Security Corner Blog

Identity Theft, Fraud and Scams

Wednesday, July 31 | 6:00 PM ET

Join us to learn about identity theft, fraud, and scams. We’ll talk about what to be on guard against, how to protect yourself, and steps to take if – despite your best efforts – you experience this.

Register Now

Mobile payment apps can be a convenient way to send and receive money with your smartphone. These apps have become very popular — and scammers may try to use them to steal your money. Find out how mobile payment apps work and how to avoid sending money to a scammer.

How Mobile Payment Apps Work

You may have heard of mobile payment apps like Venmo, Cash App, or PayPal that let you send and receive money through your smartphone (or online). If you haven't used one before, here's how they work.

First, you download the mobile payment app, and create an account. You’ll have to choose a payment method or source of funds, like a bank account, a debit card, or a credit card.

Once you set up the account, you can send and receive money. When someone sends you money, the money doesn't go directly to your bank account. It gets added to your balance in the app. You can leave the money there to use later or transfer it to your bank account.

Know the Risks:

P2P apps may make our wallets lighter and our fingers cleaner, but they come with some risks.

P2P apps are not federally insured, regulated, or supervised, even if they partner with an FDIC-insured bank. The lack of federal regulations for non-bank financial institutions means consumers are held responsible for errors, such as sending money to the wrong person or a scammer. There is no requirement under the law for the pay app to return the funds or to help recover the funds.  

When sending money using a P2P app, the payments and transfers are instant and mostly irreversible. You pay other users by typing in their email address, phone number, or username, so if you end up sending money to the wrong number, that money is gone. There is also little you can do if you pay for a product or service that turns out to be unsatisfactory or that you never receive, or if you make a mistake or typo, like sending $400 instead of $40. 

Another concern regarding pay apps is the potential for your electronic device to be affected by malware allowing scammers to access your personal information or digital wallet and possibly remove more funds than permitted for the intended transaction.   

Fraud and Scams:

As consumers grow more comfortable using P2P apps in their daily lives, scammers have adapted their tactics to take advantage of the quick and often anonymous access to cash that they provide. Their ease and convenience make them appealing to consumers, but their general lack of user protections is precisely what makes these services attractive to fraudsters.

P2P scams can take many forms and require an extra degree of caution be given to any transaction with someone you do not know. Be aware of the following scams when using a pay app:

• Scammers impersonating your bank may call to alert you about “suspicious activity” on your account and direct you to send money to yourself or “the bank’s address” to reverse a transaction or to verify the account is not frozen. However, your bank will never tell you to send money to anyone, not even yourself. Criminals try to make you believe you’re sending money to yourself, but you’re actually sending money to the impostor.

• Fraudsters may reach out claiming to represent a fraud department or merchant and ask you to confirm information such as your bank account username and password, credit card or debit card data, or Social Security numbers. But do not share this information — scammers want to create a P2P account with your information, steal your identity, and gain access to your accounts.

• Scammers posing as a legitimate business may request a P2P payment for a product or service. Once they receive your money, you never receive what you paid for, and they disappear. Treat P2P payments like cash — don’t pay until you receive the product.

• A scammer “accidentally” sends you money on a P2P service and asks you to send the money back. Never send back the money, and instead contact the P2P service about the error. Criminals’ accounts usually use stolen funds that the P2P payment service will eventually flag as fraud. If you send money back to the scammer, the P2P service could take funds out of your account or hold you responsible.

• Scammers will connect a stolen credit card to a payment app then look for people selling big ticket items (such as a computer, tablet, or car) online. The scammers will offer to pay for the product using the app. Once the seller accepts the payment and sends the item, they’ll soon discover that the payment sent is not to a legitimate buyer, and the money collected is removed from their account. The seller is then without either the item or the money.

• Fraudsters may try to convince you that you’ve been paid more than you were owed. For example, a spoofed email says that you’ve been paid $3,000 for a camera you listed at $300! The sender asks you to ship the camera in addition to the extra $2,700 you were “paid” by mistake. In this example, the scammer wants your camera and your money. In another version of this scheme, scammers overpay for items with a stolen credit card.

• Fraudsters send spoofed emails warning that an account is about to be suspended and that the account holder must enter their password on a spoofed webpage. Generally, payment app vendors will never ask you to enter your password unless you are on the login page. Scammers ask for fake charitable donations using P2P apps.  Before donating using a P2P app, always check the charity’s website to verify that they accept donations through that app.  

Privacy and Security:

It is important to know about privacy settings on any app.  When you download apps, they often ask for permission to access your personal information like contacts, location, and your camera. They may need this information to make the app work, but they also may share this information with third-party companies or use it for internal marketing purposes. With P2P apps, your personal data acts as its own currency.  

Security tips to help protect yourself when using P2P systems:

• Review the terms and conditions of the P2P payment provider’s service.

• Review the app’s fraud protection policies and understand whether and how you can recover funds if a problem arises.

• Link your money transfer app to a credit card rather than a debit card or your bank account. A credit card provides added protection in case you do not receive the goods or services that you have purchased.

• Most P2P apps don’t let you cancel a transaction once completed.  It is best to send money only to people and vendors you know and trust.

• Set up your account to require a PIN or fingerprint/face ID before completing a transaction.

• Set up notifications so you’re alerted each time a transaction is made

• Don’t use P2P services to purchase products online

• Always double-check and confirm the recipient’s ID before sending payment. 

• Be wary of any business that only accepts P2P payments

How To Avoid Sending Money to a Scammer

Some scammers may try to trick you into sending them money through a mobile payment app. That’s because they know once you do, it’s hard for you to get your money back.

Scammers might pretend to be a loved one who’s in trouble and ask you for money to deal with an emergency. Others might say you won a prize or a sweepstakes but need to pay some fees to collect it.

Keep this advice in mind if you send money through a mobile payment app:

• Don’t send a payment to claim a prize or collect sweepstakes winnings.

• Don’t give your account credentials to anyone that contacts you.

• Protect your account with multi-factor authentication or a PIN.

• Before you submit any payment, double-check the recipient’s information to make sure you’re sending money to the right person.

• If you get an unexpected request for money from someone you do recognize, speak with them to make sure the request really is from them — and not a hacker who got access to their account.

What To Do if You Sent Money to a Scammer

If you find unauthorized payments or think you paid a scammer, here’s how to report it to the mobile payment app.

• Cash App. Cash App recommends chatting through their app for the fastest service. To do so, open the app, go to your profile, and choose Support. You can also get help through cash.app/help or by calling 1 (800) 969-1940.

• Venmo. Venmo recommends chatting through their app for the fastest service. To do so, open the app, go to your profile, and choose Get Help. You can also email Venmo through their contact form or call them at 1 (855) 812-4430.

• PayPal. Report it online through PayPal’s Resolution Center or call PayPal at 1 (888) 221-1161.

Report It to the FTC

If you paid a scammer with a mobile payment app, report it to the Federal Trade Commission at ReportFraud.ftc.gov. When you report a scam, you help the FTC and other law enforcement agencies stop scams.

Article content and third-party links are provided for information purposes only. Article sources: Consumer.ftc.gov, Michigan.gov