Contract phone scam costs victims thousands: Internet Scambusters #617
A new phone scam in which crooks offer cash to people for taking out multiple wireless contracts is targeting students and other cash-strapped people.
Con artists trick victims into signing up for phones, which they hand over to the crooks in return for payment, believing they can then cancel the contracts -- but they can't.
We explain all in this week's issue, as well as signposting what to do about one of the latest hacking scandals.
Now, here we go...
"Credit Mules" Lined Up for Latest Phone Scam
Cash-strapped people, including students, other financially disadvantaged and homeless people, are falling victim to a new cell phone scam known as credit muling.
A few weeks back, in New Student Scams Exploit Need for Cash, we wrote about how students were being lured into selling their debit or credit cards to crooks and then reporting them as stolen so they don't get lumbered with the bill when the cards are used for fraud.
The latest variation uses cell phones as the fraudulent cash generator.
It works because many mobile service providers offer cell phones at substantial discounts to their normal retail price when a customer signs up for a two-year contract.
Victims are paid by the scammers to sign up for several contracts at different stores.
In some cases, the fraudsters will actually drive their victims around to phone stores to sign several contracts.
The crooks, also known as "recruiters," give them the money to pay for the discounted phones, plus a commission payment for themselves, usually around $100 total, when they hand over the phones.
Victims are told they can cancel the contract within 30 days, which they often can.
But there's one big drawback: The phone contract can only be cancelled if the customer returns the phone, which, of course, they no longer have.
The end result is that, instead of making a few dollars by taking part in the illicit deal, victims are lumbered with the full replacement cost of the phone plus a handful of two- or three-year phone subscription contracts for which they could find themselves paying several hundred dollars every month.
In most cases, the victims simply cannot pay, which can leave them on the receiving end of debt collection services and a negative listing on their credit records that can take years to clear, if ever.
And of course, because the real crooks used the victims as go-betweens -- "mules" in criminal lingo -- there's no way for law enforcement to track them down.
What happens to the phones?
The crooks "unlock" them, which means removing the codes that tie them to individual cell phone service providers and then sell them for much more than their victims paid.
"Unlocked" phones can be worth quite a bit more than "locked" ones because they can be used on just about any service.
And, according to the Federal Trade Commission (FTC), they can even fetch thousands of dollars when sold abroad.
Action: This trick is easy to avoid. There's no legitimate reason why anyone would want to pay you to take out multiple phone contracts, or even a single contract in your name and then to hand over the phone to them.
So, simply refuse any such "opportunity" that comes your way.
Also, be warned that taking part in this scam could land you in legal as well as financial trouble.
If there's any suggestion that you knowingly took part in a fraud, you could face criminal charges.
If you are approached by someone who offers you money to take out a wireless phone contract or if you have fallen victim, the FTC wants you to complete an online complaints form to help protect others.
Start here at the FTC Complaint Assistant.
It's so sad that the people who can least afford to be duped are often the crooks' favorite target.
A Colorado TV station that first raised the alert on this scam reported one 19-year-old victim as saying: "I thought it was amazing money. I had rent due the next day and I was looking to pay it. I was very desperate."
The young women said she was "in the hole for about $6,000," while another victim found he owed phone companies around $2,000.
Always be wary if someone offers you what seems to be an easy way to make money. They could be lining you up as a credit mule for a phone scam or other fraud.
Alert of the Week
Is your email address -- and perhaps other personal details -- among the 500 million reported to have been stolen earlier this year by Russian hackers? And what should you do if it is?
Well, the bad news, according to the Department of Homeland Security (DHS), is that it's virtually impossible to know if you're a victim, so you should change your password on any account that contains any important financial or health information.
And if the account has the potential for extra security through what is known as "two factor authentication" (basically a password plus another code), you should use it.
Learn more about this hack and what you can do about it from the DHS OnGuardOnline website.
That's all for today -- we'll see you next week.