Each year, more than 1.5 million taxpayers obtain refund anticipation loans (RALs). This year, the number may be higher as a result of the government shutdown. While, RALs provide faster access to your money, they come with high fees and should only be used as a last resort. These “cash advances” are a potential for scams; before using these loans, take these actions:
- Assess the cost. While some national tax chains promote this service as a “free” cash advance, fees may apply for applying for the advance, checking your credit, and transferring the money to you. Costs for your refund advance check range from $29 to $65. If your refund is on a prepaid debit card, there will likely be additional fees.
- Beware of loan terms based on timing. Additional charges may occur if your refund is delayed.
- Compare other options. Seek less expensive, small-dollar, short-term loans from a community bank or credit union, or a zero-percent credit card. A $35 charge to defer a $350 tax preparation fee for two weeks has an APR of 174 percent.
- To avoid late fees for bills, contact your creditors. Utility companies and medical providers may offer no-cost extensions or no-cost payment plans.
Always be sure you are doing business with a reputable tax preparer. Check credentials and references. Avoid tax preparers who charge fees based your refund amount, or who deposit your refund in their bank account. Another fraudulent activity is filing false information to increase the amount of the refund.
For additional information on tax refund advances, click here.
- Have students search online for costs for refund anticipation loans.
- Have students prepare a video presentation on avoiding refund anticipation loans.
- What advice would you give a person planning to obtain a refund anticipation loan?
- How might community organizations and government agencies assist people who are considering a refund anticipation loan?
What are some signs that a romance scam could be taking place?
- a new love living far away requests money or use of your credit card number
- being asked to sign a document giving a new romantic interest control of your finances
- a new sweetheart wants you to open a joint bank account with them
While romance scammers usually focus on single, older people, anyone seeking a new relationship is a possible target. These scams can happen in person, but more often through social media, dating websites, smartphone apps. These scams happen when a new love pretends to be interested in you as a way to get your money. In fact, they may not even be who they say they are.
Beware of Cupid’s arrow striking your wallet instead of your heart! To protect you, friends, and family from romance and other scams, consider these actions:
- Avoid giving a new friend access to credit cards, bank accounts, or other financial assets.
- Report crimes or financial exploitation to local law enforcement agencies or to Adult Protective Services (APS); information available at gov.
- Contact your state attorney general and the Federal Trade Commission to report cases of financial abuse.
For additional information on romance scams, click here.
- Have students create and present possible scam situations to create awareness among various potential victims.
- Have students create a visual presentation (using computer software or a poster) to communicate actions to avoid scams.
- What are common warning signs that may indicate that a possible scam is taking place?
- Describe actions that might be taken to avoid various scams and frauds.
The Internet has made our lives easier in so many ways. However, you need to know how you can protect your privacy and avoid fraud. Remember, not only can people be defrauded when using the Internet for investing; the fraudsters use information online to send bogus materials, solicit or phish.
Here’s what you can do to protect yourself when using social media:
Privacy Settings: Always check the default privacy settings when opening an account on a social media website.
Biographical Information: Consider customizing your privacy settings to minimize the amount of biographical information others can view on the website.
Account Information: Never give account information, Social Security numbers, bank information or other sensitive financial information on a social media website.
Friends/Contacts: Decide whether it is appropriate to accept a “friend” or other membership request from a financial service provider, such as a financial adviser or broker-dealer.
Site Features: Familiarize yourself with the functionality of the social media website before broadcasting messages on the site. Who will be able to see your messages — only specified recipients, or all users?
For More Information, click here.
- Ask students to make a list of their social media accounts. How do they protect their accounts from fraudsters?
- Why do many social media websites require biographical information to open an account?
- Why is it important to limit the information made available to other social media users?
- Is there an obligation to accept a “friend” request of a service provider or anyone you don’t know or do not know well?
- Why be extra careful before clicking on a link sent to you even if by a friend?
Natural disasters create a need for unique actions. After physical safety is assured, some of the activities related to finances include:
- contacting your insurance company – request a copy of your policy, take photos and videos to document your claim.
- registering for assistance at DisasterAssistance.gov or call 1-800-621-3362.
