Tips to Avoid Becoming a Victim of Fraud

Jul 11, 2017 11:38am

identity theft preventionWhen you think of financial planning, you probably think of creating a budget, investing money and saving for retirement. Those are all essential parts of planning and creating financial stability; however, protecting yourself from fraud is also crucial. You should know how and where fraud can occur, what signs to watch for and what you can do if it happens to you. 

Fraud can exist within any industry or market that involves consumers’ money, but there are also dozens of other scams to be aware of – here are a few types of fraud to watch out for. 

Real Estate 

Real estate criminals attempt to take advantage of property owners who find themselves in financial trouble. A common scam that exploits consumers is foreclosure fraud.

Foreclosure fraud occurs when a homeowner is having difficulty making mortgage payments and a criminal poses as a company which offers loans to cover expenses and consolidate debt. The criminal will request upfront fees and an agreement to transfer the property title but will pocket the payments, remortgage the property and flee with the money, leaving the property owner homeless and still in debt. Other forms of real estate fraud include falsifying information in a mortgage application, illegal flipping and wire fraud. 


A criminal may sell a car without a clean title, or a dealer may lie about the history of the car. For example, they may not inform a buyer that the car was previously in a crash. Falsely claiming a car as new, misleading a consumer about certification and odometer tampering can also occur. 

A common type of fraud in the automobile industry is called “yo-yo financing,” in which a dealer sells the customer a vehicle under a payment plan, but after several weeks, the dealer contacts the customers to alert them that financing company rejected the credit application. Since the buyer has come become accustomed to the vehicle, the seller is able to pressure them into a more expensive in-house payment plan.


A criminal may pose as a company attempting to collect debts for taxes, credit cards or medical bills. These criminals try to collect on what is called “phantom debts,” which are outstanding fees that are either too old to collect, were never truly owed or are unable to be proven as valid. Posing as the collection agency, the criminal often threatens the consumer with jail time and legal retribution for unpaid debts. They often obtain bits of contact or financial information about the customer from public databases orand from data that has been purchased illegally to make their claims more realistic. 

Signs and Prevention 

There are ways to protect yourself against becoming a victim of fraud. If someone ever calls to collect any debt or discuss anything related to your finances, always ask for the company’s name, address and phone number. If your state licenses debt collectors, ask for their professional license number. Refuse to discuss any monies owed until you get a written validation notice.

  • When entering your bank card PIN at an ATM, cover the pad and never provide your PIN or other personal information without checking the legitimacy of the company.
  • Regularly check receipts against your bank statements. If you notice any unfamiliar transactions or discrepancies, contact your bank or card company immediately.
  • Keep sensitive documents, cards and other identification in a safe place.
  • Only shop on secure websites. If you don’t see a padlock at the top of the web browser or “https” in the URL, do not use the site.
  • Always keep your internet-connected devices protected and up to date with the latest antivirus software and operating system.

What to Do

If you suspect that you’re a victim of fraud, contact the Federal Trade Commission. You can use the Online Complaint Assistant to report most types of fraud. You can also contact an attorney to pursue claims. Remember that the sooner you report fraud, the more likely you are to recover what you’ve lost. It also helps stop the perpetrator faster so less people become victims.

It never hurts to be overly cautious about your personal information. There are many diverse and sophisticated types of scams, so stay informed about current threats, prevention methods and what to do if you become a victim.

About the Author
Chloe Pearson is a freelance writer and research specialist. She loves volunteering for Consumer Health Labs, which aims to help consumers make healthy choices.