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Consumer Scams

In honor of National Consumer Protection Week, the District of Columbia Department of Insurance, Securities and Banking wants to help consumers protect their money and other financial interests. There are numerous scams that people fall victim to each day in the DMV and around the country. A few scams to beware of:

IRS Impersonation Scams

Taxpayers need to be wary of phone calls or automated messages from someone who claims to be from the IRS. The most common tax scams are phone calls and emails from thieves who pretend to be from the IRS. Scammers use the IRS name, logo, fake employee names and badge numbers to try to steal money and identities from taxpayers. Often, these criminals will say taxpayers owe money and demand payment right away. Also, scammers will lie to taxpayers and say they’re due a refund. The thieves ask for bank account information over the phone. The IRS warns taxpayers not to fall for these scams.

  • IRS will never initiate a call to you directly. IRS will mail tax bills to you first.
  • IRS will never demand information.
  • IRS will never ask for your credit card number over the phone.
  • IRS will never threaten you with arrest by local police.

Sweepstakes Scams

You receive a letter or phone call claiming you have won a $5,000 luxury vacation or, perhaps, a considerable sum of cash. The caller then asks you to pay fees to participate in the program or to receive your prize. You should never be required to pay handling charges, service fees, taxes, or any kind of charges up front to receive a prize you have supposedly won. Winning a sweepstakes prize is a dream come true. However, that dream can quickly turn into nightmare if you don’t know the difference between a legitimate win notification and a sweepstakes scam.

What to watch for:

  • Be mindful of letters or calls congratulating you for winning sweepstakes that you do not recall entering.
  • Conduct a search to be sure the entity is legitimate by contacting the District’s Department on Consumer and Regulatory Affairs or the federal Consumer Financial Protection Bureau.
  • Never pay up front fees to receive a prize you have supposedly won.
  • Report all scams to the Department or local or state law enforcement authorities.

Advance Fee Scams

Advance fee scams solicit investors to pay a fee up front—in advance of receiving proceeds, money, stock or warranties—to complete a deal or transaction. The advance payment may be described as a fee, tax, commission or incidental expense that will be repaid later.

Some advance fee schemes target investors who purchased underperforming securities; the investors are offered the opportunity to sell those securities if an advance fee is paid. The perpetrators also target investors who have already lost money in investment schemes.

Advance fee scammers may pose as legitimate US agents or firms and offer to help investors recover their stock market losses by exchanging worthless stock. However, they will require investors to pay an upfront security deposit or post an insurance or performance bond. They often direct investors to wire advance fees to so-called escrow agents or lawyers to give investors a level of comfort and to lend the appearance of legitimacy to their schemes.

Advance fee scammers also use official-sounding websites and email addresses to trick investors. Once the investor wires the advance fees into the designated account, it is then quickly wired to another account at an off-shore bank where the money trail disappears.

If you are contacted by an organization claiming to be a financial regulator, or any potential scammer, you should note the time and date of the call, the name of the caller, the caller ID information and what the caller says. You should not provide the caller with your personal information. Instruct them not to call you again and hang up the phone.

If you believe you have been a victim of an advance fee scam, another type of financial scam or have questions, please contact the Enforcement and Consumer Protection Division of the District of Columbia Department of Insurance, Securities and Banking at (202) 727-8000.

Affinity Fraud Scams

Most consumers, in some way or another, are connected to a group, association or community-based organization. Affinity frauds target members of identifiable groups such as veterans, the elderly and religious or ethnic communities. The fraudsters involved in affinity scams often are – or pretend to be – members of the group. The scams usually involve “Ponzi” or pyramid schemes where the scammers generate returns for older investors through revenue paid by new investors, rather than through legitimate business activities. They promise guaranteed high rates of return with minor risk to investors. Veterans are often exploited by affinity fraud scammers because they have steady monthly income; they are a very motivated group; they watch out for each other; and they give freely of both time and money. Affinity fraud scammers will claim to be veterans or working for organizations that support veterans. They might even be a veteran who is in on the scam. In any case, they will be very persuasive in convincing veterans to invest their money with them.

Steps to Take:

  • Even if you know the person making the investment offer, be sure to research the person’s background as well as the investment itself – no matter how trustworthy the person who brings the investment opportunity to your attention seems to be. You can check the legitimacy of an investment offering in the District by contacting the Department of Insurance, Securities and Banking.
  • Never make an investment based solely on the recommendation of a member of an organization or group to which you belong.
  • Do not fall for investments that promise spectacular profits or “guaranteed” returns. These are classic warning signs of fraud.
  • Be skeptical of any investment opportunity that you cannot get in writing.
  • Don’t be pressured or rushed into buying an investment before you have an opportunity to thoroughly research it.
  • Report all scams to the Department by calling (202) 727-8000 or visiting disb.dc.gov.

