The Most Common Types of Fraud and How to Protect Yourself

October 24th, 2019


Hacking, Fraud, Identity Theft. According to the Federal Trade Commission, the number of cases reported are growing every year. Here’s how to protect yourself.


Social media fraud

Hacking social media accounts has happened for as long as social media have existed. While the experience can be embarrassing, the danger lies in the resulting vulnerability of your other accounts – think email, shopping, banking, etc. How many of your accounts are connected to one another? Keep in mind that if one gets hacked, the other won’t be far behind. To limit your risk, try these tips:

  • Update the privacy settings for all your accounts.
  • Choose strong passwords and change them frequently.
  • Be selective when choosing who to accept as a “friend” on social media.
  • Never give out private information over social media.
  • Use caution when using public computers or Wi-Fi.

Investment fraud

This type of fraud encompasses everything from affinity fraud (a fraudster preys on specific, identifiable groups like religious communities or the elderly) to pyramid schemes (members receive money by recruiting others instead of by providing investments or products). Know that if an offer sounds too good to be true, it is and that nothing is guaranteed. Keep these tips in mind:

  • Take the time to get to know your salesperson, even if you know them personally. Disciplinary histories of brokers and advisers are available for free though the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA)
  • Be wary of foreign or “off-shore” investments. If something goes wrong, it’s much harder to find out what happened and locate your money.
  • Most importantly: research before investing! There’s no reason to make quick decisions on investments.

Identity theft 

This type of fraud often tops the list of complaints reported to the FTC and other enforcement agencies. Thieves can access your information through low-tech methods like theft of purses or wallets, or through high-tech methods such as phishing emails or spyware. With so many opportunities for thieves to access your information, it’s incredibly important to be mindful of how you protect your data. Take these steps:

  • Keep up-to-date security software on your computers.
  • Use multi-factor authorization on your accounts (i.e. password and security questions).
  • Don’t click on links in unexpected emails, and certainly do not provide information through these links.
  • Review your credit reports and bank statements regularly for any suspicious activity.
  • Shred receipts, copies of credit applications, and other sensitive documents.

Debt collection scams 

It is important to know your rights when it comes to debt collection. The FTC enforces the Fair Debt Collection Practices Act (FDCPA), making it illegal for collectors to use practices that are deceptive, unfair, or abusive. Household debts such as credit card debt, auto loans, medical bills, student loans, and mortgage loans are covered under the FDCPA. Business debts are not. Keep in mind that debt collectors are not allowed to:

  • Contact you before 8:00 a.m. or after 9:00 p.m., unless you give them permission to.
  • Threaten you with violence or harm.
  • Use obscene or profane language.
  • Misrepresent the amount of money you owe.
  • Falsely claim legal action will be taken against you if it’s not true.
  • Try to collect interest, fees, or other charges in addition to the amount you owe unless the original contract or your state law allows it.
  • Take or threaten to take your property unless it can be done legally.

Imposter scams 

The most common scam reported in 2018 was imposter scams. These scams involve thieves pretending to be a family member or involve a well-known company or government agency.  The vast majority begin with a phone call promising a significant benefit or attempting to create a sense of urgency or fear. Since 2014, more than $450 million have been lost to imposter scams. To avoid this scam, try the following:

  • Never give out your social security number or account numbers over the phone.
  • Never pay anyone you do not know with a gift card; this is the preferred method of payment for scammers.
  • Be suspicious of unexpected calls from government agencies or financial institutions. When in doubt, hang up and call them back at a publicly listed phone number.

The best protection against fraud is to educate yourself. Explore the federal, trusted sources below for more information, and seek legal counsel when needed. 

The FTC on top frauds in 2018

The SEC on social media fraud

The SEC on investment fraud

The FTC on identity theft

The FTC on debt collection scams

The FTC on imposter scams

Legal, Investment and Tax Notice: This information is not intended to be and should not be treated as legal advice or tax advice. Readers should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel.