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15 Consumer frauds or scams and how to protect yourself from them

What is consumer fraud?

You can consider a financial incident as a consumer fraud when a person is experiencing a financial loss due to some unethical activities. The fraud can be executed by financial companies or by a person, via unethical, deceptive, misleading, or false business practices. The fraudsters or “scammers” normally target young college students, retired senior citizens, or some person who isn't well aware of the current financial facts or information.

The Consumer Financial Protection Bureau (CFPB) suggests people choose cautious steps to save themselves from financial fraud and scams. It also advises different financial institutions such as banks, lenders, and other financial companies to treat consumers well and fairly.

Myths vs. Truths

"Scammers are constantly finding new ways to steal your money. You can protect yourself by knowing what to look out for."- the CFPB.

Here are some of the most common consumer frauds that can ruin the financial life of a consumer. Check out the types and possible scenarios to identify such frauds. and check out how to protect yourself from becoming a victim.

Different types of consumer fraud, possible scenario, and ways to save yourself from them

Scam type I - Identity theft or Stolen ID

An identity thief might use modern technology to gain access to your sensitive personal information. By using that information that scammer can access and drain your bank accounts, damage your credit, and harm your finances in many ways. So, people should use proper Identity theft prevention methods to stop this consumer fraud.

There are multiple types of Identity theft you may experience. As per Experion.com, and few other financial websites, these are the types of Identity theft:

  • Existing account takeover identity theft
  • New account identity theft
  • Biometric ID Theft
  • Mail Identity Theft
  • Lost or Stolen Passport
  • Debit Card Fraud or Credit Card Fraud
  • Tax identity theft
  • Employment identity theft
  • Driver's License Identity Theft
  • Medical identity theft
  • Social Security Number Identity Theft
  • Senior identity theft
  • Child identity theft
  • Criminal identity theft
  • Estate identity theft
  • Mortgage Fraud
  • Synthetic identity theft
  • Internet of Things Identity Fraud

Common Scenario:

Jimmy steven’s 25-year-old son stole his identity and applied for 3 credit cards and got a cell phone connection. He gave his address for the application and was approved for the cards. He never paid a single payment for both the cards and both are due $1800 each. For the cell phone service, he was due for 1500.

Jimmy didn’t realize the fact that it was his son, he filed a police report. Once Jimmy knows about the misdeed, he makes his son sign a letter to each one of the creditors that he is taking full responsibility and agreeing to pay all the bills.

Possible ways to protect yourself:

Scam type II - Bank Debit scam

It's a common incident of consumer fraud nowadays. When people are communicating with few companies who are dealing with their financial issues, sometimes some of the companies may misuse the personal data of a consumer and withdraw money directly from their bank account. It may also happen that during taking some digital signature, these companies also get authorization to debit the consumer's bank account.

Common Scenario:

One fine day Alan jackman realized via an alert message that his bank account has been debited with $2500 by a reputed company that provided financial assistance to consumers. Alan’s bank provided assistance to him, but the scam company was so clever, sneaky, that Alan could not anticipate what was going to happen after he unknowingly gave out his personal information.

Possible ways to protect yourself:

  • First of all, you must call your bank and give a "stop payment order" so that no one can withdraw money without your concern. If you have issued an ACH in favor of any financial company, then revoke it as soon as possible.
  • Tell your bank that you have "revoked authorization" for the company to take automatic payments from your account.
  • Tell the company that you are taking away your permission for the company to take automatic payments out of your bank account. Get your account statement, and send an official letter to the company and ask for a refund.
  • Always check and verify your documents before signing them, especially when you are authorizing any third party to deal with financial matters.

Scam type III - Vehicle finance scam

Vehicle or auto finance fraud is big business in the world and the U.S. in particular with $7 billion in losses in 2018, according to an estimate by solution vendor Point Predictive. Auto finance fraud is growing mainly because low-interest rates have incentivized lenders to accept more buyers with subprime credit.

Few basic fraud tactics can be used to make a fool out of you while you buy a vehicle, so you should avoid these:

  • Spot financing
  • Guaranteed approval
  • Upfront fees
  • Packing payments
  • Loan modification scams

Common Scenario:

Rick Jonas, aged 25, was going to apply for a new credit card, and soon he found that there is a vehicle financed in his name in 2018 and he has not made any payments on it! This has destroyed his credit and now he is desperately seeking help.

