Overpayment scams affect businesses, too

I thought I was onto some clever application of the “duck test” for the title of this post, about how “if it looks like a scam and quacks like a scam,” but I really couldn’t make it sound anything other than monstrously insane, so I dropped it and went with the title you see above.

Anyway, the old repayment scam has been explained a thousand times here, there and everywhere. You’re selling something on Craigslist (for example), and a buyer contacts you, usually from out of state. They send their payment, but instead of $200, it’s a cashier’s check for $3,200. “Cash it and use the extra for shipping, then wire the rest back to me,” they say when you contact them.

What happens next is fairly predictable: you cash the check, send the item, wire the excess money (thousands of dollars) to someone, then find out a week later that it was a counterfeit check and that you’re on the hook for the loss caused to your financial institution.

But did you know that scammers also target businesses with the same tactic?

And if you’re a business owner, you might fall for it because what might strike you as suspicious during a private sale might seem less so in a business context. I’ve heard of several cases where retail businesses, attorneys and rental property owners have been victimized by this scam.

However, the principle applies in every context, whether in a person-to-person or a business transaction: if someone sends you a cashier’s check and tells you to cash it and wire money back to them, you’re almost always dealing with a con artist.

Overpayment Scams

Burn this into your memory:

“Cash this check, then wire money back to me” always equals scam.

I’ve said it a million times before when discussing secret shopper and lottery scams, but the actual context just does not matter. Anyone who gives you a check to cash so you can wire cash back to them is a con artist.

 It’s pretty easy to remember that when you’re looking at a letter from a Nigerian Prince, or an email that says you won the “Microsoft Lottery” or something, but there are versions of the overpayment scam that target businesses, too.

Let’s say you’ve got a property for rent. You get a call from someone who seems really interested in the space. They agree to send you a deposit to hold the property for them. You tell them it’s $800 (I’ve never been in this business, so I don’t know if that’s a realistic number or not).

A couple days later you get a cashier’s check for $3,000. You call the renter about the overpayment, who tells you to just wire the difference back to him. The check will turn out to be counterfeit.

And there it is; you are about to fall for the same old scam, just in a new context.

The same thing happens on Craigslist and online classified sites. You’re selling an item. Somebody contacts you with the intent to buy, so you agree on a price of $500. You get a check for $3,000, with instructions to wire the excess back. Exact same story.

Think about this: would you send a extra couple thousand dollars to an online seller, and trust this stranger to give you back your change? Online classifieds are risky enough without handing over four times the cost of the item you’re hoping to receive. My online classified rule is: whether buying or selling, if you can’t meet in person, you’re not interested. The short version (and homage to the Surf Punks) is: Locals Only!

There are versions of this scam that target business owners, too. The details just do not matter—those checks are always going to turn out to be counterfeit, and you’re always going to end up losing money.

Fraud Prevention Templates: scams involving money wiring.

I’ve written upwards of 140 posts about scams, fraud and identity theft since last July, and it seems like there are a lot of schemes that are based on the same idea, only with different details.

For example, consider these two scenarios:

  1. Rental Scam: a landlord is sent a cashier’s check for far more than the first/last month’s rent and security deposit. The crook tells the landlord to just wire the overage back to him. Later, the check is returned as fraudulent.
  2. Mystery Shopper Scam: a job seeker is sent a cashier’s check and instructed to cash it and wire the funds back, allegedly to check out the customer service at Western Union. Later, the check is returned as fraudulent.

They’re two different scams, but they hinge on that counterfeit check, and they both involve wiring money. So let’s extract a general rule of thumb here, a Fraud Prevention Template:

Anyone who sends you a check and instructs you to cash it and wire money back to them is attempting to commit fraud.

That’s it. If you’re in a situation that involves a check and wiring money back to the maker of that check, you’re about to become a victim of fraud if you continue. The actual context doesn’t really matter.

Someone contacts you via Craigslist to purchase an item you’ve listed. They send you a check for $2,000 more than you wanted for the object. They tell you to just cash it and wire the funds back. It fits the template.

You get a letter that says you won the Canadian Lottery, but you have to pay taxes and fees first. The letter includes a check with instructions to cash it and wire the funds back to them. It fits the template.

The best part of keeping this one simple rule in mind is that you don’t even have to carry any other information around in your head. You don’t have to know that a legitimate lottery never asks winners to pay in order to claim a prize, or that you can’t win a lottery you never entered, or that it’s illegal to play foreign lotteries—you’ve got a check in your hand, and some clown is telling you to cash it and wire the money back. You know right away you’re dealing with a con artist. Fraud averted.

I’m going to come up with a few more of these templates over the next few weeks. It’s a lot easier than trying to memorize the details of every little variation.

Don’t worry, though; I’ll still be on the lookout for all those variations to write about, too.

How to avoid Craigslist scams.

You’ve probably heard of Craigslist. Basically, it’s an online classified ad site where you can sell or buy items, find jobs, dates or local events.

It’s an interesting site, for a variety of reasons:

  1. The design of the site is super-minimalist. It’s changed very little since 1996, so it’s an example of pure function over flash (and Flash, for that matter).
  2. The company genuinely seems more interested in creating value than raking in supermassive profits, which it could do if it would just fill the site up with paid advertising and skeevy JavaScript (their profits are pretty massive anyway, though).
  3. It’s only source of revenue is paid job listings in certain cities

There are more, but “Why Craigslist Is Neat” is not the title of today’s post.

When you’re selling something on Craigslist, it’s very likely you’re going to get some messages from people attempting to scam you. So how do you avoid them?

First and foremost, deal only with local people you can meet in person, and accept only cash as payment. With this one step, you will reduce your chances of running into a scam to nearly nothing.

When you do meet your buyer in person, only do so in a public place (never at your home), make sure you tell your friends or family where you are going, bring a cell phone, consider bringing a friend, and listen to any nagging doubts you might have when you’re meeting the buyer. These tips are directly from Craigslist’s page on the topic of personal safety.

Never give any personal information to anyone during the course of a Craigslist transaction. You’re buying or selling an object with cash. Nobody needs anybody’s account numbers (or full name, in my opinion).

Generally, nobody from Craigslist is going to contact you about your listing, as the company is not involved in the transaction at all. There are no “guarantees,” and anyone who talks of these things is up to no good.

You might get people who agree to buy an item, then send you a cashier’s check for ten times the amount, with instructions to cash it and wire the excess back to them.

Sound familiar? It should—it’s a variation on the old secret shopper scam, this time in the form of an overpayment scam.

However, if you’re following the number one rule (cash only, local in-person sales only), you eliminate the possibility of this scam entirely.

Craigslist has a page dedicated to avoiding scams, which contains some examples of different scams, as well as the following:

Most scams involve one or more of the following:

  • inquiry from someone far away, often in another country
  • Western Union, Money Gram, cashier’s check, money order, shipping, escrow service, or a “guarantee”
  • inability or refusal to meet face-to-face before consummating transaction

Finally, make sure you’re actually on Craigslist. The real web address is www.craigslist.org. Watch out for easy misspellings like “craiglist” or different domains (.com or .net).

It’s a great site if you use it wisely (and an interesting business model), but be aware of the dangers and stick to in-person sales using cash.