5 Things You Can Do to...Protect Against Bad Deals and Scams that Arrive by Phone, Letter and the Internet

Beware of crooks impersonating legitimate businesses, charities and other organizations

Collage with computer and documentsMarketers have lots of ways to find out who you are, where you live, and how you're likely to spend your money. While many unsolicited offers may be good deals for you, others may be costly or inappropriate… or even scams. In particular, crooks have become very good at impersonating legitimate businesses, charities and other organizations to trick people into giving out valuable information that can be used to commit identity theft, which involves stealing money using someone else's name.

"The amount of fake products, investments and services advertised online, by e-mail or by telemarketers is staggering," said David Nelson, a fraud specialist at the FDIC.

While laws and industry practices may limit losses for fraud victims in many cases, innocent victims sometimes end up losing money or spending many hours clearing their good name.

Here are a few ways you can be better prepared to know a good deal from a bad one and protect against a variety of scams, including ID theft. (For special guidance on avoiding counterfeit check frauds, see the Avoid Costly Scams Involving Fake Checks and Money Orders.)

1. Never divulge personal information in response to an unsolicited call, letter or e-mail. Just having information about your checking account may be enough for a thief to obtain a bank draft that deducts funds from your account. So unless you initiate the contact with another party and you know it's reputable, don't provide details such as your Social Security Number, bank account and credit card numbers, personal identification numbers (PINs), date of birth, or your mother's maiden name.

Also don't provide personal information via phone or e-mail in response to an unsolicited e-mail or an Internet advertisement, no matter how legitimate it may appear. That's because there are fraudulent, copycat e-mails and sites that are designed to appear to be from well-known companies. If you want to follow up with a company, use an e-mail address or phone number from a reliable, independent source that you go to on your own.

2. Thoroughly check out any offer before agreeing to anything. Always get key details in writing. Carefully read all the documentation, including the fine print in applications and contracts, to understand your potential costs, risks and requirements. Don't just rely on what a sales person tells you or what's printed in promotional literature. Ask friends and family what they think.

Do some comparison shopping at your bank and one or two other financial services firms to make sure that the "special" unsolicited offer you received is really special.

With credit card offers, for example, carefully review the terms and conditions, including the potential fees or penalties, all of which must be disclosed to you before you incur any charges on the account. By law, the most important terms in credit card offers must be in a specially highlighted box or near the box.

3. Try to deal only with businesses you already know or that have been recommended by someone you trust. This minimizes the chance that you may be lured in by a high-cost company or a shady marketer, perhaps even a con artist. When in doubt, start with your state or local consumer protection office (listed in the blue pages of your phone book) and ask where to go for information on whether a service provider is properly licensed to do business and whether there are complaints or rule violations tied to this company. Another resource for complaints against a company is the Better Business Bureau.

For guidance on whether a bank is legitimate, you can call the FDIC's toll-free consumer assistance line (1-877-ASK-FDIC, which is 1-877-275-3342). You can also use the FDIC's online directory of insured banking institutions, Bank Find, at www2.fdic.gov/idasp/main_bankfind.asp.

4. Assume that any offer that "sounds too good to be true" – especially one from a stranger or an unfamiliar company – is probably a fraud. Common examples include:

  • A telephone call or a letter notifying you of winning a lottery or a sweepstakes that you don't remember entering, and you are told to pay "taxes" or "fees" before you can claim your prize.
  • A promise of an investment paying significantly above market rates.
  • A fake job offer that promises to pay a lot for doing very little (such as stuffing packages or envelopes at home) and may involve handling or wiring money. "The crooks mostly want to learn your Social Security Number from your application or they want you to deposit a fraudulent check and then wire money to them out of your bank account," said Michael Benardo, manager of the FDIC‘s financial crimes section. (Read more about fake check scams.)
  • An Internet friendship or romance that soon leads to pleas for money and secrecy.

If you think that you've already been fooled by a con artist, you can file a complaint with the government at www.lookstoogoodtobetrue.com/complaint.aspx, a Web site that is a joint effort of federal law enforcement agencies and corporate partners. You can also contact the Federal Trade Commission toll-free at 1-877-FTC-HELP (1-877-382-4357) and your local police or the police where the fraud took place. Ask to file a written report about the incident.

5. Know the other signs of a scam. In general, any story that grabs your attention and emotions and then forces you to act quickly – before you have time to think rationally – may be part of a con game. Here are some of the classic red flags of financial fraud:

  • You're told to send money or provide bank account information up front – before you receive any goods, services or other benefits.
  • You're pressured to act fast, even before you've seen details in writing. "Scam victims have been interviewed by researchers and the results show that even very smart people can be tricked by fast talkers who spark emotions and then say, ‘This is a limited time offer. Act fast before it's too late'," Nelson said.
  • You sense a reluctance to answer questions or provide written information.
  • Someone tells an emotional story of being "in danger" or the victim of fraud or discrimination and then asks for your help, perhaps by placing funds in an overseas bank account.
  • You're told you already agreed to donate or pay money, and you don't remember doing so.