Staying One Step Ahead of Financial Scams During a Pandemic

Point of Interest

Pandemics put a massive strain on the resources of consumers, leaving many vulnerable to scams that promise support in making ends meet. By looking out for common scammer tactics, you can protect both your health and finances and get through any outbreak in one piece.

Scammers are particularly active during times of crisis, relying on people’s fear and uncertainty to trick them into giving up their time, money and personal information.

The most recent example was the uptick in financial scams during the 2008 financial crisis. The stock market lost $8 trillion in value between 2007 and 2009, and unemployment climbed to 10% by October 2009. Many Americans were desperate to make up for their lost income, so they became more willing to engage in risky ventures.

Older adults and young adults are more likely to be scammed than other age groups, in part because they are targeted by scammers more often. Studies show that older people lose as much as $36 billion each year from financial exploitation. Meanwhile, in 2017, the Federal Trade Commission reported 40% of Americans in their 20s who reported fraud said they lost money because of it — more than any other age group.

As the COVID-19 pandemic continues, we will likely see another resurgence of financial scams as criminals attempt to prey on people’s fear for financial gain. Here are some of the scams to watch out for and what you can do in the interim to keep yourself safe.

Where do we currently stand?

The number of novel coronavirus cases identified in the United States increases daily.

In addition to economic consequences, the rapid spread of the virus has also had some serious psychological implications. When people are forced to stay home for long periods, they may grow restless and irritable. Living each day with the knowledge that a deadly virus is active in the community can lead to anxiety and a feeling of helplessness. Unfortunately, these feelings of fear and vulnerability can also make people more susceptible to falling for scams.

The American Psychological Association (APA) has put forth some suggestions for staying positive. Mainly, they say people should stay connected with loved ones, trust in information from reliable sources and remember that work is being done to combat the virus.

Furthermore, the APA also suggests, “Individuals who feel an overwhelming nervousness, a lingering sadness, or other prolonged reactions that adversely affect their job performance or interpersonal relationships should consult with a trained and experienced mental health professional.” Taking care of your mental health during this time will also make you less susceptible to financial scams.

Spotting financial scams

Not all financial scams are obvious, and they can come to you in a variety of ways. Telephone scams have become more common thanks to autodialing and caller-masking technologies. However, online channels like email, social media and even online dating apps are prime platforms for scammers.

Currently, one in ten adults fall victim to fraud each year in the United States, and the majority of fraud occurs online. Here are a few of the scams you should watch out for and what you can do to avoid them.

Mortgage-specific scams

For most consumers, purchasing a home is the biggest expense they’ll make in their lifetime. That makes high-dollar mortgage transactions a primary target for scammers.

Mortgage scams can take a variety of forms. Predatory lenders may encourage you to take out a mortgage by using an attractive interest rate, only to switch you to a more expensive mortgage at the last moment.

Scammers also target people who can’t afford their mortgages and are at risk of foreclosure — specifically people who have lost income due to being laid off during the pandemic. They may approach you as a “mortgage relief” specialist, offering to renegotiate your rates with your lender on your behalf. But after paying them an “up-front fee,” you never hear from them again.

Signs of this scam and how to avoid it

Legitimate lenders will do a thorough check on your credit score and repayment history to determine if you’re a good fit for a mortgage or a refinance loan. If they don’t consider your ability to pay or don’t care about your credit, you’re probably not dealing with a legitimate lender.

You should also avoid anyone who approaches you under the following circumstances:

  • They want a fee in advance to “work with your lender” to modify your loan
  • They guarantee they can stop a foreclosure or lower your rates.
  • They want you to stop paying your mortgage entirely and only pay them.
  • They say they are affiliated with the government but have no credentials.
  • They require you to release personal information as a stipulation for services.
  • There is no evidence of them online or on third-party review sites.

If you run into any of these circumstances, focus on protecting your mortgage by not engaging with the “company” offering you the deal.

Stock market scams

News of the coronavirus has sent stock prices in a downward spiral. Many investors are selling their assets to recoup their losses and avoid further loss. If you’ve suffered a substantial loss in the market, you may be anxious to recover the funds. This makes you a primary target for stock market and investment scams, which prey on emotions like desperation and loss.

The most obvious investment scams are of the “get rich quick” variety. These are relatively easy to spot because they sound too good to be true, and they often come with bogus money-back guarantees. You may receive a phone call, an email or even an ad promising you exponential returns for a small initial investment, only to find out later that the promises were false.

Subtler scammers may offer you an “insider” deal, claiming they have special knowledge of a specific stock that nobody else does. They may even offer you inside information for a small fee.