Possible ways to protect yourself:

  • If you face such financial trouble, make sure to file a police report for identity theft first.
  • Next, file a dispute with the credit bureaus and inform the case number and the department. Contact the Finance company and do the same!
  • Report it to the FTC and CFPB if you think the financing agency is following unauthorized methods.
  • Last but not the least, check your credit report and search for any other errors. Make sure you check your credit report every month to avoid such consumer fraud issues.

Scam type IV - Wrongful credit card access

Wrongful credit card access by an unknown entity is considered as credit card fraud. In this situation, a person uses your credit card or credit account to make transactions without your authorization. You may face this situation due to different reasons:

  • You have lost your cards or it has been stolen from you. In both cases, your card can be used to make transactions, directly or via online.
  • Scammers or fraudsters may somehow get access to your Customer ID, Internet PIN, credit or debit card number, Card expiry date, CVV number, etc. By using such information they may execute unauthorized purchases, without using your credit card physically. This type of fraud is considered as card-not-present fraud or Phishing.

Sometimes they may call you as your bank executive and ask your details. Sometimes they may send you an SMS and ask you to open the link added in the SMS. These are all cunning methods to snatch your money by using your credit cards illegally.

Common Scenario:

Roger Tunney got a call from his credit card company that there are few suspicious transaction requests which they need to verify with him. Roger confirmed he hasn’t made any transaction recently with that particular amount. Then the credit card guy asked him his card details, PIN, and CVV code, just to verify that Roger is the actual cardholder. This is where Robin made a grave mistake and disclosed his details to that person. The other guy disconnected the call and within 2 hrs $10,000 worth of transaction was made through Roger’s credit card. Roger called his credit card company and was informed that they didn’t make such calls to him ever.

Possible ways to protect yourself:

  • You may experience such incidents anytime, so it's important to track all your credit card accounts regularly. Do not disclose your credit card details to anyone over the phone or directly.
  • If you face such a situation, call your credit card company immediately and tell them everything, as well as block your card asap.
  • If someone uses your card before you file a complaint to your credit card company, you can only be held responsible for $50 of any fraudulent charge.
  • Change your credit card PIN once you get a new credit card. Also, keep monitoring your account and credit report to check any suspicious transactions.
  • Report credit card fraud to the credit bureaus.
  • File an official complaint to the police department.
  • Add a fraud alert to your credit report if necessary.

Scam type V - IRS scam or Tax scam

IRS scams or Tax scams may be committed by fraudsters who target American citizens, specifically taxpayers. The scammers contact common taxpayers and pretend to be the Internal Revenue Service (IRS) collection officers. The scammers often confuse people by making disturbing, abusive official-sounding calls regarding their unpaid taxes, and also threatening them that they will arrest and freeze assets if a certain amount is not paid immediately to them. The scammers often ask the victim to pay via cash, or gift cards such as Google Play or iTunes cards, wire transfer, or credit cards. They will deliberately avoid direct account transfer to the IRS.

Apart from that, as per the IRS - “Phishing is a scam typically carried out through unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.”

As per a 2020 report by IRS, Different IRS scams are:

  • Phishing
  • Fake Charities
  • Threatening Impersonator Phone Calls
  • Social Media Scams
  • EIP or Refund Theft
  • Senior Fraud
  • Scams targeting non-English speakers
  • Unscrupulous Return Preparers
  • Offer in Compromise Mills
  • Fake Payments with Repayment Demands
  • Payroll and HR Scams
  • Ransomware

Common Scenario:

Amanda receives a call from an unknown number where the caller represented him as an officer of the IRS. He told Amanda that he can suspend or cancel her Social Security number. To stop him from doing that, she needs to call back to a particular number, else she will be arrested. Once Amanda called back, another guy received the call and told her to buy certain gift cards; and asked for the gift card access numbers.

