Don’t Be A Victim: A Review of Common Scams Used to Take your Money

1. Don’t Be A Victim: A Review of Common Scams Used to Take your Money Resource made available by the Department of Financial Institutions for Tennessee Financial Literacy Month 2010

2. Online Crime by the Numbers • The Internet Crime Complaint Center (IC3), a partnership between the FBI and the National White Collar Crime Center (NW3C), released the 2008 Annual Report on the number of Internet crime complaints received. • The 2008 Annual Report states that complaints of online crime hit a record high in 2008. IC3 received a total of 275,284 complaints, a 33.1 percent increase over the previous year. • The total dollar loss linked to online fraud was $265 million, about $25 million more than in 2007. The average individual loss amounted to $931.

3. Scam Statistics **Source-IC3 web site: http://www.ic3.gov/media/2009/090331.aspx Since 2004, there has been a 289 percent increase in the dollar amount of losses experienced by victims of various fraud-related scams.

4. What are some of the scams being used or reported? • Advance Fee Loan Scams • Lottery Sweepstakes Scams • Mystery Shopper Scams • E-Mail Scams • Online Auction Scams • Loan Modification-Foreclosure Rescue Scams

5. Advance Fee Loan Scams

6. Advance Fee Loan Scams • These typically result from advertisements placed in small community newspapers. There are more of these showing up on the Internet, as well. • They will use catch lines such as: “Bad credit or no credit…No problem!” • The company will advertise that you can obtain large, unsecured personal loans. • Even though they claim unsecured, they state you must purchase an insurance policy to “collateralize” the loan.

7. Advance Fee Loan Scams • The insurance policy requires payment of an upfront premium to be paid to either the lender or insurance company. • Payment is almost always asked to be wired via Western Union or Money Gram to an individual and/or address that doesn’t correspond with any address shown in documents provided. The address is most commonly in Canada. • After sending the premium payment, the consumer is either asked to send more due to the need for extra collateralization, or the consumer never hears from the company again. • In this case, the consumer never receives their loan and are out any money they have sent for the reported insurance policy The following is a recent consumer alert issued by our Department on such a company

8. Advance Fee Loan Scams

9. Advance Fee Loan Scams • Loan agreement indicated at the Memphis address that we proved was false • “Approved” for a $25,000 loan over 10 years at 7 percent interest • “Borrower” had to make four collateral payments of the $290 monthly amount, or $1160

10. Advance Fee Loan Scams The loan was reportedly approved for a 10 year repayment term, yet the maturity date is listed as November 1, 2010 from a loan origination date Of October 30, 2008. This is only two years! A $25,000 loan at 7.00 percent over a term of 10 years actually has payments of $290.27 per month.

11. Advance Fee Loan Scams “Borrower” paid $1160 for the collateral payments, plus $72 in fees to send.

12. Advance Fee Loan Scams The original agreement was dated October 23, 2008. The “borrower” wired $1160 on October 24, 2008. However, on October 27, 2008 when the “company” realized they could take further advantage of this consumer, they sought to get another $870 out of them.

13. Lottery Sweepstakes Scams

14. Lottery Sweepstakes Scams • These may come through mail notification, or you could possibly receive an e-mail advising that you’ve won a lottery sweepstakes. • If you don’t participate in any type of lottery, you have to question why you would receive any type of notification. • This type of scam will try a variety of ways to get your money. They tend to charge an application or processing fee. • The following is a recent example we received….

15. Lottery Sweepstakes Scams This looks official; however, it asks the receiver to send them $5, along with a claim form to obtain their winnings.

16. Lottery Sweepstakes Scams • Another example of a sweepstakes scam advising you’ve won $215,000 and they’ve sent a portion of your winnings to help pay taxes. • Check amount was for $4875 and they want you to wire $3795 back to them.

17. Lottery Sweepstakes Scams Scanned The back of the check indicated a security feature was that “VOID” will appear if scanned or photocopied. Void didn’t appear in either case, except where it was written on check since we received the original item. Copied

18. Lottery Sweepstakes Scams Scanned The back of the check also indicated a security feature in which the “Original Document” text should not appear if scanned or photocopied. This didn’t appear when scanned, but it did when copied. Copied

19. Mystery Shopper Scams

20. Mystery Shopper Scams • These type of scams will advise that you have been selected to be part of a mystery shoppers group. • They will ask you to “shop” at certain retailers or use the services of an existing company. • The scam is that they will often send an official looking check. The victim is asked to spend a portion of the funds, but is then asked to send the majority of the check back to the sender. • Even though the check looks official, it usually ends up being counterfeit and the victim is out the total amount of the check.

21. Mystery Shopper Scams • Asked to evaluate Wal-Mart and Money Gram. • Check amount was for $3,405. Use $100 at Wal-Mart, send $2950 back to company using Money Gram, and earn $250. • Wire money to an individual with a Canadian address.

22. Mystery Shopper Scams The check that was sent looks authentic; however, there were not any “Void” indicators that will typically show up when a check is copied. You would also want to hold the check up to the light at an angle to see if it has any type of watermark that shows up in the paper on which it is printed.