Unclaimed Property Scams

The email or letter looks official, and it contains an attention-grabbing message: The state is holding on to your unclaimed property, which may be worth hundreds of thousands of dollars. All you have to do is pay a fee upfront or provide your personal information and the money is yours.

But the letters and emails are the work of scammers, not state officials. A growing number of people across the country are receiving these messages and some are falling for them, losing thousands of dollars or becoming victims of identity theft in the process.

  • Be mindful of callers who ask you to purchase prepaid store credit cards to pay transaction fees so that you can receive your unclaimed lottery or prize.
  • Conduct an Internet search to be sure the entity is legitimate.
  • Never pay up-front fees for unknown services.
  • Report all scams to the Department.

Investment Scam via Real Estate

Every industry has its scam artists, and real estate is no exception. While most of the professionals who work in real estate are ethical and honest, there are people in the industry who want to take your money and run. Worse, there are scam artists who use real estate as a cover. These fraudsters may know nothing about real estate but simply use properties to extract money from victims. Sadly, properties mean large amounts of cash and this can attract criminals. You don't have to be a victim, though. Whether you are investing in real estate or buying your own home, there are a few things you can do to stay safe:

  • Be mindful of persons soliciting investment opportunities using real estate as the investment vehicle.
  • Contact the District’s Department of Consumer and Regulatory Affairs’ Occupational and Professional Licensing unit to be sure the company you are dealing with is legitimate.
  • Report all scams immediately to the Department of Insurance, Securities and Banking by calling (202) 727-8000 or visiting disb.dc.gov.

ATM and Gas Station Skimmers

A skimmer is a device that is attached to the face of an ATM or a gas station pump that appears to be part of the machine. When you slide your card into the phony slot reader, it reads the magnetic stripe data from credit or debit cards and, when you enter your pin number, it copies the information and sends it back to the person who attached the device. The thief is then able to access your account and either place fraudulent charges on your credit card or empty your bank account. The thief can create a replica of the card. The skimmer usually contains software that allows the thief to retrieve your personal data directly to their computer.

  • Tug and pull on the slot reader to make sure it’s not a glue-on card cloning devise.
  • Inspect the card reader and the area near the pin pad.
  • Keep an eye on your bank accounts and check your credit card statements.
  • Report suspicious activity to the Department.

Identity Theft

Identity theft occurs when someone obtains and uses your personal information fraudulently, often for financial gain. Most people think of credit reports, credit cards and bank accounts when they hear the words “identity theft.” This type of identity theft is financial identity theft; however, many more types of identity theft exist. Other types of identity theft include medical identity theft, insurance identity theft; driver’s license identity theft; criminal identity theft; social security identity theft; synthetic identity theft; and child identity theft.

Here are some steps you can take to prevent various types of identity theft.

  • Know what’s in your wallet. Avoid carrying your Social Security number in your wallet or purse. This number provides access to personal information and should be stored in a safe place. In addition, only carry the credit cards you need. This practice limits access to your accounts in the event that your purse or wallet is lost or stolen. It is also a good idea to periodically photocopy your cards and keep a record of the customer service phone numbers associated with your financial accounts to speed up the process of cancelling credit cards, if needed.
  • Shred, Shred, Shred. Open all mail and read it carefully—even the items that might appear to be junk mail could contain personal offers. Any items with personal information, such as pre-approved credit offers, bank statements or utility bills should be shredded before being discarded.
  • Be suspicious of solicitors. You should never give personal information or your Social Security number to people unless you have verified that they are trustworthy. This advice applies to sharing information over the phone, in-store or online.
  • Monitor your revolving accounts and credit score. Check your bank, credit card and other financial account information, along with your credit score, once a year to reduce the risk of unauthorized charges or credit applications. If you see a suspicious charge, immediately contact your financial institution.
  • Take action against unauthorized actions. If you notice a new account has been opened in your name without your permission, immediately contact one of the three major credit bureaus—Equifax, Experian or TransUnion—and ask that a one-year or a seven-year “fraud alert” be placed on your record. Once the alert is placed, the other two bureaus will be notified, and creditors will be required to contact you directly before opening new accounts or making changes to existing accounts. Another option is to restrict access to your credit report by asking for a security or credit freeze. Under a freeze, creditors will not have access to your credit report and most likely will not extend credit without report access. The freeze remains in place until you ask the credit bureau to remove it. In addition, file a police report and submit a complaint to the Federal Trade Commission. You also might consider enrolling in paid services that monitor your credit report and alert you when someone applies for credit in your name or account information is altered.
  • Use the Internet safely. Millions of people are online at any given time, some of whom are thieves looking to steal your identity. These hackers can be found collecting information from unsuspecting “pop-ups,” surfing unsecured networks or hacking into retail websites. Always use a secured network and frequently update firewall protections on your computer. Also, limit the amount of personal information you post on networking websites.
  • Consider purchasing identity theft insurance. Several insurance companies offer identity theft insurance. Although it cannot protect you from becoming a victim of identity theft, this insurance provides coverage for the cost of reclaiming your financial identity, such as the expenses of placing phone calls, making copies, mailing documents, taking time off from work without pay and hiring an attorney. As with any insurance policy, make sure you understand what you are purchasing and compare prices, coverages and deductibles among multiple insurers.