Possible ways to protect yourself:

  • Forward email messages that claim to be from the IRS to phishing@irs.gov. Do not open the attachments or click on any links in those emails.
  • Ask for help from the Treasury Inspector General for Tax Administration (TIGTA). You can report IRS scams online at or by calling TIGTA at 1-800-366-4484.
  • Inform the Federal Trade Commission via the FTC Complaint Assistant on FTC.gov. Mention "IRS Telephone Scam" in the notes.
  • Report Social Security Administration phone impostor scams using the form on the Social Security Administration's website.
  • The IRS will never call you in the first place on your tax situation. They will always use postal mail to contact you. So, if you get a call from IRS scammers, just avoid them.
  • The IRS never threatens arrest or sends the local police to arrest you. So, common taxpayers aren't arrested by any means if they make any mistake regarding their taxes.

Scam type VI - Credit account scam

This is similar to Identity theft where some financial companies may try to access your details and want to open new credit accounts. These companies might force you to reveal your identity details, and when you put a complaint against them, they will simply deny them. Apart from that few companies often send email messages notifying the consumer of a lottery or contest that he or she may not remember. The email will require the consumer to pay a minimal fee by using a credit card to access the prize. The scammer collects the fee and credit card number, but no prize money will be credited to the consumer.

Common Scenario:

Alex Summers received an Email from a few money lending companies that they attempted to open credit accounts under his name and social security number, but the given details - such as the address is wrong. They request him to call and verify his information with them. When he calls, they force him into giving out his social security number to verify his identity. He informs them he has not applied for any credit with them and attempts to stop the process.

When Alex made an official complaint to the police about this, the companies denied any correspondence regarding this matter.

Possible ways to protect yourself:

  • First of all, do not reveal your data to a third party via online mediums such as Emails or messages.
  • Make sure you are not signing any data disclosure forms while opting for any kind of financial service.
  • Always avoid clicking any link provided by unknown companies. Always contact them via website-provided information, such as Email address, phone number, or postal mail address.
  • If you experience such consumer fraud activities, you are required to inform credit bureaus and initiate a fraud alert.
    (Experian‘s fraud alert center - 1-888-397-3742 , Equifax - 800-525-6285, and TransUnion - 1-800-680-7289)
  • No legitimate lottery company will ask a winner for a fee or information such as a credit card details/bank account number too. So, do not entertain such calls.

Scam type VII- Wallet stolen

People normally keep all their cash and credit cards in their wallets and generally do not carry important documents there. So, if your wallet has been stolen, be assured that you can’t recover the cash. But, the fraudster who stole your card may also use your credit or debit card to make transactions, or withdraw money. So, you must act quickly to solve these issues.

Common Scenario:

Phil went to the Target store with his wife Sandra to buy monthly groceries. So, he carried all his credit cards and store cards along with him. After shopping both of them went to the nearest cafe to get refreshed. But while coming back to the parking lot some low-life person pick-pocketed his wallet. Phil was unaware of that and came to know about it after returning home. He was terrified and confused about what to do next!!

Possible ways to protect yourself:

  • Prepare a list of things that you have lost along with your wallet.
  • You should call your bank or financial institution who issued your debit card and cancel that card. Request your bank to issue a new card as soon as possible. Your bank will also verify your recent transactions and determine the last purchase made by you, before losing your debit card.
  • You should contact your bank and cancel checks if you carry any in your wallet.
  • Call your credit card companies and cancel all the cards you carried in your wallet. As per the Fair Credit Billing Act, you will not be responsible for any monetary loss due to this consumer fraud, and as long as you report your card stolen.
  • You should file a complaint to your local police department. Filing a police report is necessary to keep your identity safe.
  • Set up fraud alerts with the national credit bureaus
  • Check your credit reports for unusual activities along with tracking your bank statements.
  • Apply for a new driver’s license and Social Security card.
  • Check your credit report and bank statement regularly for unusual monetary activities.

Scam type VIII - Internet Job Scams

There is a new consumer scam going on these days. People who search for a new job online were scammed by a few companies. These companies created new job portals where job-seeking persons come and they are offered lucrative jobs. To apply for such jobs they need to fill an online form where they must enter their details. Those details may include:

  • Name (Full)
  • Date of birth
  • Country
  • State
  • Full address
  • SSN
  • Bank account number
  • Phone number, etc.

