A small business owner is thrilled at the prospect of a huge sale, the biggest of the year. The cashier’s check for over $50,000 was deposited and everyone was happy. Then the client called asking to cancel a part of the order. The small business owner was happy to refund the client and cut and mailed the check immediately. After all, what’s $7,000 when you’ve just banked $50,000?
About two weeks later the small business owner gets some bad news. The cashier’s check for $50,000 was bogus. The company has now lost forever the “refund” money they forwarded to the scamming client along with any goods provided.
This scam has been making its way through the business world for some time. A large cashier’s or “official bank check” is provided then a refund is requested. Often the amount of the check will be several thousand dollars more than the agreed-upon price, which is where the con derives its name – the Overpayment Scam.
Hotels, business facilities and exposition halls have regularly found themselves victims with the scammer blocking a large number or rooms for events, then calling to cancel a portion of the reservations.
Other’s who are often victim to this scam are event planners and caterers, along with companies that offer high-end products such as sports equipment, vehicles of all types and jewelry.
In an interview with BusinessWeek .com, CEO and President of the Milwaukee Better Business Bureau Randall Hoth took special not that the victims of these overpayment scams shared a common trait.
“The common thread seems to be business that advertise themselves on the internet…it opens up the opportunity to be surfed and scammed.”
If the con artists are viewing the internet as fertile soil for these overpayment scams, then small business are not the only one’s in danger. One only needs to look at the numbers for Craigslist and Ebay to spot another area ripe with potential victims.
Eight million people use Craigslist every month, at more than two billion page views. With pages specifically catered 120 cities and 25 countries, the “For Sale” section is among the site’s top areas. Ebay generated over six billion dollars in yearly business and that number was expected to increase by another billion in twelve months. Ebay has over 222 million registered users.
These sites are a conduit for small business to sell their goods and services, but more often than not they offer an online auction house for every day people who are looking to make some extra cash. These are ideal victims of an overpayment scam.
Along with the sale of goods, there are other services provided by individuals online that are susceptible to these overpayment scams. Those looking to rent apartments, for example, have found themselves falling victim to the con artists.
A Brandeis University message board recently exploded with reports of an overpayment scammer who was targeting locals looking to rent spare rooms and apartment to students. They were contacted by a man claiming to be a prospective student’s uncle who was looking to place her in a safe environment as she was coming from a Russian home where she had been abused.
The check he sent, a full month before the “student” was due to arrive, exceeded the rental fee by several thousand dollars. The “uncle” then requested to have the amount he overpaid wired back to him, after asking the renter to keep half of it as a good faith gesture for keeping an eye on his niece. Of course, the initial check was bogus. The entire story concocted to play on the emotions of the victims, even seeming to reward them for doing a good deed.
The specifics may vary, but the basics of the overpayment scam remain the same. The scammers locate their targets through classified ads or online sites like Craigslist or Ebay. The con artists offer payment for whatever is being advertised, whether goods or services, with either a cashier’s check or money order for more than the amount of the item or service advertised. The victim is then instructed to either cut a check or wire the excess amount to the scammer.
The reasons for the overpayment vary. It could be presented as a mistake, or a bonus for inconvenience or money to be sent to a third party, such as a shipping company (which will actually be bogus front for the con artist.) The crook is counting on the time cushion it will take the victim’s bank to identify that the initial check is a fraud to get cash directly from you, and if they’re especially lucky they’ll have goods shipped to them they can then fence.
Here are some things to keep in mind in order to avoid an overpayment scam:
Know who you are dealing with
– confirm the buyer’s name, address and telephone number before doing business with them.
Don’t fall for it
– Never accept a check for more than the amount you are selling an item for. If the buyer refuses to pay the correct amount, return the check and do not ship the merchandise.
– Never under any circumstances wire funds back to a purchaser. A legitimate buyer will not make this type of request, and if anything does go wrong, your ability to reclaim funds lost via wire transfer are basically nil.
Take your time
– Don’t be pressured into quick action by a buyer. If the offer is good now, it should still be so once the check clears.
Keep it local
– Request that any payments made by check be drawn at a local bank or at least a large bank with a local branch. You can then take the check by that location and have it confirmed as legitimate.
– Don’t assume the check is legitimate just because your bank accepts it. It can often take weeks before a bank discovers a deposited check was actually counterfeit.
Ultimately, you are on the hook and liable for these monies with your financial institution.
Overpayment scams depend on victim’s to be both trusting and honest. You can still be a decent person without being played for a fool. If you are attempting to sell an item or rent a room and someone tries to overpay for it, take a good long look at the situation. You will probably find another scam artist looking to take you for a ride.