Identity Breach Indicators

  • You are contacted in an attempt to collect money that you do not owe. The caller will rarely give you a legitimate call back number or email; they do not want to be traced.
  • You receive notice from your medical insurance provider that you have reached your limit on medical benefits. It is important to read your medical insurance statements, especially your Medicare Summary Notes and Explanation of Benefit Statements.
  • You receive a denial for insurance for a medical condition you do not have; or receive an explanation as to why you were turned down for a credit card for which you did not apply.
  • You receive bills for services you did not receive, such as medical bills and extended warranty service. Victims often think these are mistakes, but often it means that their identities have been breached.

Insurance Fraud

Insurance fraud has been around as long as insurance. It costs businesses billions of dollars each year—an expense then passed to consumers in higher premiums. While the elderly are the most vulnerable to fraud, scammers can be charming and aggressive to get you to give them money.

What is insurance fraud?

Fake insurance companies or agents defraud consumers by taking money for premiums on bogus policies with no intention of paying claims. Scammers may offer policies at costs that are significantly lower than competitors’ prices. They might be difficult to reach by phone if there is even a listed phone number. Always find out if the seller represents a legitimate, licensed insurer before purchasing a policy. The Department can provide licensing information for a company or agent.

There are also legitimate companies that sell non-insurance products marketed to look like real insurance. For example, an agent working for a company selling health discount plans might call the plan insurance when it is really an unregulated, non-insurance product. If you live in the District and question whether a product is actual insurance, contact the Department of Insurance, Securities and Banking.

A dishonest insurance agent might collect premiums from a customer without reporting them to the company. The consumer believes their premiums are paid while the insurance company has no record of payment and cancels or does not renew the policy. If you do not receive an insurance ID card or a copy of your policy in a timely manner, check with the company to see if your premiums have been applied to your policy.

Fraud perpetrated by consumers

Consumers can also be guilty of insurance fraud. The most common forms of policyholder fraud are with auto insurance and workers’ compensation. Fraud is a criminal act leading to higher rates for all consumers. Deliberately staging an accident, exaggerating a legitimate claim or knowingly providing false information on an application are all examples of insurance fraud.

What can I do to prevent being a victim of fraud?

Stop. Call. Confirm. If you are unsure about an insurance company or agent, stop before signing any paperwork or issuing payment; call the Department at 202-727-8000; and confirm the company or agent offering insurance is legitimate and licensed to sell insurance in the state. Taking precautions won’t bother honest agents and insurers.

If you believe you’re a victim of insurance fraud, or are aware of fraudulent activity, take action:

Who will help me?

The Department has a special fraud unit that investigate insurance fraud. The unit takes referrals and investigate cases from various sources, such as law enforcement agencies, insurance companies and consumer complaints. You could also call the District of Columbia’s Office of the Attorney General at (202) 727-3400.

Student Loan Repayment Scams

One of the most prevalent frauds of this kind is the advanced payment scam. The scammer will convince the victim that they can renegotiate your student loan to get the best rate. They will often promise to get your principal reduced as well. But to do all this, they will say you must pay an upfront fee; sometimes, this amount can be a thousand dollars or higher. If someone wants you to pay an upfront fee, you need to end contact with these folks immediately. Some legitimate third party companies that you may use to help you will require an escrow payment that will not be released until they have fulfilled their obligation and you have made a payment on the new loan arrangement.

For help with student loan repayment options, contact the Department’s Student Loan Ombudsman at (202) 727-8000.