If any person enters his/her details in that online form, the data is stored and used by those scam companies to execute fraudulent activities.

Apart from that, scammers may also ask you to pay them money, as they will find you good jobs.

Common Scenario:

Due to the COVID - 19 outbreak, John has lost his 9 to 5 job. So, he was searching for a suitable job in a few job provider agencies. He also looks online for new vacancies. One day he got an email from a new agency that offered a few amazing jobs. But they have one condition! John has to pay them money double of his proposed salary, upfront! Then only they will forward his name to the company that is offering that job. Now, that was a hard decision for John to make as he was in desperate need of a good job, but also had limited savings to pay the money. Ultimately, John decided to pay the agency upfront. Once the payment was made, the agency informed John that within 1 week he will get a call and an official Email from the company. After waiting for 10 days, John asked the agency about the matter. The agency told him that they are looking into the matter and will inform him asap. John was acting patiently initially, but when after 30 days the agency didn’t provide any reasonable excuse, he asked for a refund from them. Unfortunately, the agency denied his refund request and informed him that they will look into the matter, but it may take some time to solve this issue. Now, John is helpless and can’t think about any way out of this issue.

Possible ways to protect yourself:

  • It is very important to verify the agency that is offering you jobs. Do not provide personal information to any company without knowing it is legit. Check the SSL certificate of the website of the company, similar to the bank's website or Gmail.
  • If you are offered a job in a reputed company, make sure you know everything about that company and know whether or not that company is hiring.
  • Get a copy of the contract from the agency and go through it properly. A legitimate agency will ask you to read all the terms and conditions before signing the contract. You should make sure all promises, including refunds, are mentioned in the contract.
  • You can contact the local consumer protection agency, state Attorney General's Office, and the Better Business Bureau if you want consumer fraud help.

Scam type IX - Loan scams

Scammers will always try to use the situation when consumers require financial help. During the COVID- 19 outbreak, the situation became more critical. People need money, and loan scammers are ready to use different methods for snatching money from consumers.

There are mainly three common types of loan scams that can be mentioned here.

  • Student loan scams - Here, different companies charge for helping to fill out the FAFSA (Free Application for Federal Student Aid) form to debt relief companies. They promise that it will initiate loan forgiveness but that plan is to collect fees.
  • Mortgage loan scams - Most of the time, mortgage relief scammers find borrowers after reviewing general foreclosure notices. In many cases, the scammers fooled the borrowers by signing them the ownership of their house. Other scams may include taking out charges in the name of counseling or auditing.
  • Personal loan scams - A genuine personal loan can help you to consolidate your debts. Few fraud companies will offer you a personal loan, but instead, they take will money from you. These fraud lenders do not have any physical address, only have websites to attract consumers by promising interest ‘free’ money.

Common Scenario:

Ivan needed a personal loan to consolidate his credit card debts via one monthly payment. So, he was looking for online lenders who can give him a personal loan at a low-interest rate. Soon a lending company contacted him via phone, offering him the loan at a low rate of interest. The offer was good, so Ivan decided to take out the loan from the lender. Once the initial documents were signed, the lender asked him for an upfront interest payment. When Ivan asked them about why they are demanding that money, they showed him a clause written in fine prints, that the borrower has to pay upfront interest before having the loan. Apart from that, they are charging him a 3% interest extra than what they have promised earlier.

As Ivan didn’t read the contract and the fine prints properly, he is now in big trouble.

Possible ways to protect yourself

  • Check out whether or not the lender has a genuine physical address.
  • Verify if the lending company is registered in the states where it conducts the business. If it is not a registered company in your state, you could avoid such lenders and keep yourself safe from consumer scams.
  • Check out if the lender is asking for a prepaid credit card as insurance, collateral, or fees. This is a scam.
  • A genuine lender would contact you via online platforms, and make an offer via email. If you get a loan offer by phone, through the mail, or even through a door-to-door visit, be alert! As per the FTC, it’s illegal to offer a loan in the U.S. over the phone, and demand money before they deliver the loan.
  • If the lender gives you a guaranteed approval but not making a clear statement about its fee structure, then there must be something fishy going on. Be alert! Normally they might also ask you for immediate payment.
  • Check out the lender’s website. If it starts with a padlock symbol on any pages, and the website URL begins with “https” instead of “HTTP”, then it is secure to provide your details over there.
  • File a police report, and make sure to provide all the papers such as emails, screenshots, or other documentation to respective authorities, like your state attorney general’s office, the FBI, the FTC, and the Better Business Bureau.
  • Talk about the scam with family and friends. Don’t hesitate, don’t get scared.

