How to Recognize a Scam or Fraud

Fraud is the intentional misrepresentation of an important fact made to influence the buyer. However, it can be difficult to prove the misrepresentation was intentional. Each year many people lose billions of dollars because of fraud.

Scams and frauds come in many different forms. The following describes common frauds and scams. Some of the scams are "oldies but goodies," while others are more new. For more information about each of these, visit the websites listed.

Oldies but Goodies Scams

Home Repair Schemes: Door-to-door con artists pressure homeowners by telling them that they need urgent home improvements such as driveway paving, painting, roofing or siding repair. They perform shoddy work, fail to complete it, but still try to collect their money – perhaps even demanding more than the homeowner had agreed to pay. To protect yourself, work only with licensed and insured contractors. Ask the contractor to provide proof of insurance. Check customer references. Get other bids for the work. Always keep a copy of the contract in a place you will easily find it. http://www.ag.state.il.us/consumers/tips.html

Identity Theft: Someone may use your personal identifying information (like your Social Security number or credit card account number) to commit fraud or theft. To protect yourself, annually check your credit history by visiting: www.annualcreditreport.com or call 1-877-322-8228. www.ftc.gov/idtheft

Sweepstakes/Prizes/Lotteries: Examples include promotions for "free" prizes for a fee; foreign lotteries and sweepstakes offered through the phone, fax, e-mail or mail; etc. http://www.ftc.gov/bcp/conline/pubs/tmarkg/prizes.htm

Credit Repair: People having problems with credit are often targeted. Related scams include the promise of a loan that requires you to pay a fee first; worthless credit card loss protection and insurance programs; the promise that accurate negative information can be removed from your credit file for a fee; etc.

http://www.ftc.gov/opa/2000/08/credit.shtm

Work at Home Plans: Watch out for medical billing scams; misleading franchise and Internet-based business opportunities; wealth building plans that don't make good on their promises; etc. http://www.ag.state.il.us/consumers/workathome.html

http://www.ftc.gov/bcp/conline/pubs/invest/homewrk.htm

Investment Fraud: Everyone would like to see his or her money grow faster. Con artists know this, and they try to convince people to buy phony investments with promises of unusually high returns. The higher the return on an investment, the riskier it is. Do your homework about investments. Learn how much you can expect to earn in the current market. If you are targeted with questionable investment offers, notify the Illinois Secretary of State – Securities Office at 1-800-628-7937. http://www.avoidthescam.net/

Pyramid Schemes: Avoid network plans that offer commissions on the sale of goods by you and distributors you recruit. http://www.ag.state.il.us/consumers/pyramid.html

Travel/Vacation Schemes: Read offers very carefully for "free" or low-cost vacations, cut-rate student travel packages, and misleading timeshare offers. Be sure to check out the company making the offer. http://www.ag.state.il.us/consumers/travel.html

Charity Solicitations: Some solicitations on behalf of police and firefighter organizations and other charities are made by dishonest professional fundraising firms. They can be persistent and may imply that if you don't donate; your safety will be jeopardized. Be aware that only a small percentage of the donation goes to the cause. Sometimes callers falsely state or imply that they are policemen. When you receive a call asking you to make a charitable contribution, ask how much of the contribution will go directly to the institution. Before you give, check with a charity watchdog organization such as the American Institute of Philanthropy www.charitywatch.org; 773-529-2300. If you want to support local safety agencies, call your local police and fire departments and ask how to make a donation directly to them. http://www.ag.state.il.us/charities/index.html

Newer Fraud Scams

Health Care Fraud: As the business of medicine has become more complex, consumers experience confusion and difficulty obtaining the care and benefits to which they are entitled. To assist Illinois consumers with these problems the Attorney General opened the Health Care Bureau. Call the AG Hotline Number at 877-305-5145 or TTY 800-964-3013

Caregiver/Elder Abuse Fraud: Always check the background and references of people you hire to work in your home. If you give a caregiver money to go to the store for you, make sure you get a receipt and check all items purchased. Keep all important financial documents under lock and key in your home and store valuables and irreplaceable items in a bank safety deposit box. If you are concerned, talk to a family member or call the police and adult protective services. http://www.ag.state.il.us/seniors/bsafe.html

Home Equity Loan Fraud: Any attempt to steal the equity in someone's home is home equity loan fraud. Swindlers are quite creative about ways to do this. Some ways homeowners are defrauded include refinancing scams, deed forgeries, and fly-by-night lenders. http://www.ftc.gov/bcp/conline/pubs/homes/eqscams.htm

Time Shared Property: Yes, these can be riskier than buying property outright. When you buy a time-share, you are buying the rights to use a hotel room, suite or apartment for a short time every year. All time-shares require that you pay annual dues, which can be quite expensive Check out the seller with your state department of real estate. Always ask in advance for a copy of the offering statement and review it with a qualified real estate attorney. http://www.idfpr.com/dpr/re/REALEST.asp

Internet Related "Nigerian" Letters: This scam arrives as an e-mail bearing a Nigerian or Canadian Lottery stamp. The sender outlines a tale involving large amounts of money they can't access and asks you provide your bank account number so that you can help them obtain the money. In return they promise you a portion of the money. It is a fraud. If you respond to it you are guaranteed to lose your money. Never respond to an unsolicited e-mail asking for your bank account number. http://www.ftc.gov/bcp/conline/pubs/alerts/nigeralrt.htm

E-mail Scams: "Phishing" is used for e-mails which often appear quite legitimate that claim to be from your bank, a reputable business or a government agency. The e-mails ask you to "confirm" your account number and online passwords. Sometimes they warn that your account is in danger of being closed or that you may be a fraud victim. But crooks send these e-mails, not the company whose name they are using. People who have responded to such e-mails have had their accounts wiped out. Legitimate companies never send e-mails asking for account information. If you receive such an e-mail, bearing the name of your bank, call your bank on the phone to report it. Never, ever hit "reply." If you get spam email that you think is deceptive, forward it to spam@uce.gov. The FTC uses the spam stored in this database to pursue law enforcement actions against people who send deceptive email.

Fake Check Scam: When you place an ad to sell something, your biggest concern may be finding a buyer, but making sure the check is good can be just as important. Crooks often scan want ads looking for victims. A crook might answer the ad and offer to pay you using a "cashier's check" for an amount greater than the sales price. Then you are asked to wire the remainder of the money back to them or to give the extra money and the merchandise to a "shipper." The check turns out to be a fake and you lose the merchandise and the money. Be suspicious if someone wants to give you a check for more than you are actually owed if they are purchasing something from you. Inspect all cashier's checks carefully and call or visit the bank it's drawn on to verify that the check is valid. Look up the bank online or in the phone book because contact information printed on the check might be bogus. http://www.ftc.gov/bcp/conline/pubs/online/auctions.htm

There is always a "Yet to be Determined" scheme, scam or flimflam. Remember, if it sounds too good to be true it probably is!

Presented by: Kathy Sweedler, University of Illinois Extension Educator, Consumer and Family Economics

Prepared by: P. Hildebrand, S. Taylor and K. Reuter, University of Illinois Extension Educators, Consumer and Family Economics

Sources: Illinois Attorney General. http://www.ag.state.il.us/consumers/index.html

Federal Trade Commission. www.ftc.gov