Caveat emptor!

Why am I writing about this? Because I was scammed again two days ago, even though I consider myself a savvy consumer. As a result, I immediately cancelled the credit card I used and am waiting for a new set of cards to come by mail. I had to cancel the same card two months ago for the very same reason.

I call these cases "soft fraud." This is because the fraudster claims that what happened was just an error and refunds the money if you complain. Or he does not proceed—at least not quickly enough before you cancel the account—to empty your bank account or charge up to the credit limit on your credit card. 

I also assume that most people just chalk it off as a loss, doing nothing about it—and this is where the fraudster's profit is coming from.

This type of fraud proliferates these days to such an extent that most companies no longer publish their telephone numbers and want you to make a "verified" contact online. And if you want to talk to a live agent in the customer service, it is an involved process requiring multiple verifications.

There appears to be no way at this time to prevent such scammers from continuing their operations. I submitted a complaint to the Federal Trade Commission in the portion of their website dealing with fraud. In a few days, I received a response: They just file the complaints but do not investigate them. The local police tell me that such an investigation would not be within their purview. It remains to be seen what the FBI is willing and able to do about fraudsters like this after I submitted the Form IC3 to IC3.gov.

As consumers, we are therefore left to our own devices: Caveat emptor!

Here are three kinds of such "soft fraud."

1. A typical foreign fraudster (perhaps Chinese) has an extensive U.S.-based website offering various kinds of equipment and goods. You can research these companies on the internet, and you could well find that 

many receive a very low rating as to the trustworthiness of the company. (Not all Chinese companies are like that, particularly if they have warehouses in the U.S. and the shipping time is just a few days—and not weeks as it would be from China.)

Two years ago, I ordered two kayaks from a company like that for a very low price. That should have been a red flag. But they gave me a tracking number, and I could track the movement of the shipment from China to the U.S.

The problem was that instead of two kayaks, they sent me a T-shirt. 

I had paid them by PayPal. When I complained to PayPal, PayPal refunded my money within 30 minutes. When I complained to the company, they claimed an error and promptly refunded the money to PayPal, which naturally kept the money.

2. I called our internet provider and talked to an agent. He told me that I was likely paying too much every month; they were willing to lower my monthly charge, and he would give me a refund for the past several months.

In order to do that, the agent asked me to allow him to share my screen with him, and he installed a little piece of software on my computer. (I want to explain that this is nothing unusual for internet companies to do that. Their customer service sometimes asks us to do that to help us solve communication and other problems.)

Little did I know that I was not talking to our internet provider. The agent just pretended to be our internet provider after I found on the internet a telephone number that was purported to be our internet provider.

Fraudsters like this establish a number of telephone numbers that are listed as telephone numbers for legitimate companies. After they call the number a sufficient number of times, this telephone number then appears in internet searches as a number for the legitimate company.

The fraudster then asked me to input the amount of the "refund" he was giving me, and claimed that the refund went directly into my bank account. That was the first red flag. He obviously had some information about me that they bought on the "dark web," but not all of it.

When I input the amount of "refund," the number came out ten times larger (i.e., with an added zero). The agent said it was no problem, they just refunded me more money by mistake. He wanted me to go to the cash machine, withdraw the excess amount of money, and then he would give me instructions on where to send it. This is when I realized this was a fraud and I ended the call.

3. Two days ago, I made a reservation directly with a hotel in West Virginia online. I got a guaranteed rate of $101 with no sales tax. That should have been a red flag, but I thought the sales tax would be handled later. But when I received a confirmation of my reservation by email, the cost was $150.40 and no sales tax again. So I called the telephone number of the hotel from the website where I made a reservation.

They said that the reservation was non-refundable and explained to me the various "junk" fees they added. This is when I realized it was some kind of fraud.

So I made another legitimate reservation using Expedia.com. The cost was $101 a night plus tax. Then I called the hotel at the number I got from the Expedia reservation. (All the other telephone numbers I found on the internet were previously answered by the same fraudster.)

The hotel already had my reservation, made by the fraudster, but had not yet received any money. They were happy to cancel this reservation.

I also called my bank and closed the credit card account. The bank assured me that since I closed the credit card account while the charge was only pending but not posted, the bank would not pay the fraudster. This is the second time I have done it in that many months. 

The bank is sending me two new cards with a new account number.

What these scammers do is they create a website that looks exactly like the website in question—the hotel in this case. When you make a reservation on the website, the fraudster instantly has your credit card information, including the three-digit code from the back of the card.

In addition, they did what the scammer in Item 2 above did: They established several telephone numbers, pretending to be the hotel telephone number.

Here is at least one example of a "hard fraud."

A year ago, a Chinese scammer tried to open a credit card in my name at Chemical Bank. The application was flagged by LifeLock, which contacted me, and then Chemical Bank cancelled the application. (We get a LifeLock protection for two people for free from AOL, a value of $100 a year.)

I wanted to know more about the fraudster, so Chemical Bank sent me a form to fill out. The form had to be signed by the local police. The Sheriff's deputy who did it for me said it was likely a waste of time. He was right. Chemical Bank responded that, upon investigation, they would not release any information to me.

I surmise that the fraudster had probably only partial information on me, such as the name, address and the telephone number or email that he bought in bulk on the "dark web," and that is all readily available public information. Chemical Bank likely made the mistake of accepting the application based only on this publicly available information, which they should never have done.

Von Mises is an occasional column on economics, written by Ivan Orisek of Forestburgh, NY. It’ll look at money, the way money works in America, and show you the numbers behind the headlines.