Scam type X - Creditor fraud

This is an unfortunate issue. If you are a victim of Identity theft, then as usual you have to inform your creditor, your bank, three credit bureaus, and the police about such incidents. It is for your financial safety so that no one can use your details and harm you financially.

But sometimes the creditor still issues credit to some other guy who stole your identity, despite getting the information about your identity theft. Such cases are considered as Creditor fraud.

Common Scenario:

Alicia Monroe experienced an incident of Identity theft recently. So, she filed a police complaint, and informed the case to all authorities, along with the copies of the police report, proof of current address, affidavit of fraud, and personal I.D. via a certified mail. But, after doing all the things properly, the creditors still claim that the address is verified and are still issuing credit to someone with her info. Now Alicia is in grave danger and she doesn't have any idea what to do next.

Possible ways to protect yourself:

  • Report such issues and file a case against the creditor to the police. You should again send your affidavit to the fraud department of the three major credit bureaus.
  • You can also file a complaint at the consumer protection office in your state.
  • You may apply for a new SSN at your local Federal office.

Scam type XI - Online PDL

Online payday loans are based on fraudulent activities. First of all, not all states approve payday lending, but still, many payday lenders run their business in these states illegally. Secondly, payday lenders (including legal lenders) charge too much interest on the loan, nearly 350% to 550%. Apart from that, payday loan lenders may ask borrowers to authorize ACH or auto-debit options too. This way most of the time they withdraw extra interest or penalties from a borrower’s account.

Common Scenario:

Anita Renner took out a payday loan worth $700 from an online payday loan provider. Till now she has paid $1550, but the lender said she still owes them $800 more. The lender is an illegal payday lender. Now, Anita is confused about her next step and wanted to get professional help.

Possible ways to protect yourself:

  • First of all, stop taking out payday loans, make sure you consider other options and avoid it.
  • Do not take out payday loans from illegal lenders.
  • If somehow you took a PDL from an illegal lender, make sure you pay only the principal amount, not the interest.
  • Do not provide ACH to any payday lender, if you did, revoke it asap.
  • If you need professional help to handle payday loans, make sure to get help from a non-profit organization that can provide you payday loan consolidation services.

Scam type XII - Bank account phishing scam

This type of scam normally happens when consumers receive emails in the name of their bank, and they are suggested to click a link given in the mail. Once it is clicked, the scammers will receive access to your mail-id and other personal data, via an unethical hacking method. Apart from that consumers may be also asked to submit their data over the mail.

Common Scenario:

Cindy Hawkins received an email from her bank, informing her about some suspicious log in her account from a foreign IP address. Due to that reason the bank has decided to restrict some features without your authorization.

So, Cindy has given a link where she can click and has to submit all her bank details.

To get her account back, Cindy did the same. When she checked her account, everything seemed normal. So she thought she did the right thing. But, within two hours she received an SMS from the bank that a big amount of money was withdrawn from the account. She called her bank and came to know that they didn’t send her any mail. When she checked the mail ID of the sender she noticed it wasn’t from her bank.

Possible ways to protect yourself:

  • Never entertain emails from unknown sources. If you are suggested to reveal personal data over email or phone, always avoid it.
  • If you receive an email like Cindy, first you should call your bank through the official phone number given to you by the bank and verify the matter.
  • Contact your bank and ask them to stop any unauthorized automatic withdrawals until you provide permission.
  • If you are being scammed, file a complaint to your local police.
  • Report fake checks you receive by mail to the US Postal Inspection Service.
  • Report counterfeit checks to the Federal Trade Commission, either online or by phone at 1-877-382-4357.
  • Forward phishing emails to the Federal Trade Commission at spam@uce.gov.