- talking with your mortgage lender and credit card companies since you may not be able to make upcoming payments on time.
- contacting utility companies to suspend service if you will not be living in your home due to damage.
Beware of various scams that surface after natural disasters. These frauds can include phony repairs, deceptive contractors, requiring up-front fees, fake charities, and misrepresenting oneself as an insurance company agent or government representative to obtain personal information.
Assistance for the personal and financial chaos created by a hurricane or other natural disaster may be obtained from these organizations:
For additional information on financial actions for disasters, click here.
- Have students role play situations that might require actions such as those described in this article.
- Have students create a video with suggestions to take when encountering a natural disaster.
- How might the advice offered in this article be communicated to people who are victims of a natural disaster?
- Describe common mistakes people might make when encountering a natural disaster.
The FINRA Investor Education Foundation issued a new research report, Non-Traditional Costs of Financial Fraud, which found that nearly two thirds of self-reported financial fraud victims experienced at least one non-financial cost of fraud to a serious degree—including severe stress, anxiety, difficulty sleeping and depression. While the Stanford Financial Fraud Research Center estimates that $50 billion is lost to financial fraud every year, the FINRA Foundation’s innovative research examines the broader psychological and emotional impact of financial fraud.
“Fraud’s effects linger and cause distress well after the scam is over. For the first time, we have data on the deep toll that fraud exerts on its victims, and the results are sobering. This new research underscores the importance of the FINRA Foundation’s work with an array of national, state and local partners to help Americans avoid fraud, and assist consumers who have been defrauded,” said FINRA Foundation President Gerri Walsh.
The research report found that:
- nearly two thirds (65 percent) reported experiencing at least one type of non-financial cost to a serious degree; and
- most commonly cited non-financial costs of fraud are severe stress (50 percent), anxiety (44 percent), difficulty sleeping (38 percent) and depression (35 percent).
- Beyond the psychological and emotional costs, nearly half of fraud victims reported incurring indirect financial costs associated with the fraud, such as late fees, legal fees and bounced checks. Twenty-nine percent of respondents reported incurring more than $1,000 in indirect costs, and 9 percent declared bankruptcy as a result of the fraud.
Additionally, nearly half of victims blame themselves for the fraud—an indication of the far-reaching effects of financial fraud on the lives of its victims.
For more information, click here.
- Ask students to list a few suggestions to protect themselves from financial fraud.
- Explain how FINRA can assist consumers who have been the victims of financial fraud.
- What are a few indirect financial costs associated with funds?
- Why nearly half of victims blame themselves for being victims of financial fraud?
- How and where should you report financial fraud?
Don’t Stand by…..Speak Up!
Have you ever witnessed something that you knew was wrong and wondered if you should report it? Did you want to say something, but didn’t because you were afraid of negative consequences? Don’t be afraid, because there are federal laws to protect you. Indeed, as a bystander, you can play an essential role in preventing violence, wrongdoings, and fraud.
Reporting information or activity that you suspect is illegal, dishonest, or false is your right. Reportable violations could be abuse of authority, gross waste of funds, a specific danger to public health or safety, or gross mismanagement.
Social Security’s programs were originally created to serve the American public, and 80 years later they still provide critical support to people of all ages. As good stewards of the tax dollars, Social Security Administration designs its systems to protect against fraud, waste, and abuse. However, its systems can’t catch everything. And that’s where you can help. Report wrongful acts and protect lives as well as taxpayers’ dollars.
For more information, click here.
- Ask students to comment on the statement: “Nearly 70 percent of consumers believe the Medicare program would not go broke if fraud and abuse were eliminated.”
- What would YOU do if you suspected fraud or other wrongdoings, including wasting taxpayers’ dollars?
- Social Security Administration (SSA) will pay about $887 billion in Social Security benefits to almost 60 million individuals in 2015. What specific tools the SSA uses to fight fraud and protect taxpayers’ dollars.
- How does the SSA investigate people who provide false, incomplete, or inaccurate information to defraud the government?
On May 28, 2015, the Securities and Exchange Commission announced fraud charges against William Quigley. He is accused of creating a scheme to steal from investors and from a brokerage firm where he worked as the director of compliance.
