Thinking about buying or selling a used car?
You may want to proceed with caution so you don’t fall victim to a fake overpayment scam that uses fraudulent checks.
“I could see how so many people could easily fall for this,” Matt Neff, who was recently trying to sell his 1948 Packard online, told KHOU 11 Houston.
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Neff learned firsthand how a scam like this can happen. Here’s what you need to know so it doesn’t happen to you.
How the fake ‘overpayment’ scam works
This type of scam typically takes place via online marketplaces (rather than in person) where the buyer overpays for the product you’re selling.
“The buyer may claim to have seen the listing on Craigslist or on Facebook Marketplace, and declare that they want to buy it for more than you are asking just to ensure no one else buys the listing before they do,” according to Chargebacks911.
Or, they might say they overpaid to cover shipping and handling or other fees. Whatever the excuse, they follow up by asking you to refund the overpayment to a third party.
In the meantime, they’ve sent you a check and you’ve sold them your car. When, several days later, the bank processes the check, you’re informed that the check was fraudulent — but the fraudster is already in the wind and you’re on the hook for the money.
This is what happened to Neff, when a potential buyer sent him a check for more than his asking price and then asked him to refund the overage to a shipping company.
“And sure enough, 10 days later it came back as a counterfeit check,” he told KHOU 11.
It can also happen to buyers. Dayja Wallace nearly lost $1,200 when she tried buying a used car online. In her case, the seller used a sense of urgency to push the sale forward, saying that their son had passed away and they wanted to “hurry up and sell the car,” she told KHOU 11.
The seller suggested that Wallace pay a shipping company up front to speed up the transaction and the seller would then send a check to Wallace.
A fake check can look remarkably like a real one — and in some cases it may actually be real, but it belongs to someone whose identity has been stolen.
“It can take weeks for a bank to figure out that the check is a fake,” according to the Federal Trade Commission (FTC). “Even if you see the funds in your account, that doesn’t mean it’s a good check. Fake checks can take weeks to be discovered and untangled. By that time, the scammer has any money you sent, and you’re stuck paying the money back to the bank.”
Even if you were unaware that you were being scammed, you could still be responsible for replacing the funds.
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Red flags every used car seller or buyer should know
Summer is often the peak car buying season, according to Premier Auto Group. “Families often seek to purchase vehicles before the school year starts. While you can find deals, prices may be higher due to demand.”
Even if prices are higher, beware of customers who offer to overpay or ‘accidentally’ send you more money than the asking price.
“This is a huge red flag, and you should respond by rejecting any transaction with this customer. This is doubly true of any customer who offers to pay your transaction fees,” warns Chargebacks911.
Indeed, you may want to avoid accepting checks altogether. Instead, use a credit card, which can help protect you from fraudulent transactions (most major credit card companies have zero-liability protection). And don’t forward funds to a third party for any reason.
“Customers that ask you to transfer any amount of money for any reason should be flagged as potential fraudsters and their transactions immediately canceled,” advises Chargebacks911.
Other red flags include a sense of urgency and/or not wanting an in-person viewing (which is unusual for a major purchase like a car). You should also be wary if you’re feeling pressured to use an escrow service you’re not familiar with — fraudsters can set up a fake escrow company or even pose as a legitimate one.
“Be wary the moment a seller begins to stipulate the escrow site that must be used to complete a transaction. That is your time to run a thorough scrutiny on the website before settling for it,” says Escrow.com. You should also avoid any services that require payment through untraceable methods.
If you think you may have been targeted by an overpayment scam, report it to the FTC and your state consumer protection office.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