Scam type XIII - Collection agency scams

Normally, most of the collection agencies try to collect their debts from the borrowers via unethical ways. They use abusive phone calls, threatening messages to make borrowers pay. They harass people by calling their family, friends, and colleagues. But the main issue they create is they often demand money against a debt which is not yours. This is the biggest collection agency scam that a consumer may face.

Sometimes consumers may receive collection calls for debts that are not owned by them. To verify your ID the collection agent may ask you for the SSN and your phone number. This is a sign of fraud and you should never fall for that. The fraud agent may use your information to steal your identity and commit financial crimes.

Common Scenario:

Rosey Clifford was contacted by a collection agency at work and was asked to provide the last four digits of her SSN. She gave it to them in confusion. Then within a while, they informed her that she is not the person that they were looking for. Then they asked her to provide her cell number so that they can keep it in their records, this way she will never get a call from them. She made the mistake again and gave them the number. Now, it might only be a matter of time that her Identity will get compromised.

Possible ways to protect yourself:

  • Never reveal your data to anyone over phone or email.
  • A collection agency does not have the right to get your SSN. So simply deny such requests.
  • If a collection agency called you to recover a debt, make sure to get all the information about that debt and its original creditor.
  • Ask the collection agent to validate the debt and get everything in writing.
  • Check online to see if the collection agency can legally operate in your state.
  • Avoid making payments via a wire transfer or a prepaid debit card.
  • File a report to your local police station or the FTC regarding debt collection agency scams.
  • Make a complaint if necessary, to your state attorney general through the National Association of Attorneys General.
  • Submit a complaint to the CFPB via its website or by phone at 855-411-2372.

Scam type XIV - Debt validation scams

It is somehow related to the debt collection process. Once you receive a collection call or email, you must ask the collector to validate the debt by sending a debt validation letter. Most of the consumers have ignored this step and end up paying a debt that’s not owned by them.

Common Scenario:

Katherine smith got a call from a collection agency that she has an unpaid phone bill of $5000. Katherine asked the CA to validate the debt and send all the documents associated with it. Instead of validating the debt, the collection agency sold the debt to another agency. They again called her up and asked for debt payments. She again followed the process and inquired about the debt and original creditor. She found that it was her sister who did it using her name and SSN. Now she is confused about what to do next.

Possible ways to protect yourself:

  • It’s a clear case of Identity theft so a police report should be filed against the person who did it.
  • Dispute the debt with credit bureaus and report Identity theft to the FTC.
  • Get a copy of the police report; if not then the file number.
  • Contact Credit Reporting Agencies to activate Fraud Alert.

Scam type XV - Wage garnishment due to ID theft

This might happen when you become a victim of Identity theft, and you didn’t know about this for a long time. The identity thief used your details to incur debts. The creditors will sue you if you can’t pay such debts and the court may serve you judgment and garnish your wages.

Common Scenario:

Samuel Wilson has lived in Miami since 1975. In the year 1998, he moved to Nevada and purchased a house over there. He applied for electricity in his name and was told that he has an outstanding balance that must be paid. He directly placed a fraud alert on his credit report and filed police reports. He also contacted the creditor but came to know that it was an old debt and the creditor has sold the debt to a collection agency. In 2002, he received a call from the collection agency for making debt payments. He explained everything to them and went over the whole story. But the collection agency was adamant to recover the debt despite knowing the fact that Samual was a victim of Identity theft. They filed a legal case against him. In 2005 the company garnished wages from him. He sent a letter to the court opposing the garnishment and was informed that he didn't have the authority to stop it. The court also said it was not their job to determine the validity of the debt, they can only to enforce it. They advised Samuel to hire a lawyer and re-appeal.

Possible ways to protect yourself:

  • First, you should go to court and pull the file so that you will get all the complaints and all supportive documents.
  • You should contact an attorney in FDCPA to respond in such a case.
  • You can address the human resources department regarding this matter and seek their help.
  • If you decide to shift jobs, make sure you check the judgment against you properly, and verify your credit report. Also, make potential employers know that you’ve been victimized before they run a background or credit check upon you.

These are a few of the consumer fraud types and scenarios that you should be aware of. The information is shared not only to increase your knowledge but also to protect yourself from difficult financial situations. If you can also share some examples of such consumer frauds and scams, kindly share it with us.