Scam City
New York Attorney General Letitia James recently announced her office's lawsuit against Citibank for its failure to protect victims of fraud and refusal to reimburse them. The lawsuit alleges that Citibank has failed to implement strong online protections to stop unauthorized account takeovers, misleads account holders about their rights when their accounts are hacked and funds are stolen, and illegally denies reimbursement to fraud victims. As a result of Citibank's lax security, James's office alleges, customers have lost millions of dollars, and in some instances, their entire lifesavings. We couldn't agree more with James when she says that “Banks are supposed to be the safest place to keep money." At Consumer Action, we've spent decades encouraging consumers to join the financial mainstream—to become “banked”—yet these types of bank practices do little to instill confidence in the system. As explained in the AG's release, one affected bank customer received a text message that appeared to be from Citibank, instructing her to log onto a website or call her local branch. The customer clicked the link in the message but did not provide the additional information requested in the text message. When the customer called her local branch to report the suspicious activity, she was told not to worry about it. Later, the customer discovered that a scammer changed her banking password, enrolled in online wire transfers, and made off with $40,000. Citibank denied this customer’s fraud claim. Kudos to AG James for her work to secure reimbursement for defrauded bank customers.
No relief in sight
The Consumer Financial Protection Bureau (CFPB) and attorneys general from New York, Colorado, Delaware, Illinois, Minnesota, North Carolina and Wisconsin last month filed a lawsuit against Strategic Financial Solutions (SFS) and a web of shell companies that ran a debt relief operation that swindled financially strapped consumers out of more than $100 million. According to the CFPB, SFS uses third parties to target financially vulnerable consumers with advertisements that lead them to believe they may qualify for loans to pay down debts. SFS employees then discuss the advertised loans with the consumers and tell them that they don't qualify. But, as you may have guessed, the turned-down consumers are enticed to enroll in the company's debt-relief services by promises that a network of lawyers will negotiate lower debt amounts. SFS collects illegal advance fees that get siphoned off by the shell companies, yet it provides little, if any, debt relief services to the deceived consumers. An educational online article from the CFPB provides a helpful reminder that working with debt relief (debt settlement) companies comes with risks, including expensive fees, stepped-up collection efforts, worsened credit scores, and creditor penalties and fees that wipe out potential savings. If you or someone you know is struggling with debt, consider working with a nonprofit counselor or, as the CFPB suggests, negotiate with the creditor or debt collector yourself.
Day of reckoning
Dirty laundry. According to a Federal Trade Commission (FTC) press release issued last week, 6,490 victims will be receiving more than $610,000 in refunds of money lost in a “payment laundering” scheme. The defendants in the underlying FTC case—payment processing company Nexway and two of its officers—facilitated several offshore tech support scams by processing tens of millions of dollars in charges and giving the scammers access to the U.S. credit card network. The defendants were aware that their tech support clients were scammers and directly received numerous complaints about the companies, the FTC explained last April. As part of the settlement reached with the FTC, the defendants are prohibited from further payment laundering and are required to closely monitor other high-risk clients for illegal activity. Nexway and the officers also had to turn over assets, which the FTC is using to refund consumers. Most of the victims will get a check in the mail, while those without an address on file will receive a PayPal payment. Check out the release for details on where to learn more about the refunds.
Won't float your boat. As a member of the Stop The Debt Trap Coalition, we at Consumer Action have spoken out against payday and other short-term, high-cost loans. In fact, we regularly urge consumers to consider alternatives. You can imagine our glee when we learned about an FTC enforcement action against online cash advance provider FloatMe for alleged deceptive practices. An FTC press release explains that the agency charged FloatMe and its co-founders with using empty promises of quick and free cash advances to entice consumers to join its subscription service, only to fail to deliver the promised advance amounts, make it difficult to cancel, and discriminate against consumers who receive public assistance. FloatMe was also charged with making baseless claims that cash advance limits would be increased by an algorithm or another automated system. A settlement order requires FloatMe to pay $3 million toward customer refunds, cease the company’s deceptive marketing, make it easier for consumers to cancel their subscriptions, and institute a fair lending program.
Tips
Awash with relief. Old-fashioned check fraud schemes have been making a comeback in recent years, according to a 2023 report from the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN). Just last week, CBS News Chicago reported the story of an elderly couple, the Zaragozas, whose $62 check to the gas company was altered by a "check washing" scammer. The fraudster likely used household chemicals to change the amount of the check from $62.00 to $4,200 and proceeded to cash the check and pocket the money. The couple had been working to get the money credited back to their U.S. Bank account since last summer. This was money they intended to use to help pay for their funeral (when the time comes), and, as the story points out, the Zaragozas weren't getting any younger while their claim was being investigated. Fortunately, within 24 hours of CBS Chicago reaching out to U.S. Bank, the Zaragozas got all their money back. Since, contrary to popular belief, many consumers still use checks, it's a good time to review tips for avoiding check fraud. Aside from the not unexpected recommendation to move toward digital banking, handy tips from U.S. Bank itself include using a black gel pen to write checks, since the ink is more difficult to remove, and using mailboxes inside the post office when mailing checks.