23. Mystery Shopper Scams

24. E-Mail Scams

25. E-Mail Scams You may have received an e-mail similar to this example. These typically request your bank account information to establish a “business” relationship. These account for nearly 3 percent of the total complaints received by IC3. The median loss amount suffered by victims of this scam was $1,650 in 2008.

26. Online Auction Scams

27. Online Auction Scams • From the IC3statistics presented earlier, almost 70,000 of the 275,284 complaints received in 2008 involved online auction scams, or fraudulent activity. • The following are some of the more common online auction scams to be aware of: Overpayment fraud targets the seller. A seller advertises a high-value item—like a car or a computer—on the Internet. A scammer contacts the seller to purchase the item, then sends the seller a counterfeit check or money order for an amount greater than the price of the item. The purchaser asks the seller to deposit the payment, deduct the actual sale price, and then return the difference to the purchaser.

28. Online Auction Scams Wire transfer schemes start with fraudulent and misleading ads for the sale of high-value items posted on well-known online auction sites. When buyers take the bait, they are directed to wire money to the crooks using a money transfer company. Once the money changes hands, the buyer never hears from them again. Second-chance schemes involve scammers who offer losing bidders of legitimate auctions the opportunity to buy the item(s) they wanted at reduced prices. They usually require that victims send payment through money transfer companies, but then don’t follow through on delivery. ** Source-FBI and IC3 online data- http://www.fbi.gov/page2/june09/auctionfraud_063009.html

29. Loan Modification-Foreclosure Rescue Scams

30. Loan Modification Scams • The activity of these types of companies has increased dramatically over the last year and a half. The increase coincides with the rise in the number of foreclosures occurring across the country. • Loan modification companies are also known as foreclosure rescue operations. • These companies tend to review foreclosure listings in newspapers and to search courthouse records for foreclosure filings. From this information they will send letters, e-mail or even make personal phone calls or visits to the property to offer assistance to the homeowner facing foreclosure proceedings. • More often than not, the loan modification will demand a fee in exchange for their services. We have seen these range from $697 to $3,400.

31. Loan Modification Scams • Once the fee is paid, the loan modification company never contacts the existing mortgage company to negotiate on behalf of the borrower or they simply pack up and move on to their next victim. • The homeowner usually ends up having their property foreclosed since the loan modification company did not bargain in good faith in a effort to work out more favorable payment arrangements with the mortgage lender. • There have been a number of efforts to help offset the rise of these type of companies. In March 2009, President Obama gave the details of his Making Home Affordable Program. Low cost mortgage loan refinances, or loan modifications, are available for those homeowners whose mortgage is owned or governed by Fannie Mae or Freddie Mac.

32. Loan Modification Scams Under the Tennessee Consumer Protection Act (Tennessee Code Annotated 47-18-5401 et seq), it is illegal to charge an up-front fee for a loan modification. The law only allows a fee to be collected by the loan modification company AFTER all services that are listed in a written agreement are completed. This agreement has to be provided to the homeowner within three hours of their signature.

33. Loan Modification Scams • TCA 47-18-5401 also provides the homeowner that contracts with a mortgage loan modification company the opportunity to cancel the transaction within three business days of signing the agreement. • Any fees collected by the loan modification company prior to cancellation by the homeowner must returned to the homeowner within 10 business days • The new law also requires a consistent statement that has to be included with any loan modification agreement in at least 12-point font, uppercase type, so it’s easier to notice and read.

34. Loan Modification Scams

35. Where To Go For Help HELP!!!

36. Where To Go For Help If you are a victim of an online scam, you can file a formal complaint with the Internet Crime Complaint Center (IC3). Their contact information is as follows:http://www.ic3.gov/complaint/default.aspx

37. Where To Go For Help If you are a victim of an advance fee loan scam where funds may have been wired to a Canadian address, you can contact Phonebusters, a division of the Royal Canadian Mounted Police.http://phonebusters.com/ Toll Free:1 (888) 495-8501 Overseas and Local: 1 (705) 495-8501 Toll Free Fax: 1 (888) 654-9426 Mailing Address:Box 686 North Bay, Ontario P1B 8J8 E-mail:info@phonebusters.com

38. Where To Go For Help If you are facing possible foreclosure proceedings on your property, there is free foreclosure prevention counseling available through the Tennessee Housing Development Agency (THDA). The following is a link to contact information for their 23 certified counselors throughout the state: http://www.thda.org/foreclosure/counselors.pdf

39. Where To Go For Help Finally, you always have the opportunity to file a formal complaint with the Tennessee Department of Financial Institutions concerning a bank, credit union, mortgage company, title pledge lender, payday loan company, or any of the situations we have discussed. If we’re not the appropriate regulatory agency that has jurisdiction your complaint, we will direct it to the correct area for assistance. http://state.tn.us/tdfi/crd/20080818RevisedComplaint.pdf(Printable PDF) http://state.tn.us/tdfi/crd/CCF.html(Online Form)

40. Contact Information Alan E. Smith Assistant Commissioner Consumer Resources Division Tennessee Department of Financial Institutions 615-532-1024 1-800-778-4215 Alan.smith@tn.gov or www.tn.gov/tdfi