Don’t Be Bamboozled

Recession-fueled scams are on the rise. Heres how to avoid financial fraud

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Dion Chavis was victim of an ATM skimming scam. (Photo by Keith Lanpher)

Small business owner Dion Chavis couldn’t figure out how $900 disappeared from his checking account. Chavis, also known as “Showtime,” the radio personality heard throughout the Hampton Roads area in Virginia, checked his bank statements and noticed a withdrawal had been made at an ATM some 120 miles from his home, yet his debit card was still in his possession.

Chavis discovered the missing monies in July, after a $50 purchase at Macy’s was declined. That morning he had paid $200 to install a new CD player in his car, but his account still should have had a balance of $1,500. A fraud representative at Bank of America told Chavis that the bank had frozen the account when withdrawals totaling $1,100 were made in less than 24 hours. Chavis was baffled. He later found out he’d been a victim of ATM skimming, a high-tech scam in which thieves attach an innocent-looking card-reading device over an ATM’s card scanner. The reader captures the person’s banking information; installed above the ATM is a hidden camera that records the user’s PIN number.

Chavis wasn’t the only victim. “When I spoke to the police in Richmond, they had 50 cases of ATM skimming that were actively being investigated,” he says. Although the thieves haven’t yet been caught, Chavis was lucky. Within 48 hours the bank refunded the full amount that had been pilfered from his account.

When the economy flattens, scammers are known to come up with innovative ways to separate hardworking folks from their money. In uncertain financial times, consumers are more willing to take risks to relieve the burdens of unemployment, foreclosure, and debt. That’s generally when opportunistic fraudsters step in. Since the recession began in December 2007, financial scams have increased, says John Breyault, director of the National Consumers League’s Fraud Center, a nonprofit in Washington, D.C., that advocates on behalf of consumers. Results of a recent UNISYS survey reveal that three in four Americans are concerned about increased vulnerability to identity theft and fraud in light of the economy. “[Scammers] look for things on the news that will help them connect with their victims,” says Breyault. “They have learned that a good lie is based in truth—which is why some scams are especially confusing.”

Some of the timely topics scammers exploit: identity fraud protection efforts by banks, urging customers to keep their account and Social Security numbers private. Scammers also use topics such as bank closings, tax breaks, and government giveaways related to the Obama administration’s economic stimulus plan to incite interest from potential victims.

Identity thieves are using these news stories to their advantage, setting up Websites that imitate those of official government agencies, like the Federal Deposit Insurance Corp. or the Internal Revenue Service.  Scammers known as pretexters (because they contact you under a false pretext) call or e-mail consumers and urge them to fill out forms on these sites in order to receive bogus tax refunds, recover money lost in a bank closing, or recoup investments stolen from them in a scam.

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