Aiming for your gut. Law enforcement in Southwest Virginia put out a warning last week about a scam on social media referred to at times as a "bait-and-switch" post or ad, or a "bump this post" scam. As the Better Business Bureau described back in 2022, the scam consists of a gut-wrenching post, such as one featuring a lost pet or missing child, that encourages people to share it. At some point after the post is shared, the BBB continues, the scammer changes the original post to a deceptive rental ad, or sometimes to a link pointing to a survey that "guarantees" a cash prize. The idea is to get those who see the shared post to give money or personal information to the scammer. The BBB explained that these types of posts are shared in local Facebook buy-and-sell groups because there is already a sense of community and trust within these groups, and people may not realize that scammers are targeting members. In the Southwest Virginia case reported by the WSLS 10 NBC affiliate, a Pulaski Police Department spokesperson said that a post first spotted a day earlier had already been shared 169 times. That post, WSLS explains, showed a woman in a hospital bed with a caption asking for help identifying her, "clearly pulling at people’s heartstrings." The news story highlights red flags that the post was a scam, including a profile that had only eight followers, lacked a cover photo, and had a feed consisting mostly of housing sales. Pulaski police told WSLS 10 that if a profile has posts that are very similar and is new, it's either a scammer's profile or someone has been hacked. Check out the BBB's list of tips for avoiding this scam here.
Tax-time tips. In a news report earlier this week by Baton Rouge-based WAFB 9, Carmen Million of the BBB offered several tips for avoiding scams this tax season. Million said that one of the biggest problems they see is tax filers learning at the time they file their returns that someone has already filed a return in their name. She recommends consumers file as early as possible and that they contact the IRS to get a PIN to help prevent a scammer filing taxes in their name. The news anchor also asked Million whether calls consumers might get from the IRS are legitimate. Million amusingly explained that people who have ever called the IRS know that's it's very difficult to get a hold of them, so you can be pretty sure the agency is not calling you. They're not going to call you, text you, or email you, Million explained. Even if your caller ID shows that the IRS is calling, said Million, it's probably a scam and you should not respond. If you're concerned, you can contact the IRS directly. The story also offers tips for those who plan to use a tax preparer. Find more tips from the BBB here.
A scam prevention must-read. The California Department of Financial Protection and Innovation (DFPI) announced in January the publication of its updated English edition of the Protect Yourself from Fraud booklet. The booklet, which the DFPI describes as its most requested publication, includes information that can be of interest to savvy consumers and consumer educators even outside of California. It's designed to help consumers avoid identify theft and scams, safeguard personal and financial data, and understand their rights. Among the dozens of common scams covered are affinity scams, bait-and-switch schemes, crypto scams, and pyramid schemes. The booklet can be downloaded for free and is available for ordering in bulk, making it an extra helpful resource for community educators. SCAM GRAM readers in other states may also want to look into what financial scam prevention tools might be offered by their own state's banking and financial services regulator. Find your state's securities regulator here, and your state's banking regulator (sometimes one and the same) here.
Media matters. While New York Attorney General James goes to bat for Citibank customers who lost money to scammers (as reported at the top of this newsletter), one San Diego grandmother—with the help of her daughter and a local media station—recovered $147,000 stolen from her Wells Fargo account by a phone scammer. Judith Anderson was taken by what's become such a commonplace scam that you’re probably tired of reading about it. But the recovery strategy and heartwarming conclusion in this case lend a welcome twist to the usual story. As NBC 7 San Diego explains, the scammer who contacted Anderson in December used a spoofed Wells Fargo number and led her to believe that someone out-of-state had compromised her account. To supposedly protect Anderson's funds, the scammer got Anderson to make three $49,000 electronic wire transfers, which she thought were being paid to another account in her name. After spending almost an hour on the phone with the scammer, Anderson hung up and called her daughter. Here's where you should take notes: Anderson's daughter, Tracy Martinez, helped her mom get her money back by not giving up after the bank's initial refusal to reimburse all of the funds; sharing the story widely on social media, where she received millions of comments; sending emails about the problem to multiple people at the bank; and contacting her local media consumer reporters at NBC Responds. Once NBC 7 contacted Wells Fargo, and within a week of airing Anderson's story, the bank agreed to fully reimburse the consumer. Although Anderson successfully resolved her case, it was not a slam dunk. Wells Fargo told NBC 7 that if a customer provides a scammer access to their account and account information, including one-time passcodes and passwords, the customer may not recover their funds. We ditto NBC 7's suggestion that Wells Fargo customers check out the bank's fraud page. And perhaps everyone—not just Wells Fargo customers—would benefit from printing these tips for avoiding bank imposter scams and posting them on their fridge.
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