Billions Lost from Common Check Scams; BBB Advice on Best Defense

August 26, 2009

Why do people fall for it? A check arrives in the mail and it appears legitimate …and hard to resist in these economic conditions. Scams involving fake checks come in so many different forms it can be very hard to identify. Printing technology used by scammers continues to improve and often the business listed on the check is a legitimate business. Experts estimate that billions of dollars have been lost as the result of fake check scams. The Better Business Bureau (BBB) warns against three common check scams and offers advice on red flags to look out for.

According to a recent survey by the Consumer Federation of America, nearly one-third of adults have been approached by a scammer trying to pass off fake checks and at least 1.3 million people have become victim of the scam with an average loss of $3,000 to $4,000 each time.

“Consumers call us every day to inquire about phony checks and we stop them from cashing one. But even experts in the financial industry find it very difficult to tell a fake check from a real one using only the naked eye because fake checks can be printed in full color and even include watermarks,” said David Polino, Better Business Bureau President. “That’s why the consumer plays such an important role. Only they know how the check came into their hands.” Many check scams plaguing consumers in the US are the work of scammers operating outside of the country and originate in Canada, Jamaica and Africa which makes it extremely difficult for law enforcement to track them down and bring them to justice.

Tracking the scammers down may be near impossible but a consumer’s best defense says the BBB is to stop before you cash it and arm yourself by knowing some tricks of this criminal trade.

Example of a fake check:

Here’s how it works:

Scams involving fake checks typically require the victim to deposit a check into their bank account then wire money back to the scammers. While the check may initially be deposited into the victim’s bank account without issue and leads to a false sense of security — the fake check will ultimately be discovered within a couple weeks and the bank will take the funds out of the account to cover the loss. The victim of the scam is now out whatever money they sent to the scammers and will be responsible for paying the bank back if their account is overdrawn.

Here’s what to look for:

A Surprise Element. Whether a check lands in your inbox, mailbox or offered over the phone – if it’s unexpected or not given to you from someone you know – do not respond to the “offer.”

A Money-back Requirement. Legitimate checks from a legitimate business do not require money to be deposited into your account or have a portion wired back to them.

You are a Winner. Lottery and grant award claims can trick consumers when they didn’t even apply for one. Regardless of what a consumer may enter to win, legitimate drawings will offer options to confirm your lucky day, and none of these options should require wiring a portion of the money back to the company in order to claim a prize.

Here are three common scams:

Lottery and Government Grant Scam

Victims receive a letter claiming they’ve won a lottery or qualify for a financial assistance grant. Included with the letter is a check for at least a partial amount of the total money they have coming to them. The victim is told that, in order to receive the rest of the money, they are to deposit the check and wire back as much as several thousand dollars. The victim is often told this is to cover taxes or administrative fees. In June, a Nebraska woman lost $58,000 after being told she’d won $11 million in the Jamaica Lottery.

Mystery Shopping Scam

The victim believes that they are going to earn a few hundred dollars by working for a company that provides mystery—or secret—shopping evaluations for businesses. The victim receives a letter in the mail along with evaluation forms, a check and detailed instructions. The victim is to deposit the check into their bank account, and then use the money to purchase items from specified stores and evaluate the customer service the rest of the money is theirs to keep for the work they did. Included in the list of stores to evaluate is Western Union or MoneyGram and the victim is told to wire as much as a couple thousand dollars back to their “employer” and rate their experience with the money wiring service.

Overpayment Scam

The victim is selling an item through a newspaper classified or an online site such as Craigslist. A buyer shows interest and asks to pay for the item by check. When the check arrives the amount is higher than the price of the item. The victim is told that it was a mistake and is sometimes asked to wire the extra back or that the extra cost is for the victim to wire payment to a shipping company that the scammer has chosen—of course the supposed shipping company is actually the scammers.

“Consumers bear the responsibility to research the sender and verify a check before taking it to their local bank for deposit. When a consumer rushes to deposit this type of check – they’re the ones left holding the bag when it doesn’t clear, not the bank,” added Polino.

Since fake check scams are not limited to the schemes mentioned, the BBB offers more red flags to look out for:

· The name on the check does not match the name of the company or individual you’re supposedly dealing with.

· Part of the offer includes instructions. Be warned that it is a scam if the offer includes a request to deposit a check into your account and wire a part of those funds back to the sender or to another specified company or contact.

· Don’t be fooled by a phone call. Just because you’ve spoken to the scammer over the phone, it doesn’t mean they’re not trying to rip you off.