Tips for Businesses to Avoid Overpayment Scams

8/2/2005

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The Better Business Bureau is warning businesses to be wary of customers who send checks for amounts much greater than the product or service being purchased. The business could fall victim to a "check overpayment scam" if the customer requests a return of the excess funds. Businesses that deposit the customer checks ultimately find out they are counterfeit. Unfortunately, that fact is discovered after the check is initially accepted for deposit by the bank and, the business has forwarded the "overpayment" to the scammer, leaving the business liable for the losses.

The Wisconsin and Ontario BBBs recently learned of a check overpayment scam targeting local hotels. An organization contacted several hotels to reserve a large block of guest rooms and to book conference rooms and catering services for an upcoming “convention.” It sent an official check (one totaled nearly $70,000) as a deposit. After the check was deposited by the hotel, the organization stated that some guests had cancelled and requested a partial refund. Unfortunately, the original check was counterfeit, the organization was bogus and the hotel lost the money that it "refunded."

Three hotels that were “hit” by this scam reported the following:

  • The bogus organization initially contacted the hotel through its Web site and e-mail.
  • The organization described itself as a religious organization, located overseas.
  • The reservations were made shortly before the event was to take place.
  • The bogus organization provided arrival dates and lists of client names (also bogus), in an attempt to appear more legitimate.

In Tennessee, WATE-TV reported on a scammer who claimed to be organizing a big party for children in New Orleans when he contacted two face-painting artists on the phone, using a relay message system. The prospective customer sent several e-mails to the artists, offering to pay $2,500, plus expenses, for their services at the party. He sent a check for $6,000, followed by another for $7,000. He then called to say there had been a mix-up and he had mailed the wrong checks. The artists were asked to deposit the $6,000 check, send a $3,500 money gram to the customer and keep the difference. The checks were eventually discovered to be bogus.

The BBB offers businesses this advice on accepting checks from unknown parties,

  • Know who you’re dealing with. In any transaction, independently confirm the buyer’s name, street address and telephone number.
  • Don't assume that the check is legitimate, even if it’s a cashier’s check, just because your bank accepts it for deposit. It may take weeks for the bank to learn that it is counterfeit.
  • Don’t accept a check for more than the purchase price of the product or service, no matter how tempting. Ask the buyer to write the check for the correct amount. If the buyer refuses to send the correct amount, return the check and do not send the merchandise.
  • You are the party who is ultimately liable to your financial institution. Be careful!
  • Verify all bank checks, as well as certified checks, with the issuing bank. Get the bank’s phone number from directory assistance or an Internet site that you know to be reputable, not from the person who gave you the check. If in doubt, you may want to ask for a check drawn on a local bank, or a bank with a local branch.

If you suspect that your business has been the victim of a check overpayment scam, contact the U.S. Postal Inspectors (phone 1.800.372.8347) or the Internet Fraud Complaint Center, Federal Bureau of Investigation (http://www.ifccfbi.gov/). Then, contact your local BBB to warn other businesses in the area that they may be targeted.

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