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financial scams

How to Avoid the Top Financial Scams Targeting Millennials

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Since the start of the coronavirus crisis, consumer protection organizations have reported an uptick in financial scams, including employment scams, identity theft, and student loan debt relief scams. Contrary to popular belief, it’s not just older folks getting duped by fraudsters, either.

“We find that, in general, younger people actually fall for scams more often than older people,” says Ezra Coopersmith, investigations coordinator for the Better Business Bureau (BBB), which tracks scams and fields complaints about unethical businesses. 

Some of the most common scams targeting young people include employment scams, which entice victims through phishing emails with dreamy remote job opportunities, and debt relief scams, which make false promises of debt relief for mortgages, student loan debt, or credit card debt. Both types of scam target common pain points, especially given the current economic downturn and record unemployment, says Coopersmith.

Millennials Can Fall Prey to Financial Scams Too

Millennials and Gen Zers are tech-savvy, internet fluent, and masters of caller ID. So, why are we giving bank account or personal information to scammers? 

“Scammers are often master manipulators, and one of the tools they use to get people to fall for scams is to manipulate that person into a heightened emotional state,” says Coopersmith. Insinuating that immediate action is necessary due to an expiring program or soon-to-pass law generates anxiety or excitement. 

“The scammer’s goal is to put you in a place where you’re making a decision with your heart and not your head,” says Coopersmith. That kind of desperate, emotional thinking only gets worse in times of hardship, like an economic downturn or pandemic.

The COVID-19 pandemic situation facilitates financial fraud for other reasons, too.

Since the start of the coronavirus outbreak, remote work has become the norm, so a promise of high pay for a work-from-home job (common in employment scams) doesn’t arouse suspicion like it used to, says Coopersmith. 

Common Red Flags of Financial Scams

Scams can come knocking in many guises, from telemarketing phone calls, to emails, to social media advertisements, to old-fashioned paper flyers. Michelle Grajales, an attorney for the Federal Trade Commission (FTC), which investigates and prosecutes scammers, has seen them all. Fortunately, she says, there are some common red flags for a scam artist at work. 

Unsolicited offers

According to Grajales, any cold-call about your loans or looking for financial information should raise suspicion. “And for employment scams, people often receive offers for an interview for a job they never applied for in the first place,” adds Coopersmith. “Always be really wary of miracle opportunities that are unsolicited.”

Requirements that you pay upfront

According to the FTC’s telemarketing sales rule, debt relief services cannot collect payments before they’ve resolved your debt. “If someone contacts you that you haven’t solicited, and says they can reduce your debt immediately for an upfront fee, chances are it’s fake,” says Coopersmith.

Claims of government or bank affiliation

This is common among student loan debt relief scams, which Grajales says almost always involve federal loans. Scammers often lie about their relationships with the Department of Education (DOE), calling themselves underwriters or partners. In reality, the DOE only works with specified loan servicers, all of which are listed clearly online

Promises of fast money

Financial scammers often claim to have access to a special investment algorithm or a sneaky legal loophole. In other instances, they’ll claim you’ve been pre-approved for an offer without ever looking at your credit, which is always suspicious, Coopersmith says. 

Offers to negotiate your loans

Be wary of any promise that seems too good to be true, says Grajales, especially regarding federal student loans. Loan forgiveness programs take years, and income-driven payment levels are set by federal law. Those things simply aren’t negotiable, says Grajales. Plus, consolidating your federal loans or changing your repayment plan is free through the DOE website. “There’s no company that’s going to get you a better deal than what you can get by applying yourself,” she says.

A sense of urgency

Scammers want victims to act rashly. In reality, you should never have to make a snap decision about your finances. Student loans in particular are rarely subject to change. If a solicitor mentions a looming deadline or a new or changing law, be suspicious, recommends Grajales. 

Still Not Sure If It’s a Scam? 

Take your time to mull over an offer, ask questions, and research the financial institution you’re considering. Sometimes scammers will show up on BBB reports or online reviews. But don’t rely on those, Grajales cautions—bad actors change their company names frequently to keep negative reports from showing up.

“The advice I always give is to hit pause,” says Coopersmith. If the solicitor says they’re with a government office or loan servicer, call that government office or loan servicer directly to ask if the offer is legitimate, he recommends. The trick: “Don’t use the contact information or phone numbers they give you. Always use contact information that you find on your own,” he says.

According to Grajales, the point of no return occurs when you hand over your social security number, date of birth, FSA PIN number, or payment information. Con artists can use that personal and account information to take your money, sell your contact information to other solicitors, or hack into your accounts and change your passwords. Do your due diligence before sharing anything online or over the phone.

What to Do If You’ve Been Scammed

  • Prevent further damage. If it’s an employment scam, stop work right away. If it’s a debt relief scam, call your loan servicer or creditor to find out what’s going on with your debt and make sure your loans are not in default, Grajales recommends. 
  • Stop any payments. Call your bank or credit card company and stop any electronic payments that might be going to the scammer. Banks and credit card companies will sometimes work with you to refund some of your loss, as well, says Grajales, so it’s worth asking about their fraud assistance policies. You may also want to request a new account number or credit card number if that information has been compromised.  
  • Check your credit report. You get a free credit report once per year. Look for entries you don’t recognize. If you’ve been paying a company to handle your debt, make sure the balance of your loans hasn’t gone up.   
  • Report scams to law enforcement. Even if you’ve made peace with your losses, report the scam. “Whether it’s the BBB or the FTC or the FBI, we only know as much as people tell us,” says Coopersmith. “For the most part, we can’t get ahead of scams and warn people until that first person gives us a heads up. It’s the only way to protect people.”

Disclaimer: The opinions expressed by the interview subjects are not necessarily those of Earnest.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.