Are you up on all the latest financial scams? You might be surprised at how sophisticated and convincing scams have become and how many people fall prey to scammers.
Scenario 1: The phone rings at 7 p.m. The caller says he is from a collections agency, and you need to pay your outstanding debt now or you will be arrested. What should you do?
Scenario 2: You receive a call saying your granddaughter was arrested for using her iPhone while driving. The caller pressures you to pay to keep her out of jail, and then you hear her voice on the line telling you to wire money. Should you do it?
Scenario 3: You receive a text message from your credit union saying there has been a suspicious Zelle transfer to someone you don’t know. It says to click the link to secure your account. Should you click it?
Scams are common, costly and convincing
All three of these scenarios are scams. New technologies and scamming methods make it more difficult to recognize a financial scam, as recent statistics show.
Americans lost more than $10 billion to financial scams last year, more money than ever before. According to the Federal Trade Commission (FTC), one in four people reported losing money to scams in 2023. The median loss was $500 per person.
Email was the most common form of scam, followed by phone calls and then text messages. Scammers target people of all ages, income levels, education levels, gender and race.
While people often think older adults are more susceptible to scams, that isn’t always the case. Generation Zers born between 1995 and 2012 are falling for online scams three times more often than Baby Boomers, a 2023 Deloitte report found.
Younger adults who grew up with technology use it and trust it more than tech-suspicious Boomers. Gen Zers also have more of their finances online. This makes it easy for con artists to access accounts and swindle money, a recent Time article shared.
Older generations have not dodged scamming, though. Despite Gen X’s and Boomers’ careful use of technology, new AI technology is luring them into scams.
So, who is “scam vulnerable”?
“For most scams to work,” Psychology Today explains, “victims must participate in their own victimization, either directly (e.g., disclosing personal information, sending money) or indirectly (failing to report the scam). This means that in many cases, potential victims have the power to prevent being victimized.”
Financial scammers weave an intricate, panic-inducing story, build urgency and isolate victims from trusted friends and family. If you engage, the scammers’ coercion is costly. The Cut’s financial advice columnist found this out when she put $50,000 in a shoebox and handed it to a stranger.
The latest financial scams
Stay up-to-date on the latest financial scams to avoid falling victim to one.
Imposter scams
The most commonly reported scams costing a reported $2.7 billion in 2023 are imposter scams. These scams impersonate a person (family member in distress), trusted institution (bank’s fraud department, business or tech support), government agency or sweepstakes to defraud a victim.
Artificial intelligence has made imposter scams more convincing through voice cloning and deep fakes, like the second scenario in the introduction of this article. Scammers can use deep fakes to create fake celebrity endorsements leading to false websites, fake romances offering investment “tips” or sextortion schemes.
Investment scams
Investment scams ring in as the most costly scam, with consumers losing more than $4.6 billion in 2023. This is up nearly a quarter more than in 2022.
Many investment scams are shared through social media platforms. They look quick and easy, claim to have low risk and offer high returns. Testimonials from paid actors say they have benefited significantly, according to an LA Times article on spotting investment scams.
As with other financial scams, investment scammers urge you to “act now, so you don’t miss out.” They may ask you to send investment money in advance and continue contributing as your portfolio grows until the day it disappears.
Debt collection scams
Like in the first scenario presented in this article, debt collection calls can strike fear in the heart of even the most stalwart financial person. Debt collection scammers falsely claim that you owe money and need to pay it immediately or they will tell others about your debt or arrest you.
While it can be difficult to tell the difference between a legitimate debt collector and a scammer, there are a few things that give them away.
According to the Consumer Financial Protection Bureau (CFPB), legitimate debt collectors must send a formal, written notice within five days of the first collections call.
As part of the Fair Debt Collection Practices Act (FDCPA), real debt collectors cannot threaten to tell others about your debts. Threatening arrest is illegal, so real collection agencies will never make that threat. Nor will they threaten to have you fired or take your driver’s license.
Student loan scams
As more and more student loan forgiveness programs come out, scammers have taken notice. The changes have made people open to listening to scammers or curious to click email phishing links that go to fake websites. Both seek to steal personal information like social security numbers or bank account information.
Scammers may also try to charge large application fees for student loan forgiveness relief. There is no cost to apply for these programs. Check the Department of Education website for the most current information.
Zelle scams
Scams involving peer-to-peer payment, like Zelle and Venmo, often steal money by impersonation. They may ask for advance payment or fees or phishing for your bank credentials. Peer-to-peer payment apps are an easy way to transfer money, but they do not offer the same protection as credit cards.
“These financial scams are very convincing,” said Lori Pollack, Executive Director of the Financial Counseling Association of America. “They tell you to press numbers, and then large sums withdraw from your account.”
The third scenario at the beginning of the article is an example of a Zelle phishing scam. The scammer texted a link to install malware or a virus on the user’s phone, enabling them to gain the user’s Zelle credentials, bank account information and other personal information.
Romance scams
Scams from presumed romantic interests accounted for $1.3 billion in losses in 2022. Scammers pretend to be interested in pursuing a romantic relationship, working to build your trust. Then they ask you to purchase something for them or send money, which they pocket or fraudulently have removed from your account. They may also begin offering investment tips on fake cryptocurrency accounts or recommending fake charities.
Phishing emails and text messages
These scams seek to install malware to obtain your personal information or trick you into transferring your money to “protect” it.
- Fake online shopping websites – Fake websites offer low prices to trick you into sharing your credit card information. If it sounds too good to be true, always double-check.
- Sweepstakes, giveaways or prize scams – These financial scams may ask for your bank account information or for you to pay a deposit to get the prize.
