FTC Warns of 'Check Overpayment' Scam

Online Sellers Particularly Vulnerable

page out of a vintage children's book
FTC Warns of Check Overpayment Scams. (Getty Images Archive)

The Federal Trade Commission (FTC) is warning consumers of a dangerous and growing swindle called the “check overpayment” scam, now the fifth most common telemarketing fraud and the fourth most common Internet scam ever reported.

In the check overpayment scam, the person you are doing business with sends you a check for more than the amount they owe you, and then instructs you to wire the balance back to them.

Or, they send a check and tell you to deposit it, keep part of the amount for your own compensation, and then wire the rest back for one reason or another. The results are the same: the check eventually bounces, and you’re stuck, responsible for the full amount, including what you wired to the scammer.

Typical victims include persons selling something over the Internet, being paid to do work at home, or being sent “advance winnings” in a bogus sweepstakes.

The checks in this scam are fake but they look real enough to fool most bankers.

Look Out!

The FTC offers the following tips for avoiding the check overpayment scam:

  • Know who you’re dealing with – independently confirm your buyer’s name, street address, and telephone number.
  • Never agree to wire back funds to a buyer -- a legitimate buyer will not pressure you to do so, and you have limited recourse if there is a problem with a wire transfer.
  • If you’re selling something over the Internet, say “no” to a check for more than your selling price, no matter how tempting the plea or convincing the story.
  • Resist pressure to “act now.” If the buyer’s offer is good now, it should be good when the check clears.
  • If you accept payment by check, ask for a check drawn on a local bank or a bank with a local branch. You can visit that bank branch to determine if the check is legitimate.
  • There is no legitimate reason for someone who is giving you money to ask you to wire money back.
  • Consider an alternative method of payment, such as an escrow service or online payment service. If the buyer wants to use a service you have not heard of, be sure to check it out to be sure it is reliable – check its website, call its customer service hotline, and read its terms of agreement and privacy policy. If you do not feel comfortable with the service, do not use it.

The Lottery Winner Version

In another version of this scam, the victim is sent a fake check for “foreign lottery winnings,” but is told they need to wire the sender the required foreign government’s taxes or fees on the prize before they can cash the check. After sending the fees, the consumer tries to cash the check, only to be told the sender is trapped in a foreign nation with no way to produce the cash.

The FTC warns consumers to “throw away any offer that asks you to pay for a prize or 'free' gift; and do not enter foreign lotteries – most solicitations for them are fraudulent, and it is illegal to play a foreign lottery through the mail or by telephone.”

Resources

More advice on how to be on guard against Internet fraud is available at OnGuardOnline.gov .

Consumers are asked to report check overpayment scams to their state Attorney General, the National Fraud Information Center/Internet Fraud Watch, a service of the National Consumers League or 1-800-876-7060, or the FTC at www.ftc.gov or 1-877-FTC-HELP.