Student Loan Consolidation Scam

The federal government does not charge you to consolidate your student loans. You can do this yourself. Some companies will claim they can do this and charge you a fee for this when in fact they have done nothing that you can’t do yourself for free. Many of these scammers don’t even follow through, and once you have paid their fee you are right where you began. You can find out much more by visiting studentloans.gov.

Student Loan Scam Indicators

  • Any company that claims to have a relationship with the Department of Education (third-party companies do not have any relationship with the Department of Education)
  • Any company that promises you a set payment or forgiveness (companies cannot promise forgiveness or guarantee an income-based repayment because both will change based on your income)
  • Any promise of immediate loan forgiveness or cancellation
  • Any promise that a buyer will buy the loan and settle it for a set amount
  • Any promise that because your school closed or is being sued, you can get forgiveness

Ponzi and Pyramid Schemes

People often think that Ponzi and pyramid schemes are the same thing. But they are different. Ponzi schemes are made to look like legitimate investment opportunities when they are not. They pay the earlier investors with money from the later investors. Eventually, it collapses.

If someone asks you to invest in something guaranteeing a specific return or minimum return, you need to do your homework. These people must be licensed to sell investments. The Financial Industry Regulatory Authority (FINRA) oversees all securities licensing procedures and requirements. Research the person or company who is offering you this opportunity. Most securities being offered must be registered with the Securities and Exchange Commission (SEC).

Pyramid schemes mimic multi-level marketing (MLM). They have a product to sell and to make “real” money, require recruiting others into the organization. There are legitimate multi-level marketing companies. But there are some that are merely set up to take your money for so-called shares, or perhaps a future product, or a product not worth the purchase price.

If most of the money made comes from continuous recruiting and downline building with no real product, it is likely an illegal pyramid scheme. In legitimate MLM companies, there are many customers of the product who do not sell the product. Remember, if it sounds too good to be true, it probably is.

If you have questions about a possible Ponzi or Pyramid scheme, or any other suspicious or fraudulent activity in the District of Columbia, please reach out to us at the Department of Insurance, Securities and Banking.

Cryptocurrency Scam Targeting Unsophisticated Investors

A fraudulent company may operate a website using online advertising to recruit sales agents for its cryptocurrency-based investment programs. The sales agents target investors in the District of Columbia using websites, social media and online marketplaces. The company does not disclose any information about its principals, financial condition or strategies for earning profits for investors. It does not provide a physical address for its offices purportedly located overseas. Despite providing no information on how it will make money for investors, the company touts its investments as a safe way to earn a high rate of return. It guarantees investors an annualized rate of return of 100 percent.

What to look for?

  • Investing in cryptocurrencies carries significant risk because of regulatory and legal actions, competition from other cryptocurrencies and the extreme volatility in the price of many cryptocurrencies.
  • Additionally, these investments could be considered securities which could trigger a filing requirement with the US Securities and Exchange Commission and the Department.
  • If you are solicited to invest in a cryptocurrency-based investment program through the Internet, social media, by telephone, or by any other means, thoroughly research the company and if you have any questions, contact the Department.

Stock Redemption Scams Targeting the Elderly

This scam generally targets elderly citizens. The victim is informed by a third party that he owns shares of the outstanding capital stock of a worthless company, and that a prospective buyer seeking to establish a presence in the US market is interested in purchasing the victim’s shares for a large sum of US currency. The victim is then instructed by the scammers to register at a specified web address where he or she must pay an advance fee of thousands of dollars so the restrictive legend on the shares can be lifted to complete the sale. However, once the victim pays the money at the web address, it is immediately wired into an unknown bank account and disappears. The victim does not receive his proceeds for the sale of his stock and, despite his/her efforts, can no longer contact the individuals who perpetrated the scam.

If you live in the District and are ever contacted by an individual in the same manner as the victim in the above scenario, you should:

  • Contact the Department of Insurance, Securities and Banking (DISB) to verify the authenticity of the business, the law firm and their representatives.
  • Conduct internet searches for information about similar scams.
  • Report scammers to the Department. You can reach us at (202) 727-8000.

REMEMBER: Do’s and Don’ts

  • If you receive letters, phone calls or emails that seem suspicious, report them to the District of Columbia Department of Insurance, Securities and Banking by calling (202) 727-8000.
  • The Department has complaint staff and financial fraud investigators who look into potential scams.
  • There is NO COST for our service.
  • Do not send money to a company or individual before verifying that the letter or caller is coming from a legitimate source.
  • Check with the Department to see if the company or individual has a license to operate in the District.

To get tips directly, consumers can visit disb.dc.gov, follow the Department on Twitter @DCDISB, or call the Department at (202) 727-8000.