We tend to think of financial fraud as a retiree problem. After all, older adults are more likely to be sitting on a large nest egg and are often resistant to getting financial help from others for fear of losing independence. Both of those traits make them tempting targets for scammers and con artists.
However, just because scammers traditionally like to hit up Nana and Poppy does not mean that young adults are shielded from the problem. In fact, according to a recently released Federal Trade Commission study, more adults aged 20–29 reported losing money to financial scams in 2017 than did any other age group. The study found that 40 percent of adults in their 20s lost money to fraud, as compared to only 18 percent of people over the age of 70 — although the median amount lost was lower among 20-somethings than among the elderly.
We’ve done a great job of helping to alert older adults to the dangers of financial fraud. Now we need to make sure everyone else also knows what they need to do to steer clear of scams. Here is what you need to know about protecting yourself from financial fraud.
The most common types of fraud
Of the types of fraud reported to the FTC, the three most common scams were debt collection (23 percent), identity theft (14 percent), and impostor scams wherein the scammer pretends to be either a government official, a loved one in trouble, or someone else the victim knows (13 percent).
Although debt collection was the issue most commonly reported to the FTC, impostor scams were the type of fraud that cost victims the most money. Consumers reportedly lost $328 million total in 2017 to this type of scam.
Each of these types of fraud requires a different protection strategy, and savvy consumers should use all of these approaches to make sure they are covered in case of any type of fraud.
1. Know your debt collection rights
Getting a phone call from a debt collector can be nerve-wracking for anyone, and debt collection scams rely on your natural fear of financial consequences. The best way to avoid becoming a victim of such a scam is to know your rights as a borrower. According to the Consumer Financial Protection Bureau, any debt collector who contacts with a claim that you owe payment is required by law to tell you the following information:
The name of the creditor.
The amount you owe.
The fact that you can dispute the debt.
The fact that you can request the name and address of the original creditor if it is different from the current creditor.
If a debt collector doesn’t provide this information when first contacting you, he or she is required to send you written notice that includes this information within five days of that initial contact.
It is a red flag if you receive a call from a debt collector who balks at providing you with this information. In addition, while debt collectors have the right to be persistent and can tell you the potential consequences of failing to pay your debt, intimidation tactics to get you to pay what they claim you owe are also a common scheme from con artists.
You also have the right to refuse to discuss any debt until you receive a written validation notice from the creditor, which must include the amount of the debt, the name of the creditor, and a description of your rights under the federal Fair Debt Collection Practices Act.
Asking for this notice will protect your rights with legitimate debt collectors and scare off any scam artists who are trying to make a buck off your fear. (See also: 5 Things Debt Collectors Don’t Want You to Know)
2. Freeze your credit to protect yourself from identity theft
Identity theft is the 21st Century boogeyman, and for good reason. Our information is only as secure as the company that has collected it. No product or service can wholly protect you from the possibility of someone using your identity.
However, you can make it more difficult for hackers and scammers to get hold of your identity by freezing your credit. With this process, you pay a small fee to each credit reporting bureau (which has been waived by Equifax in the wake of their recent data breach), and no one, including you, can open new credit in your name until the freeze is lifted.
This is one of the most effective tools in fighting identity theft, since you take out the possibility of human error. The most common method identity thieves use to steal your information is by calling and asking you. Such a thief will pretend to be from your bank or another institution you trust and will request things like your Social Security number and birth date. Even if you fall victim to this kind of fishing scam, a credit freeze can ensure that the thief is unable to live large on your credit. (See also: 9 Signs Your Identity Was Stolen)
3. Ask for specifics to prevent impostors from getting your money
Impostor scams come in two common varieties: impostors pretending to call from the IRS or another government or official agency, and impostors pretending to be a loved one who is in trouble. In both cases, the impostor will play on your emotions — fear of an audit, fear for a loved one — to get you to wire money to their account.
In both cases, the more specific information you can ask for, the better your chance of scaring off the impostor. For instance, if you are contacted by someone claiming to be an IRS agent, you can request the caller’s name, badge number, and callback number and say you will get back to him or her. Then, you can contact the U.S. Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 to find out if your caller is an actual IRS employee who has a legitimate reason for contacting you. (See also: 5 Tax Scams You Should Know About for 2018)
You can use this same strategy for any caller who claims to be a representative from an institution or agency you deal with. If someone calls claiming to be from your bank, ask him or her for a name and callback number, and get in touch with your bank via their main phone number to determine if the issue is legitimate.
Similarly, the loved one impostor scam can be stopped in its tracks by asking the caller (or emailer) to verify certain information that only your relative would know. If you are still feeling unsure, ask for a callback number in this case, too, and contact another family member to find out if there is any possibility your cousin Emma is stuck in a hospital in London before you start wiring money. (See also: What to Do When You Suspect a Scam)
Keep their hands off your money
Scammers, con artists, and identity thieves all have your number. Every single one of us can be vulnerable to their tactics. But knowing your rights, taking your credit out of circulation, and asking for specific details can help you keep your information and your money secure.