- Employment scams – Fake employers may conduct multiple interviews, collect your personal information, and then ask you to purchase equipment or training materials. Others may ask you to receive and forward money or packages. These are often illegal operations and open you to legal liability.
Warning signs of a scam
Identifying a financial scam can be as simple as finding a few clues. If you receive a phone call or email that seems odd, be suspicious. Even if you know the person, their email address or phone number could have been spoofed. Verify the following to help identify scams:
- Are they who they say they are? Verify the person or organization is who they say they are by hanging up the phone. Call a mutual friend or colleague to verify details. Call or email the organization directly via the information on their website.
- Why are they calling? Is it a problem, like suspicious activity on your account or unpaid taxes? A prize? These should raise immediate red flags. Stop the conversation and contact the organization or a trusted contact before proceeding.
- What is their tone and timeframe? If they are using high-pressure sales tactics, pushing an urgent timeframe or threatening you, it is probably a scam.
- What do they want you to do? If they want you to give out personal information, send a wire transfer or provide verification codes, it’s probably a scam.
- Is their message causing you to feel big emotions like fear, anxiety, worry, panic or excitement? This should raise a red flag. If the caller or contact says you cannot get off the line without losing the opportunity or without causing harm, then it is likely a scam.
- Are they trying to get you to move your money to protect it? It is a scam.
- Are they trying to keep you on the line and listening to their story by transferring you to people in other departments or agencies? This is a red flag. Hang up and contact the organization directly. It is most likely a scam.
- Did they tell you not to tell anyone else or keep it a secret? It is a scam.
- If you ask who they are, do they share their identity? Just because they share their identity does not mean they are to be trusted. They could be impersonating someone else. Verify their identity and the situation when you get off the phone or out of the chat to ensure it is not a scam.
- Do they threaten to reveal your debt to others or have you arrested for your debt? It is a scam.
How to avoid financial scams
Avoiding a financial scam requires diligence to protect yourself and your loved ones. Below are some tips to help.
- Keep an eye on your credit score. If your credit score changes for no reason you can think of, it could be due to a hard pull instigated by someone trying to open an account in your name. Monitoring your credit score enables you to pick up fraudulent activity before it gets out of hand. Check your credit score for free.
- “If you get a call from someone you do not know, don’t answer it,” advises Lori Pollack, Executive Director of the Financial Counseling Association of America. “If you answer a call from an unknown number, be aware of the language the phone caller uses. Do they call you the wrong name? Are they using badge numbers and case numbers? Hang up the phone and call someone who can verify the call, like a family member, your financial institution or accountant.”
- Do not share your personal information, especially with anyone who emails or calls you asking for it.
- Never click links in texts, emails or pop-up ads. If you are concerned, go to the organization’s website and contact them through their contact page. If you have a virus on your computer, real technical support help will not appear in a pop-up ad.
- Monitor your bank account, online accounts and credit score regularly. “Watch your credit card bills carefully,” said Pollack. “I know someone who, during a move, threw out an old Apple TV box. Someone found it and began using it. For years, there were small charges here and there, but they did not realize it until a large purchase happened. By that time, the theft had gone on for so long that they could only recoup a portion of the charges.”
- Set up a family password or challenge question that you can ask to thwart AI scams.
- Lock down your social media accounts to “Only Friends” and be careful who you accept as a friend. Scammers only need 15 seconds of your voice or photos from social media accounts to create deep fakes and attempt to extort you and/or your loved ones.
- Use strong, 12+ digit passwords with letters, numbers and symbols and set up multi-factor authentication (MFA).
- Do not share your passwords, and never give out your PIN or verification codes to someone who calls to ask for it.
- Research websites to ensure they are credible and have good reviews before inputting personal or credit card information.
- Watch out for unusual texts about suspicious activity on your account from Zelle, Venmo or other peer-to-peer payment apps.
- Never refund or forward an overpayment.
- Keep your computer updated and use antivirus software.
How to report a financial scam
Have you fallen for a financial scam? There may be a way to get your money back and prevent the scammers from hurting others.
The first step in reporting a financial scam is to try to get your money back. Contact your bank or the company you used to send the payment to try to stop or reverse the transaction.
Second, secure your accounts. Reset your passwords to new, strong passwords.
Next, report scams or suspected fraud to the Federal Trade Commission. Follow the steps outlined here by the FTC for consumers who believe they have been scammed.
“Recently, someone in our office received a text message from a credit union alleging a suspicious Zelle transfer to a person she did not know,” said Pollack. “Fortunately, she does not have an account at the credit union, so she was able to identify it as a scam.”
According to Pollack, the individual reported it to the FTC and found the process to be very simple. Once the information was entered, the FTC also provided helpful links for other related financial scams, spam and identity theft-related information.
You can also file a complaint with the Consumer Financial Protection Bureau and submit a complaint to your State Attorney General’s office.
If someone tried to steal your identity, report the identity theft to the FTC here. They will create a personalized recovery plan for you.
Furthermore, protect your credit by adding fraud alerts to your credit reports. This lets companies know you have been the victim of fraud and/or identity theft.
Finally, consider other ways to protect yourself, such as signing up for identity protection services like Aura, IdentityForce, Identity Guard or LifeLock.
“Reporting a scam is a lot of work, so it is easy to understand why people give up,” said Pollack. “But it is important to protect your credit and help shut down scammers.”
How the FCAA can help
While FCAA members cannot protect you from financial scams or give legal advice, our members can review your credit report with you and guide you about moving forward financially following a scam or identity theft. Our non-profit members’ educational focus allows them to offer unbiased advice to help you get back on your feet following a scam. Contact us for credit counseling and financial education.