The SEC’s Enforcement Division alleges that was involved in a scheme to solicit investors to buy stock in well-known companies or supposed start-ups on the verge of going public. The SEC alleges that:
- The securities were never purchased for the investors.
- Quigley wired the money out of the country or he withdrew it from ATM’s near his home.
- he had accomplices, two brothers who live in the Philippines.
For more information, click here.
- Have students prepare a position paper on how to protect themselves from investment fraud.
- Have students go to the Securities and Exchange Commission website (sec.gov) to learn how SEC protects investors and maintains fair, orderly and efficient markets.
- How can federal, state, and local governmental agencies protect investors from investment fraud?
- What punishment should be meted out to investment fraudsters?
Phone calls from criminals impersonating an Internal Revenue Service agent are the most common and serious tax scams reported by the IRS. Taxpayers should be aware the IRS never calls demanding payment or to ask for a credit card; the agency will first make contact by mail.
Phishing involves a taxpayer receiving an unsolicited email trying to obtain financial or personal information. These phony emails often look very official with an IRS logo. Tax-related identity theft occurs when a stolen a Social Security number is used to file a tax return for a refund. Fraudulent tax preparation services prey on innocent taxpayers with promises of large refunds. Be sure to investigate the credentials of the tax preparer and make sure the preparer will be available after April 15. Avoid tax preparers who base their fees on a percentage of the refund or promise a large refund.
Other common tax scams include inflated refund claims, fake charities, filing false documents to hide income, abusive tax shelters, falsifying income to claim tax credits, and excessive claims for fuel tax credits.
For additional information on tax scams, click here:
- Have students talk with others to obtain information about actions taken to file their taxes.
- Have students prepare a list of warning signs of tax scams.
- What attitudes and behaviors can result in a person being a victim of a tax scam?
- What actions can taxpayers take to avoid being a victim of a tax scam?
Millions of people serve as fiduciaries, someone who manages money or property for another person who is unable to do so. This responsibility provides caring assistance while also protecting the person from potential scams and fraud. Many older Americans experience declining capacity to handle finances, which can make them vulnerable. The main responsibilities of a fiduciary are to: (1) act in the person’s best interest, (2) manage money and property carefully, (3) keep money and property separate from own, and (4) maintain good records.
The Consumer Financial Protection Bureau (CFPB) recently published four guides to help financial caregivers, particularly those who handle the finances of older Americans. These guides are designed for those who serve as agents with power of attorney, a court-appointed guardian, a trustee or as a government fiduciary, such as a Social Security payee.
The guides will assist financial caregivers as they: (1) plan and implement their duties, (2) attempt to avoid scams and financial exploitation, and what to do if the person is a victim, and (3) require additional information; the guides tell where to go for help.
For additional information on a managing someone else’s money, go to:
- Have students talk to someone who manages money on behalf of someone else. Obtain information about the activities and concerns they have encountered.
- Prepare a list of actions that might be taken to avoid scams targeted at older consumers and other vulnerable audiences.
- What are situations that might require a person to manage the money of another person?
- What are examples of frauds and scams aimed at older consumers?
- How might a person avoid frauds and scams?
In May 2014, the Federal Trade Commission mailed checks totaling over $3.7 million to over 26,000 consumers whose bank accounts were debited without their consent by EDebitPay LLC. The company deceptively offered a $10,000 credit line that was really a membership to a website where consumers could buy goods.
In 2011, a federal district court ordered the company to pay more than $3.7 million after finding that the defendants were in contempt of court for violating a 2008 court order by selling a bogus “$10,000 credit line”, and a “no cost” prepaid debit card with hidden fees, to consumers who were unemployed or had poor credit.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.
For additional information on fraudulent business practices, go to
1. How do you discover that someone has debited your bank accounts?
2. What steps can you take to prevent such fraudulent business practices?
* Ask students what actions might they take to ensure that their credit cards and other financial information are secure.
* Ask students to compile a list of resources a person can use to report such fraudulent business practices, and check out a company’s reputation before signing a contract.