Old-school phone scammers make comeback with modern twist

Robo-dialing makes fraud prospecting easier

You confine your online shopping to secure sites. You inspect the ATM for sketchy-looking attachments. You spurn emailed offers of riches from foreign potentates. But even as you develop new defenses to modern scams, don't let down your guard to a traditional source of fraudulent pitches: your phone.

These days, crooks are more likely to contact you by phone, rather than through websites or emails, according to the National Consumers League (NCL). The crooks have added some modern twists, initiating their thievery by robodialing every number they can.

"The technology to operate boiler rooms is very cheap," says John Breyault, vice president of public policy, telecommunications and fraud at the NCL. "Scammers can call millions of people with a click of the mouse." It's like being able to shake an entire orchard to break free a few ripe prospects.

Phone scams trick consumers into losing money

By using Internet calling software, fraudsters can ring you from almost anywhere in the world and tinker with caller ID so it looks like the calls are coming from the United States. Once they have you on the line, the scammers try to convince you to fork over cash, disclose personal information or give them command of your computer with all the personal information it contains.

Through their efforts, these fraudsters are raking in big bucks. From the summer of 2013 to the summer of 2014, an estimated 17.6 million Americans lost $8.6 billion from phone fraud, a study for Truecaller found. Truecaller offers a caller ID app for smartphones.

Phone fraud on the rise
Fraudulent calls may pop up on your cellphone or landline, with no regard for whether your phone is registered on the federal Do Not Call list.

In 2013, the telephone was the first point of contact for 36 percent of the fraud complaints filed with Fraud.org, which is operated by NCL. That's up from 25 percent of complaints in 2012 and 30 percent in 2011 (see chart).

Breyault says telephone fraud may be on the rise because phone calls "are more intrusive. People pick up the call." Scammers also may be shying away from email because it may be getting harder to avoid anti-spam filters, he says. "Scammers go to the point of least resistance."

Wire transfers are the scammers' favorite way to collect money, used in 42 percent of the complaints, according to the Fraud.org study. That's closely followed by credit cards, with 35 percent. No other form of payment breaks into double digits.

Scams run the gamut
Scam techniques vary, from fraudsters purporting to be Internal Revenue Service representatives, to scammers who call your phone once and hang up, leaving you with hefty charges if you call back.

Some of the most common in 2014 involve scammers who claim to work for the IRS, or from Microsoft technical support, says Matt Anthony, vice president of marketing at Pindrop Security, which provides fraud detection systems for call centers.

Scammers go to the point of least resistance.

-- John Breyault
National Consumers League

Fraudsters posing as IRS employees call victims, saying they owe tax money and must pay up immediately. The callers often target immigrants, who may be threatened with arrest or deportation, or having their driver's license suspended if they don't fork over the cash.

From January through mid-August, the Treasury Inspector General for Tax Administration had received 90,000 complaints about the scam, and had identified around 1,100 victims who had lost about $5 million. The victims are told to use a wire transfer or prepaid debit card to pay up.

Caller ID makes it look like the calls originated from the IRS, and the callers may already have the last four digits of the victim's Social Security number. Once the victims hang up, they may receive a call from someone who purports to be from local law enforcement or the department of motor vehicles, the IRS warns.

Pindrop recorded a call from a scammer to someone that the fraudster thought was a victim. The supposed victim was told to send money immediately, and the fraudster stayed on the phone for nearly an hour till the money was supposedly transferred. "They had their pitch down," Anthony says.

In other cases, a caller will claim to be from Microsoft's technical support department and say the company received an alert from the victim's computer saying that it was infected with a virus. The victim is told to go to a certain website, and when he does, the scammers get control of the victim's computer, Anthony says.

Also popular is the "one-ring" scam, says Alan Mamedi, CEO of Truecaller. In these cases, the victim's phone rings once, with the call coming from what looks like a domestic number she doesn't recognize. It's actually an international, pay-per-call number. When the victim calls the number back, she's immediately charged $19.95 for placing the call, and up to $9 per minute after that. "The number shows up as a regular 10-digit number, making the person assume the caller is from the U.S., even if it's often from somewhere like Jamaica or the Dominican Republic."

The fastest-growing phone scam is the refund and recovery scam, according to the NCL. These brazen crooks buy, sell and trade the names of those who already have been fraud victims, and say they can help the victims recover the money they've already lost. But, of course, the victims need to pay a fee for that assistance.

Fraudsters also may target people who make inquiries online about payday lending. The scammers set up fake websites, then use that information to contact those they aim to defraud, Breyault says.

Phone fraud rings up big bucks
The average phone scam victim lost nearly $490, Truecaller found in its study of more than 2,000 adults. Of those who fell for a phone scam, 71 percent were male and just 29 percent were female.

Among those who checked their bill after receiving a suspicious call on their mobile phone, 37 percent found fraudulent charges, the study found.

The phone is making a comeback, but in a bad way. After falling behind the Internet, the phone is again the most-common method by which scammers contact potential victims.
Method of first contact 2011 2013
Telephone 30% 36%
Internet 35% 29%
Email 20% 20%
Postal mail 12% 11%
Other* 3% 3%
Source: National Consumers League/Fraud.org annual compilation of consumer complaints
*Other includes in-person, TV, radio, print, fax

If you find fraudulent charges, you can often contest them with your telephone company, Mamedi says. But you may have to spend a long time on hold with customer service, trying to address the problem. In the worst case, you may find the scammers have used your information to steal your identity.

Certain scammers, such as those claiming to be from the IRS, specifically target new immigrants, says Eva Velasquez, president of the Identity Theft Resource Center. Scammers also have taken advantage of the rollout of the Affordable Care Act to target the immigrant population.

If someone says they're from the IRS, the immigrants often think: "This is a government authority. If the government says you need to do something, you need to do it," Velasquez says.

Experts think these scammers buy legitimate telephone lists sold to companies that want to market their products to Hispanics of a certain age, Anthony says.

The bad guys also may use your social media accounts to learn more about you. "They look for information to help further the attack" Anthony says.

Keep your guard up
To protect yourself from falling prey to scammers, "you should just naturally be suspicious," Anthony says.

Mamedi warns, "Don't pay supposed debts over the phone, especially if you're being called about something out of the blue."

If someone claims to be from an institution such as your bank and asks for your personal information, Anthony recommends telling the caller you are going to hang up and will call the bank yourself. You should find the bank's number online or in the phone book, and then make your call. "A legitimate business will be fine with it. A fraudster will fight it," he says.

Another option is to not answer calls from numbers you don't recognize. Fraudsters won't leave a voice mail, Anthony says.

You can also check online or through a service such as Truecaller to see if the phone number has been reported as spam, Mamedi says. Be wary of all phone numbers you don't recognize, even if they appear to come from a local caller. Caller ID can easily be manipulated, so what appears to be a local call might originate overseas. "Just because they say they're calling from close by doesn't mean they are," Breyault says.

Finally, report suspicious calls to law enforcement and at Fraud.org, Breyault says, "to help law enforcement put together a pattern."

See related: Beware of advance-fee credit card scams, Seniors vulnerable to credit card fraud, CFPB expands complaints system to prepaid cards, pawnshops

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Updated: 12-12-2018