In the current context, you can expect scammers to say they have inside knowledge of treatments or products that “cure the coronavirus,” which could lead to high returns if you invest immediately. These types of scams are often broadcast across social media and the internet.

Signs of this scam and how to avoid it

In most cases, you should rely on your gut instincts to avoid these scams. There is no way to game the market and there is always risk when investing. No firm can legally offer you a guarantee of a return. If an opportunity sounds too good to be true, it probably is.

You should also stick to what you know. Only invest in legitimate business entities that have a presence online and in the markets. You may wish to work with a financial planner to keep yourself safe.

Otherwise, watch out for these signs:

  • They promise you high returns with little or no risk.
  • They say they have insider information.
  • They pressure you to buy or invest.
  • They aren’t registered to sell investment products.
  • They want you to invest in a company you’ve never heard of or can’t learn anything about.

If you’re new to investing, stick to the basics first or work with a professional.

Fast money scams

Fast money scams involve any promise of easy money for either a small financial investment or a small amount of effort. Scammers have come up with myriad ways to do this, but their schemes almost always prey on people’s desperation, fear and insecurity. Typically, a scammer will approach you online or over the phone.

Scammers may transfer funds to your bank account, then ask you to transfer money out of the account to one in another country. As compensation, you’ll get paid a fee, or you’ll be able to make up the difference because of a supposedly favorable conversion rate. Of course, there is no money, so you end up losing whatever funds you transfer out of your account.

Other quick money scams involve company rebate scams, fake settlements, fake job offers and anything that requires an up-front fee. You should also avoid payday loans. While these technically be legal, they come with high interest rates and can leave you struggling with debt.

Signs of this scam and how to avoid it

Some of the most common signs of this scam include:

  • They want you to wire or transfer money.
  • They approached you online or out of nowhere.
  • They use threats or hyperbolic language to play with your emotions.
  • They’re linked to an unsecured website.
  • Their emails don’t look official.

There are only a few ways to make legitimate money, and they all take time and effort.

Get healthy quick scams

During a pandemic, people are particularly concerned about their health and stopping the spread of the virus. There has already been a rapid increase in false information about how to combat COVID-19. Scammers will try to use this to their advantage, preying on people’s fear and their lack of medical knowledge to trick them into buying “cures,” “treatments” or other products that have no medical value.

Scammers might try to sell you supplements, immune system support products, hand sanitizers, cleaning products and protective gear, like masks and gloves that offer no protection.

Signs of this scam and how to avoid it

Some of the most common signs of this scam include:

  • A  product  being sold by someone who isn’t a health professional.
  • A  product being sold by a company that isn’t in the medical or pharmaceutical industry.
  • The product is outrageously priced.
  • The seller makes outlandish claims about the product’s capabilities.
  • There is no other news about the product being what the seller claims.

You should only take health advice from official sources, such as the Centers for Disease Control and Prevention (CDC) or your own doctor during a pandemic. If you aren’t sure about the effectiveness of a health product, contact your doctor before buying it.

Work from home scams

Work from home scams are already common, but they may become more widespread as more people work remotely during the pandemic. People who are struggling financially may be more vulnerable, as well as people who have been laid off due to the spread of COVID-19.

These scams are usually a ploy to obtain your personal or financial information. Typically, the companies placing the ads don’t exist, or they are a dishonest company looking for free labor or illegally obtained consumer data.

Signs of this scam and how to avoid it

To spot this scam, look out for the following:

  • Job postings that offer exorbitant amounts of money for menial work.
  • Jobs that require no experience or skills.
  • Jobs from anonymous companies.
  • Jobs from companies that don’t have an online presence.
  • Jobs that require you to pay upfront for tools just to work.
  • Job postings with poor grammar and sentence structure.

If you’re looking for jobs that you can do from home, stick to legitimate job sites and freelancing job boards.

Tax scams

Tax scams have become more common because of technology that helps scammers spoof their phone numbers, making them look like they are calling from the nation’s capital. Entire networks of scammers have been arrested engaging in this scam.

Scammers may also contact you via email, text message or social media claiming to be from the IRS. They may claim you owe taxes, and they may threaten you with arrest or other penalties if you don’t comply with their demands for money or information.

Signs of this scam and how to avoid it

Here are some of the most common indicators of a tax scam:

  • They initially contact you via email, text message, social media or by phone.
  • They use threatening language to convince you to pay or give them personal information.
  • They tell you the police are already on their way to arrest you.
  • They use poor grammar or awkward sentence structure.
  • They request an unconventional payment method, such as cryptocurrency, a gift card or a money order.

