Special to The Dallas Examiner
While fake checks are often a common tactic of scammers carrying out an employment scam, Better Business Bureau has recently received information from Texas business owners that a new type of scam targeting small businesses is making rounds in multiple counties across the Lone Star State.
How the scam works
A local contractor or service provider is contacted by an individual who claims to live out of state and manages one or multiple properties that need work. Most often, landscaping or remodeling contractors are targeted by these con artists. After solidifying the project’s scope, the client mails a check to the business, which deposits it in their business account. Communication with the client is primarily through email or text; the contractor never physically meets with the potential client. The property in question is often abandoned or listed for sale, so there is no access to it. Reports to BBB indicate that these scammers target Spanish-speaking businesses at significantly higher rates.
Shortly after depositing the check, the client requests the money be returned through a nontraditional method, such as a wire transfer or mobile banking app. Since no work has been started, the business owner agrees and returns the money through the requested method. After providing the refund, the business does not hear back from the client again. In time, the business’s bank flags the deposited check as fraudulent and removes the funds from the account, leaving the business out however much they ‘returned’ to the client. Some businesses report that their account is permanently closed due to fraudulent activity, requiring them to open a new account at a different financial institution.
In another twist, some of these scammers provide a check that is $2,000-$5,000 more than what the business owner bid under the direction to use the extra money to pay other contractors that are working at the property. To be accommodating, many business owners agree. When the check is detected as a fake, they lose the money they paid the other contractor(s) in addition to their own losses. Often, the other ‘contractor’ paid by the business on behalf of the client is also fraudulent.
BBB business practices experts estimate they have received reports of this scam occurring in counties across Texas at least twice per week for the past two years.
How to avoid fake check scams targeting contractors
Do not fall for an overpayment scam. Only accept payments for the job bid by your business and avoid any client who overpays and requests you to pay other contractors supposedly working on the property. Also, be wary of requests from the client to return additional money through nontraditional means such as a gift card, wire transfer or mobile banking app.
Insist on communicating over the phone or video call at least once. Most scammers using this scam will claim that they are either out of state or otherwise unable to meet in person, but contractors should be wary of any client that also refuses to talk over the phone or video call at least once. When talking with the client over the phone, consider if the phone reception seems spotty or excessively loud or if the client seems to be in a rush to resume communications through text or email. If any or multiple of these exist, take the time to ask a few detailed questions about the property, such as its location or distinguishable characteristics. It may not be in the business’s best interest to accept clients who provide vague answers or become aggressive.
Verify the state of the property. Despite clients’ claims that they own the property, it is good practice for the business to conduct an on-site evaluation before providing a quote or estimate for the project. This will allow the business to properly assess the full scope of the project, as well as determine if the property is vacant or for sale. Scammers use the addresses for vacant properties for various scams and can easily locate these locations online for their schemes.
Do not provide refunds through nontraditional methods. Scammers know that payments made through wire transfers, gift cards and mobile banking apps are difficult, if not impossible, to reverse. Be wary of any client who insists on returns through these methods. When possible, only provide refunds for checks with another check. Business owners may need to explicitly state that refunds will only be provided by check to protect themselves from falling victim to this scam.
Spend the time to verify the authenticity of the check. Fake checks can be challenging to identify and may even pass an initial verification process by a bank. However, it will eventually be detected as a fake and can significantly impact a business’s operations, especially if it leads to account closure and the removal of thousands of dollars. BBB recommends businesses look for some of the hallmarks of fake checks. A few things to consider include:
• Does the check number at the top-right corner match the check number included at the bottom?
• Is the company’s or individual’s name or address misspelled?
• Is the check stock flimsy or suspicious?
• Does the check have the correct routing number at the bottom for the bank it is supposedly drawn on? Consumers can search for routing numbers for most banking institutions online.
Typically, banks will immediately provide a portion of the check as available funds until it has been verified. Think of immediately available funds as an advance, and if the check is found to be fake, the account holder is held liable to repay that advance. Businesses are encouraged to review their bank’s policies and processes for check verification and the portion of funds they make immediately available. Most banks take two or three business days to complete the verification process.
For more information and tips from BBB focused on preventing scams from impacting small businesses, visit BBB.org/SmallBusiness.