- 02 Apr
Consumer Protection: Staying Safe from Spring Scams
In our home base of Chicago, Illinois, the telltale signs of spring are finally starting to emerge. The days are getting longer and warmer, flowers are starting to bloom back to life, and heavy snow has given way to beautiful sunshine and spring showers.
With the first days of spring come a renewed sense of energy and purpose. For many of us, these early days are a time to refocus on our financial future, perhaps after taking some time off for the holidays. During the spring months, many individuals, families, and businesses take a look back at the year that was, and begin to look ahead to the big moves they want to make come summer, fall, and winter – whether that means launching a new business, taking advantage of new investment opportunities, buying or selling real estate, preparing for retirement, or simply checking off that “bucket list” vacation that’s long been in the cards.
But with these big plans come a big warning: Watch out for scams and fraud.
The spring and summer seasons are incredibly busy, for businesses, individuals, and families alike, and there are many malicious actors out there, hoping to quickly run away with your hard earned income. In fact, did you know that during 2018, the FTC collected more than 1.4 million fraud reports, amounting to $1.48 billion lost? That total represents an increase of 38% over FY 2017. According to the FTC, the primary types of scams affecting consumers from all backgrounds included imposter scams, debt collection, and identity theft, which can all come in many different forms.
With all this in mind, as you prepare to hit “refresh” for the spring, it may be important to take steps to protect yourself from financial harm. Here are a few common “trouble spots” to watch for as we enter the heart of the spring and summer seasons:
The warmer months are some of the busiest travel times of the year, as countless people pack up and hit the road for their spring break getaways and summer excursions. Knowing this, many scammers target travelers, many of whom are just looking to take a relaxing trip.
According to data from the Washington Post, consumers filed 22,264 complaints about travel and timeshare fraud with the FTC in 2017. Courtesy of Katherine Hutt, national spokesperson for the Better Business Bureau (BBB), here are a few “tried-and-true” steps that consumers can take to help avoid vacation scams:
- Do your research. Before committing to traveling with a company or booking a trip through a travel agency, research, research, research. Use resources like the BBB to see if there have been any formal complaints against a company, and comb through consumer review sites to see what past clients have to say.
- Be wary of deals that come to you. If a remarkable offer comes to you via email or through social media out of the blue, Mamie Kresses, senior attorney in the FTC’s division of advertising practices, encourages having “a high level of skepticism.” She encourages consumers to always vet any marketing materials they may receive, and to look closely at brand websites and ads – often, scammers may set up sites that look like the real thing, in order to get consumers to lower their guard.
- Watch how you pay. The Washington Post encourages travelers to, “never hand over a check, money order or cash when booking travel. If a travel purchase turns out to be fraudulent, your credit card may be able to offer a layer of protection.” However, with that said, they also note that “you should not share your credit card information until you are certain of what you are getting and you have decided you want to make the purchase.”
Tax scams are incredibly common around this time of year, and they emerge in many different forms – though, as CNBC notes, “the number of tax refund fraud incidents is way down in the last several years,” thanks to bold action on the part of the IRS. Still, these incidences are quite commonplace, and can have devastating effects on innocent parties.
There are a few different types of tax scams that affect American consumers. In one common scheme, as CBS News reports:
“If scammers get their hands on your data or a previous tax return, they can use the information to fill out their own returns using your Social Security number. If you file your return after the con artist, the IRS may not accept it because it has already been filed.
If the IRS processes the phony return, the scammers can siphon your refund into their own bank accounts or, in some schemes, have it direct-deposited into your bank account to avoid IRS suspicion.
Scammers posing as debt-collection agency officials or IRS representatives will then call you to claim the refund as an “error.” They often threaten to arrest victims, deport them or charge them with criminal fraud to get them to comply out of fear.”
In other cases, scammers may pose as the IRS or a local department of revenue, and attempt to coerce a taxpayer into making up for an alleged error by via snail mail, emails, or phone calls. If you receive such a contact, do some research, and look for red flags. As Eric Smith, a spokesman for the IRS, put it to CNBC: “The IRS might call you but never to demand personal information or that you pay taxes in a particular way.” Instead of immediately complying, CNBC and Smith encourage taxpayers to “contact the IRS about any such attempts to gather personal information or to demand payment for tax debts.”
Otherwise, as CNBC notes, it may be prudent to take steps to avoid allowing your personal information to fall into the wrong hands in the first place. Consumer protection experts encourage taxpayers to be vigilant for phishing scams, which are attempts to get you to click a suspicious link or submit personal information (such as your W2 or social security number) online or by phone. Generally speaking, they encourage consumers to take care to protect their most sensitive information, safeguard their computer and network from breaches, and avoid submitting data on public Wi-Fi networks,
In a recent blog post, the SEC listed “be alert to affinity fraud and celebrity endorsements” as one of its “10 Investment Tips for 2019.”
Here’s how the SEC defines this important concept:
“Affinity fraud almost always involves either a fake investment or an investment where the fraudster lies about important details (such as the risk of loss, the track record of the investment, or the background of the promoter of the scheme). Many affinity frauds are Ponzi or pyramid schemes, where money given to the promoter by new investors is paid to earlier investors to create the illusion that the so-called investment is successful. This tricks new investors into investing in the scheme, and lulls existing investors into believing their investments are safe.”
As the SEC notes, affinity fraud attempts generally target members of identifiable groups, “such as the elderly, religious, or ethnic communities, or the military.” The encourage investors to take caution, and remember that to always take care to “check out the investment and the person’s background—no matter how trustworthy the person seems.” To that end, the SEC also encourages consumers to be wary of celebrity endorsements, since “just because you know the celebrity, doesn’t automatically make the investment opportunity being endorsed worthwhile.”
Similarly, the SEC warns investors to “be careful when using social media as an investment tool.” As they explain:
“Social media has become an important tool for investors, but also present opportunities for fraudsters to lure investors into a wide range of scams.”
As you look ahead to the spring market, remember to think about all of these little challenges, which could amount to a big impact on your portfolio.
About FourStar Wealth Advisors
Here at FourStar Wealth Advisors, we believe in arming consumers with the knowledge that it takes to always make the best possible financial decisions, during the spring market season and beyond.
Whether you are accumulating wealth or investing for income, solidifying your retirement plan, or devising a distribution approach that meets your lifestyle and legacy goals, FourStar Wealth Advisors can help you define what is most important to you and then formulate the strategies that are best suited for your needs. As you look ahead to what the rest of the calendar year has in store, don’t hesitate to get in touch with us to discuss the state of the market, or to examine the financial strategies that will empower you and yours to live a full and complete life.
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This article is provided by FourStar Wealth Advisors, LLC (“FourStar” or the “Firm”) for general informational purposes only. This information is not considered to be an offer to buy or sell any securities or other investments. Investing involves the risk of loss and investors should be prepared to bear potential losses. Investments should only be made after thorough review with your investment advisor, considering all factors including personal goals, needs and risk tolerance. FourStar is a SEC registered investment adviser that maintains a principal place of business in the State of Illinois. The Firm may only transact business in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about FourStar’s registration status and business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov/
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