According to the IRS website, “The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information.” They may call you, but only after you start a dialogue with them. They will always send an official message in the mail on IRS letterhead if they need you to act.

Charity scams

During a crisis, both people and organizations want to find ways to help those in need. But scammers will try to exploit peoples’ charitable spirit for their personal gain.

In the current situation, scammers might pretend to be a charitable organization looking for donations. Thinking they are helping in the fight against the coronavirus pandemic, victims will send the scammers money or even personal information.

Signs of this scam and how to avoid it

Common indicators of this scam include the following:

  • The email was sent from an unregistered domain.
  • The login page for the charity’s website has an unfamiliar URL.
  • They use poor grammar and sentence structure.
  • They lack identifiable logos and charity information.
  • You don’t recognize the charity or can’t find evidence of it online.
  • The messages urge you to act quickly or use threatening language.

If you’d like to give, you should start with nonprofits that are easy to recognize, such as the American Red Cross or The Center for Disaster Philanthropy. You can also use a tool like Charity Navigator to find top-rated charities that are trying to help.

How to stay one step ahead

While it can be challenging to remember all the different types of scams you need to watch out for, there are a few steps you can take to keep ahead of scammers during this pandemic, including:

  • Never disclose sensitive information to anyone who contacts you by phone or email.
  • Set up two-factor authentication on any accounts that have a login.
  • Regularly check your credit report for fraud.

Finance and security experts also have some tips for staying one step ahead of scammers. Stephen Ritter, Chief Technology Officer at Mitek Systems, Inc., says, “People need to pay extra attention to their emails, especially ones that look like official communications from work or the government about the outbreak. Check that links are safe and lead to a legitimate domain. Do not give out personal or financial information to an entity that you are not 100% sure about. If a bank or business calls you, hang up and call back via the number on their official website. Taking extra precautions can prevent detrimental identity theft incidents.”

During a pandemic, fake advertisements that lead to malicious sites are also common. According to Milos Varaklic, Vice President of Operations at MDG, “Nothing should ever be purchased from an ad. Only purchase directly from the retailer or marketplace. Do your research before purchasing from a website to make sure it’s legitimate, trusted and has real customer reviews. Make sure the company has a contact page and contact them before making a purchase.” Varaklic also recommends you read through their about page. “Make sure that it makes sense and falls in line with what they’re actually selling. Oftentimes, bots will generate scam websites selling products you were recently looking at, at extremely cheap costs, yet they will lack a working contact, address and credible about page.”

Jan Youngren, cybersecurity researcher at VPNpro.com also suggests avoiding pop-up websites related to the virus: “Right now, the vast majority of coronavirus-related domains are being used for online fraud, malware distribution, or are obvious scams peddling cures, vaccines and supplements. Avoid these at all cost! Your source of coronavirus-related news should not come from email nor social media nor Google, and especially not a mobile app. These are some of the oldest playgrounds for scammers, where attachments and benign-looking links result in stolen personal data or even banking info.” 

What to do if you’ve already fallen for a scam

If you believe you have been scammed during the COVID-19 pandemic already, don’t panic. There are steps you can take now to recover your identity and reduce the chances of significant financial loss.

First, you should stop all contact with the scammer. Next, contact your financial institutions. Even if you only surrendered your personal information, scammers may try to target your financial accounts. If you sent money through a service like PayPal or Venmo, you should contact them as well.

Then, change all your passwords to newer, more complex ones. You can use a password keeper to keep track of them all, but the safest method is always writing them down. Start with the email address you have listed in your most crucial accounts. Once a fraudster gets access to your email, they can use it to request password resets on your other accounts.

Finally, report the scam to the authorities. You can start with your state’s Consumer Protection Office, then you can contact one or some of the following organizations:

There are also private support services available that can help you recover your identity and protect against future scams. If being scammed has taken a toll on your mental health, don’t hesitate to contact your primary care physician or a mental health provider for help.

Don’t become another statistic

This is a trying time, but you should always think before you click on a suspicious link or invest in something that seems too good to be true. Be wary of misinformation about the pandemic, cures for the virus or financial opportunities that appear to profit from the pandemic.

For legitimate information on the COVID-19 pandemic, trust in recognized sources like the Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO). You can also follow the government websites listed above to stay appraised of new scams related to the virus.

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Michael Rand

Personal Finance Contributor

Michael Rand is a business and personal finance writer based in Beverly, Massachusetts. He holds a master’s degree in writing from Salem State University and spent years producing content for financial services clients as an agency writer. His work has been featured in publications like Interest.com, The Simple Dollar, and Monetize.info.