Online banking fraud: The most common scams impacting consumers and how CUs can help protect them

According to recent reports, more than 65% of people use some sort of digital banking service to manage their finances. Since the beginning of the Covid-19 pandemic, online banking fraud and credit scams have skyrocketed to levels unseen since the early 2000s with con artists preying on consumer fear and confusion surrounding these uncertain times. According to the Federal Trade Commission, in 2021, American consumers reported losing more than $5.8 billion to fraud, more than a 70% increase from 2020, and almost 2.8 million people filed a fraud report with about 25% of these scams leading to an average financial loss of $500. The true financial toll is even higher as many incidents likely were not reported.

Across the country, financial institutions, like credit unions, are seeing an increase in a wide variety of online scams, targeting all ages – from college students to senior adults. In 2021, imposter scams were the most prevalent form of fraud, accounting for more than a third of all reports filed, according to the FTC. In these scams, criminals often pretended to be someone else including a romantic partner, a relative in distress, a well-known business, a technical support expert, or even a government official in order to steal money or sensitive personal information from someone. Other online scams, involving check fraud, wire fraud, faulty loan offerings and more are currently growing in popularity among hackers and scammers right now.

With more people using digital services to manage their finances, and scammers using smarter and more believable con methods, financial institutions must stay on the pulse of the newest scam trends in order to protect their members from falling victim.

Right now, there are four major scams that financial institutions should be aware of and how they are targeting consumers.

Low-Rate Loan Offering Scams

Many criminals are utilizing the promise of a low-rate loan to steal people’s money and information. Typically, a consumer will receive an email or visit a website that is offering an uncharacteristically low-rate deal on a loan. These websites and emails are built to look legitimate and trustworthy enough to fool people, so consumers who don’t want to miss out on the opportunity for a low rate often forego doing any additional fact-checking or research to see if the offer is legitimate. Following that, people usually click a link in the email or a button on the website that takes them to a place where it asks them to input their personal banking information to either get a quote or start the loan process. The scammers then take the information input by the consumers and log into their bank account to cash a fraudulent check that eventually bounces.

Wire Fraud in Real Estate

Another scam being seen right now is wire fraud in real estate proceedings and transactions. Scammers will use already occurring real estate transactions to go around the buyer and hack the title company involved in the transaction. They then use this hack to make fraudulent wire transfers through the title company to make them more undetectable and make them seem legitimate if they are detected.

College Students as Mules for Fraudulent Checks

A popular, age-specific scam that is being seen right now is one where college students are being used as mules for fraudulent checks. With these scams, students between the ages of 18 and 24 are receiving spoof emails/messages that look like they are coming from someone they know like a friend, family member, or colleague. The message will usually ask the recipient to help the person they are pretending to be by opening a bank account and cashing a check, promising them a portion of the check money if they do it. The check, unknowingly to the student of course, is fraudulent, and after being cashed, the check eventually bounces, causing their account balance to go negative.

Fraud Spoofing Emails/Online Payment Scams

As previously mentioned, a lot of scammers are using imposter scams, where they pretend to be someone else. Right now, some con artists are taking imposter scams to the extreme, pretending to be banking institutions alerting their customers of fraud detected on their account. Customers will get a spoof email that looks like it is from their bank or credit union, saying that suspicious activity has been detected on their account and that fraudulent online payments have been made in their name. The emails often say that the person’s account is temporarily suspended due to the suspected fraud and asks them to provide online banking credentials to get it back, in addition to asking them to reverse the online fraudulent payments. Usually, they end up making payments to random online entities with their banking information now being out there for possible future use by the scammer.

Unfortunately, people continue to fall victim to these scams because they look and sound legitimate enough to make people trust them. Even further, some scammers are directly communicating with consumers during the scams and are training them on what to say and do when their banks inquire about unusual account activity. The scammers use the relationships they are spoofing to gain the consumers trust and make them distrust their financial institutions.

However, there are multiple, easy ways for financial institutions to protect consumers and avoid being scammed. As mentioned before, one of the easiest ways to do this is to stay up to date on the latest scams and cons.

  • Regularly updating your members on scams in their area to see which ones are popping up or by encouraging consumers to check their local bank or credit union website for a scams page that tells them what to watch out for, like the one we have at Neighborhood Credit Union.
  • To further protect consumers, tell members to NEVER give out their personal banking credentials to anyone, no matter what, and especially not online or via text. This may seem obvious, but it needs to constantly be repeated.
  • Additionally, encourage consumers to double check all communications they receive and all financial websites that they visit to make sure they are from legitimate, well-known sources.

Many financial institutions also have measures in place to protect their own members from scams and fraud. For example, Neighborhood Credit Union, a Texas, not-for-profit organization, works to protect its members and combat these scams through a variety of different methods. This includes flagging unusual activity and charges on members accounts and asking the members to verify them; verifying a member’s location whose account is showing access attempts by unknown, out of country IP addresses, and putting a hold on the account if it was not them; and closing an account where fraud is suspected, among other things.

As the amount of people using online banking services continues to increase, so will the prevalence and quality of online banking scams. Stay ahead of the trend and protect consumers from falling victim by staying up to date on the latest scams, letting members know to guard their personal banking information, and always inform them to always be cautious about banking related emails and websites.

Kelly Gidney

Kelly Gidney

Kelly Gidney leads the Internal Audit, Risk and Compliance areas for Neighborhood Credit Union. She graduated from the University of Texas at Dallas with a Bachelor of Science in Economics ... Web: Details