulated, agreeing to receive the kit gives the consumer a 7-day trial access to the Google Money Tree private Web site where, presumably, the secrets of getting rich quick with Google will be revealed.

The Devil is in the Term and Conditions

As with most dubious work-at-home schemes, the devil is in the details; or in this case, the “terms and conditions” section. There, in tiny font, the red flags abound. First, consumers are alerted that the use of the Google Money Tree involves a negative option, a bill practice that has been deemed unethical by some (since the customer must “opt out” in order to avoid getting billed). The Federal Trade Commission enforces strict rules about how negative option billing programs can be advertised and disclosed via the Prenotification Negative Option Rule, which “requires companies to give you information about their plans, clearly and conspicuously, in any promotional materials that consumers can use to enroll.”

Second, the “Disclaimer of Warranties and Liability” section seems at odds with the advertised purpose of Google Money Tree. Specifically, the fine print states that:

“This Site is for informational purposes only, and is intended to provide helpful and informative material on the subjects addressed. googlemoneytree.com does not provide legal, financial, or any other kind of professional advice or services. To make sure that information or suggestions on this site fit your particular circumstances, you should consult with an appropriate professional before taking action based on any suggestions or information on this site.”

The Google Money Tree Web site advertises that this is a “limited time offer” and that consumers should “act now!” Why then, are consumers advised to “consult with an appropriate professional” before taking any action (presumably to include investing money) that Google Money Tree advises?

Finally, there is the dreaded “Consent to Binding Arbitration Before the American Arbitration Association,” clause which essentially prevents a consumer from trying to get their money back from Google Money Tree in court.

Sleuthiness!

The dubiousness of Google Money Tree does not end at the Terms and Condition section. Since we’re inquisitive types, we took it upon ourselves to look a bit deeper into Google Money Tree. First, we checked with the Better Business Bureau of Southern Nevada (Google Money Tree is registered to a P.O. Box in Las Vegas). Lo and behold, Google Money Tree has an “F” rating with the BBB due, in part, to six complaints against the company. The good folks at the BBB told us that Google Money Tree does not have a valid business license and that they began receiving complaints about the business in November 2008, which is incidentally around the same time that our Fraud Center began receiving complaints as well (are we surprised?).

We also checked out the inference on Google Money Tree’s advertising Web site that they were written up in the New York Times and USA Today. The only “mention” of Google Money Tree in either publication was a November 12, 2008 story in the New York Times that mentions how a former Google employee’s friends call him “the Google money tree.” If this is what the operators of googlemoneytree.com feel amounts to an endorsement by the paper of record, they really are ambitious.

The Bottom Line: Avoid

For all intents and purposes, Google Money Tree looks like an extremely dubious enterprise, operating on the edge of being an out-and-out scam. Consumers should be on the watch for any get-rich-quick scheme, particularly those that promise large paydays in exchange for up-front investments in “training kits” or “educational materials,” especially if they involve recurring monthly fees. Because Internet companies like Google are respected names, scam artists frequently make use of their names to try and associate themselves with such companies’ good reputations. Remember to check out ANY company with the Better Business Bureau before sending them money and always, always, ALWAYS read the fine print. Finally, consumers who feel that they’ve been scammed by Google Money Tree or ANY scam should file their complaint at NCL’s online complaint form.

Fraudulent Text Messages? Just Delete ‘em!

By John Breyault

When faced with spam text messages — also known as SMiShing – just delete the messages. That was the advice we gave to Nashville’s CBS Newschannel 5 in a story that ran on the issue earlier this week.  Click here to watch the full video.

While the estimated 1.5 billion spam text messages that will be sent in 2008 represent only a small fraction of the total amount of spam consumers receive, the problem is growing. Since 2006, the number of spam text messages sent has nearly doubled, likely driven by dramatic growth in text messaging use by American consumers. Even though most mobile phone consumers will receive very much, if any, text messaging spam, the cost of getting even a few is not insignificant. Given that U.S. consumers pay for text messages sent and received, combined with rising pay-as-you-go text messaging fees (currently at 20¢ per message on most carriers), the real costs of such spam can quickly add up.

The easiest way to avoid becoming a victim of SMiShing scams is to simply delete the messages. Do not call the number listed in the text message or surf to the Web address provided. You will likely be asked to provide sensitive financial information (bank or credit card account numbers) which the scammers will then use to defraud you. In particular, SMiShing scams seem to be targeting credit union, so be especially wary if you are one of their customers and receive these text messages. Other ways to cut down on SMiShing is to avoid listing cell phone numbers online (such as in online social networking site profiles), since scammers frequently use sophisticated harvesting software to comb the Internet for such numbers. If the problem is especially severe, cell phone carriers can block all SMS text messages to a consumer’s handset, though this will also block legitimate messages.

Consumers who suspect they’ve been a victim of SMiShing fraud should contact their financial institution and cell phone provider immediately. Also consider reporting the fraud to NCL’s Fraud Center, so that we can alert the FTC and federal and state law enforcement authorities.

Meet John Breyault

by John Breyault, NCL VP, Public Policy Telecommunications and Fraud

Hello to you all, fellow Savvy Consumer Blog readers! I’m the “new guy” here at the National Consumers League. At NCL, I’ll be coordinating the League’s policy activities and managing the National Consumers League’s Fraud Center and the Alliance Against Fraud coalition in my position as Vice President of Public Policy, Telecommunications, and Fraud.

While I’m new to the position, I have been a fan of NCL for many years through my work as Research Director of the non-profit Telecommunications Research and Action Center (TRAC). In my five years at TRAC, I educated and advocated on behalf of residential and small business consumers of communications services. As such, I became well-versed in all things related to telecom and broadband policy, where I developed an intense love-hate relationship with the minutiae of tariff sheets, ex parte filings, and – yes – even EULA’s.

Concurrent with my role at TRAC, I was also Director, Research at Amplify Public Affairs where I helped launch one of the public affairs industry’s first blogger relations practices (which should serve me well with this blog!). I also designed and implemented issue campaigns using online social networks such as MySpace and Facebook and even virtual worlds like Second Life.

I’m very excited to be joining the League at this important moment in its history. With a new Administration set to take office, the next few months will be a critical time to help shape the future of consumer-friendly policies in Washington. The old saying “you never get a second chance to make a first impression” holds true in policy work as well. Relationships with the new occupants of the White House will be forged. New Members of Congress and agency officials will need to be educated to make sure that the 111th Congress keeps the interests of consumers in mind. In short, the next few months are full of possibilities for the League and I’m proud to have this opportunity be a part of it.

Going forward, I’m looking forward to keeping up a regular posting schedule to keep everyone up to date on the League’s policy activities here in Washington. I’ll also be discussing some of the important consumer news that never seems to make it into the newspapers and evening news. Please do feel free to post comments or drop me a line directly at johnb@nclnet.org.

That Warm Fuzzy Feeling: Fraud Center Helps Friend Avoid Credit Repair Scam

Turns out there are a few perks of working at a nonprofit consumer advocacy organization!

Just this week, a staffer at our Fraud Center was able to identify a scam that a friend of his was about to fall for and stop her from losing a bunch of money.

We track complaints on a number of scams: investment seminars, Fake Check Scams, and Phishing are just a few. Here’s what happened: “Rachel” saw an ad in a magazine from a company that claimed it would lower your credit score for only $500. She’s trying to remove some debt from her credit report, in order to buy a car, so this offer was especially appealing. “Rachel” called her friend, our colleague at the Fraud Center, to tell him about the offer. Good thing she did, because “Rachel” was able to save $500, and avoid further financial heartache.

Our staffer explained to Rachel that the only way to repair your credit is to get a copy of your report and review it for any errors. There are tons of scenarios in which mistakes can pop up on your credit report:

  • A creditor reports inaccurate information to the credit bureau
  • A case of mistaken identity leaves you paying for John C. Smith’s debt, when your name is John G. Smith.
  • A credit bureau employee accidentally types the wrong Social Security number when inputting data.

You get the picture.

Consumers are entitled to one free copy a year of their report through any major credit bureau. You can request your copy here. The moral is: as tempting as a company’s promise to “fix” your credit report may be, it’s not true!

You can report complaints of credit repair scams to NCL’s Fraud Center. Feel free to drop us a comment about how you avoided being scammed. Or, consider supporting our efforts in educating consumers on avoiding being scammed!