Illustration by Philip Smith for Forbes
The holiday season is busy one for fraudsters. This round-up story will pull out five common scams people pull on cash apps like Venmo, CashApp or Zelle. One example are accidental payment scams, where users are told money was sent by mistake using stolen credit card information. If they send the funds back, they risk being stuck with the loss.
Payment apps like Venmo, Cash App, PayPal and Zelle have revolutionized the way people send money for everything from check splitting among friends to monthly rent payments. Unfortunately, scammers are evolving with the payments landscape and have come up with a raft of tricks to siphon customer funds from these payment methods into their own pockets.
Consumers are used to being protected from certain fraud losses – most notably, bogus charges on their credit cards. But with payment apps, customers’ digital funds are treated as cash, making it difficult for victims to recover fraud losses if they have been tricked into approving a payment. In fact, under current federal regulations for electronic fund transfers in the United States, if a customer makes the mistake of authorizing a scam payment, he’s not entitled to any reimbursement from the bank.
Industry pros refer to cases where folks are tricked into sending money to the crooks’ accounts as authorized push payment (APP) scams and say they’re growing quickly. In the United States, APP scams could cost consumers $3.1 billion by 2026, up from $1.6 billion in 2021, payments software company ACI Worldwide
The first phase of many scams is phishing—con artists start by sending out text messages, emails, fake advertisements and other forms of communication to identify vulnerable individuals. These messages are also used to gather information to better target potential victims by figuring out products they are interested in, people they know or other personal pieces of information to make a scam feel more believable. That allows a scammer to create a sense of urgency when he later tries to get a target to send money. (That urgency is in itself a red flag to watch for before sending money to new accounts.)
“A lot of instances where people get scammed, it’s actually rapid fire and they just never thought about the fact for one second that they might be being scammed,” Tommy Nicholas, CEO of identity verification platform Alloy, says. “Take a beat and give yourself time because there are almost no situations in which you are put in a position where through some unusual channel somebody is asking you for money and it’s time sensitive. It’s almost always a scam.”
The good news is that under pressure from lawmakers, the seven banks behind the Zelle network are reportedly developing a standardized system for refunding money to customers who were tricked into sending cash to criminals. While the future may bring a path for such refunds, the best way to keep your money safe now is to avoid scams altogether. Here are five to watch out for.
The Legitimate Business Con
Scams where con artists pretend to be selling a legitimate product are the most common, representing 38% of scams reported by consumers to ACI. These types of scams will appear on online marketplaces, social media sites or in search results where criminals advertise that they are selling a product – which either doesn’t exist or never arrives after people purchase it. In these attacks, the perpetrator typically advertises an item at a steep discount and may offer customers even better deals if they pay through an app instead of with a credit or debit card. Remember, by using data collected from phishing schemes, scammers can target their advertising towards individuals they already know are interested in their products. This con has caught the attention of the Federal Bureau of Investigation which warned the public ahead of the holiday season to watch out for criminals using search engine advertisement services to impersonate real brands.
In a variant of this scam, potential victims may receive calls from people claiming to be their heat, electricity or internet provider who threaten to shut off an essential service if the customer doesn’t send money immediately to a specific account.
The Romance Scam
Online dating, like payment apps, has been growing quickly. The two can make a dangerous combination–romance scams are the second most popular type of trap, according to ACI’s report. In these schemes, criminals create fake online personas, build romantic relationships with people and then ask for money. After gaining their target’s trust, it’s common for romance scammers to begin talking about family or business troubles then feign an emergency that requires receiving money immediately. It should go without saying that sending money to a romantic interest you’ve never met is asking for trouble.
The Social Media Takeover
In this scheme, a bad actor takes over a person’s real social media account then messages their friends or family members claiming they need money urgently. The actor may say that they need to pay off a bill immediately or that they have gotten into trouble at work or school. For people with family abroad, the scammer may claim that there is a visa or customs issue that requires payment or else their loved one will not be able to travel. The criminal will then direct the family member or friend to send money to an account they control.
One pernicious variant of this is known as the “Grandma scam,’’ in which a crook contacts an older person by phone or online and says their grandchild has been in an accident or is in legal or other trouble in a foreign country and needs cash–or a cash card–to be sent to an unknown address. Even without actually taking over social accounts, it’s not hard for a scammer to glean from social media that a grandchild is, for example, studying or traveling abroad and to then play on a grandparent’s natural concern.
The Accidental Payment Act
In order to avoid this scam, always be wary of large sums of money that appear in your account with no explanation. In this setup, a bad actor sends money to a person’s account then contacts them asking the funds be returned because they were sent by mistake. The scammer may create a sense of panic by saying they need the money urgently to make their intended payment or for an important purpose. In this situation, the fraudster may have sent the money with stolen credit card information. If you send the money back and the actual card owner cancels the original charge (thus recouping the money that inexplicably showed up in your account), you’ll be the one stuck with a loss.
The Fake Invoice
On PayPal, criminals take advantage of the ability to create invoices through the platform. Scammers create fraudulent invoices with a real company’s branding attached. The invoices come from PayPal.com and include a link to a PayPal page that displays the invoice, lending legitimacy to the attack. If a person is not paying attention, they may absentmindedly pay the invoice–particularly if it’s for an item or service they regularly purchase.
In one variant of this scam, the fake invoice may include a note that there is evidence of fraud and ask individuals to call a toll-free number provided immediately. When the target calls, the perpetrator may begin asking them for personal details or login credentials to help verify the charge is bogus. Additionally, the scammer may ask the target to download a software which gives them remote control of their computer–all, supposedly in the interest of investigating the fake charge.
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