They say that necessity breeds ingenuity, and while the latest methods for conning people out of their hard-earned money could hardly be seen as the most brilliant of ideas, scammers seem to be getting away with it. According to a survey by the Consumer Federation of America (CFA), about one third of the adult American population has been approached by someone trying to pull off some type of fake check scam.

Worse, about 1.3 million Americans actually fell for it and got ripped off in amounts ranging from $3,000 to $4,000. The National Consumers League estimates the total money lost on a yearly basis from all cases of fake check scams to be a whooping $20 billion to $60 billion.

How the scam is perpetrated

Behind every bogus scheme is a storyline that would seem like the opportunity of a lifetime. While the circumstances do not always sound right on hindsight, in many cases, consumers usually find the opportunity too good to say no to. It could be a win in the lottery, an answer to your “for sale” or “for rent” ad online, a job as a mystery shopper, and other similar so-called income-generating prospects. Little do the victims know that they would be the ones producing the money and not the other way around.

Once an individual rises to the bait, the next step to the scam is easy enough: you will receive a check in a certain amount which is to be deposited in your account. As soon as the check “clears”, the proceeds or a huge part of it should be wire-transferred to a third-party account. When the funds are wired off into the hands of the scammers, that money will forever be lost from you.

How check clearance works

One of the main reasons why so many people have been lured into these trick scenarios is because these fraud perpetrators use authentic-looking checks and even names of existing local businesses. Consumers also believe that depositing the check first into their bank accounts is a good way of making sure that the check is legitimate. At the very least, the bank personnel wouldn’t let you withdraw money for the account if the check was a phony one, would they?

Sadly, the answer to this is yes. US banking laws are required to make the funds available to the depositor usually after one to seven days, depending on where the check is supposedly drawn (e.g. local or out-of-state). But just because the funds can already be withdrawn does not mean however, that the check is already confirmed to be authentic or funded. And when the check does return or bounces, your bank account will be debited for the exact same amount as the check.

Common fake-check scenarios

In order to guard ourselves against scams like these, prudence and vigilance are essential. Here are some of the more common fake-check schemes that fraudsters are trying to pass off as legitimate transactions and cashing in on the process.

  • A once-in-a-lifetime lottery winning. In this case, the victim is congratulated for having won the lottery or sweepstakes, usually one he doesn’t even remember joining in the first place. The winnings are huge but the catch is, the “winner” must first wire-transfer some amount as tax payment before he can claim the prize money. Remember: no legitimate lottery or raffle would require that payment for taxes or any processing fees be paid out in advance so if this happens to you, just pass up on your supposed winnings.
  • The buyer or renter you’ve been waiting for. You place a local or online ad selling off or renting out something and after a few days you get a positive response. Could this perhaps be the answer to your needs? Don’t be quite so confident yet. If the other party sends out a payment check that’s been “mistakenly” made out for a higher amount and asks you to transfer the balance to another account, this is just another one of the more common fake check scams being carried out.
  • Mystery shopping, anyone? A swindler first places an ad looking for a mystery shopper. Once an interested individual answers to the job posting, he or she is given the first assignment: receive a check, have it cleared through his personal bank account, then transfer the cleared funds to a specified third-party through the money transfer service being evaluated, less of course, say $200 as the job payment. Too good to be true for such an easy job? That’s because it is. No mystery shopping job asks you to cash a check and wire money, and they don’t pay that much as well.
  • You’ve been selected for a federal grant. Or a stimulus loan or student aid. Now all you need to do is deposit a small processing fee and you can claim your cash grant. But before you even skip to the bank, think… did you even apply for this? This could most likely be just another fake check tactic.

Don’t let scammers fleece you out of your savings. Be informed and help put a stop to these latest swindling strategies to hit American consumers.

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