It has never been easier to send money than it is now. The days of going to the bank to withdraw cash or writing a check are mostly gone. In place of these things, we have an array of financial apps including PayPal, Venmo and Zelle, all of which allow you to send money in a matter of seconds.
At Addition Financial, we want our members to understand both the benefits and risks of financial technology, and that includes the risk of peer-to-peer (P2P) payment scams. Would you be able to recognize a scam if you were targeted? Do you know how to report financial scams? Here are six steps that can help you report suspect fraud.
What is a peer-to-peer payment scam?
Let’s start by explaining what a payment scam is and what are some telltale signs you can look for if you want to know how to recognize a peer-to peer-payment scam.
A peer-to-peer payment scam is any situation where somebody tries to get your personal information, wants you to send money for a transaction that is never completed or sends money to you and claims it was an accident.
Here are some red flags that may indicate you’re being scammed:
- Someone you don’t know or trust asks you to send money from a P2P app such as Venmo or CashApp.
- Somebody contacts you claiming to be from your bank, credit union or credit card company and asks for personal information.
- You receive an unexpected P2P payment from someone you don’t know.
- Someone you don’t know or trust asks you to borrow your phone.
- Somebody applies pressure to get you to send them money.
The most important thing you can do is to stay vigilant about anything related to your money. You can easily sidestep most of these issues with some care and attention.
Examples of P2P payment scams
Here are some examples of the most common scams with pointers on how to avoid being scammed.
We’ve all had the experience of receiving an email or phone call from someone claiming to be from a financial institution telling us there’s been suspicious activity on our account. A legitimate alert would ask you to log into your account either on the bank’s website or app and verify transactions. An illegitimate one might ask you to provide banking information or, in the case of a P2P fraud, ask you to send money to reverse a transaction.
Any time you receive a communication from your credit union or bank, remember that no real financial institution would ask you to send money to them due to fraud. Avoid clicking on links. Instead, navigate to your bank’s website or mobile app, log in as usual and review your activity. Call the bank’s customer service number if you need additional help.
Another common scam is when someone claiming to be from a business asks you to send a payment using a P2P service with the promise to send you the product or render a service after they receive the payment.
While there might be some situations where a real business uses PayPal, you should be cautious and do some research about the company before sending them anything. A lot of people have lost money when the business failed to send the product or perform the service they paid for.
An old-school scam that’s been updated involves someone sending you a (bad) check, asking you to deposit it and then send the money to a third party using a P2P app. The old version involved depositing a check and then writing a new check or sending a wire to pay someone else.
Your best bet to avoid this scam is to avoid depositing checks from anybody you don’t know and trust. There are some scammers who even pose as employers to carry off this scam. Don’t deposit the check and instead, report it using the steps below.
You log into your P2P app and notice you have a payment you weren’t expecting from someone you don’t know. They contact you and ask you to send the money back to them. The problem is, they probably came by that money illegally and if you send it back, you’ll be on the hook.
If this happens to you, don’t do anything with the money. Instead, report the transaction to your P2P service and let them handle it.
Borrowing your phone
Finally, be careful about letting anybody you don’t know use your phone. Once your phone is unlocked, they’ll have access to your P2P accounts and could send money to themselves or someone they know without your permission.
If someone asks to borrow your phone, offer to make a phone call on their behalf or look up information for them instead. You can further protect yourself by signing up for multi-factor authentication that requires a fingerprint scan.
6 Steps to report a peer-to-peer payment scam
The process of reporting a peer-to-peer payment scam isn’t difficult. We recommend reporting any suspected fraud or scam to protect yourself as well has to help authorities find the scammer and prevent other people from being targeted. Here are six steps to follow.
#1: Contact your financial institution
We suggest contacting your credit union or bank first because they’re the ones who can put a fraud alert on your account. Taking this step will prevent anybody who may have used your account information from making withdrawals or further impacting your finances.
If you’re not sure where to start, you can search for “report fraud” on your financial institution’s website or app. Addition Financial members can find directions to report fraud at our Security Center, which offers free resources about fraud prevention and detection.
#2: Report the transaction to the P2P app
The next step is to report the fraudulent activity directly to your P2P app. Any app you use will have a help center where you can report suspicious activity. Many, including PayPal, have a dedicated page that explains the steps to take if you feel you’ve been targeted by a P2P payment scam.
Make sure to note any information provided, including a claim number and details about the transaction, as you may need these later.
#3: File a police report
If you lost any money to a P2P payment scam, you should also take the time to file a report with your local police. They may not be able to dedicate resources to pursuing the recovery of a small amount of money, but you should still let them know what happened.
Filing a report will create a paper trail to protect you as well as anybody else who may be targeted by the same scammer.
#4: Report the fraud to the Federal Trade Commission
Next, you’ll want to report the fraud to the Federal Trade Commission (FTC) to make sure they know about it.
You can file a report on this page. Make sure to include all relevant information, so they can research the crime.
#5: Change your password
If your P2P accounts have been compromised in any way, you should change your password immediately. Make sure to use a secure password with lowercase and uppercase letters, numbers and symbols.
It’s very important to use a unique password on each account. Most P2P apps also have an option to use two-factor authentication. If you have an app on your phone, enable biometrics if available or enter a code to send money.
#6: Contact the credit bureaus
The final step is to contact the three main credit bureaus to inform them of the scam. If you believe your identity has been compromised, you may ask them to put a fraud alert on your account or temporarily freeze your credit to prevent further damage.
It’s a good idea to review your credit reports regularly to make sure you recognize all transactions and that the information on your credit report is accurate.
How can you get your money back from a scammer?
If you lose money in a P2P payment scam, there are limited options for getting your money back. The thing to remember about P2P payments is that the experience is the same as handing someone cash, so if you send money to someone and then realize it’s a scam, you may not be able to get your money back.
With apps like Venmo, Zelle and CashApp, there’s no recourse if you send money and want to get it back. You can and should report the fraud, but unless the police or FTC can track down the person who scammed you, you probably won’t be reimbursed.
Will PayPal refund money to scam victims? Here, the answer is more helpful. While PayPal doesn’t refund money from Friends and Family payments, there is a way to get a refund if you send money to a business. You’ll need to report the unauthorized transaction. After that, you’ll have 20 days to contact the business to ask for your money back. If that doesn’t work, you can escalate the claim and potentially get reimbursed thanks to PayPal Purchase Protection. If your claim meets the requirements, PayPal will issue a refund.
Get fraud protection with Addition Financial
The key to avoiding P2P payment scams is to be vigilant and to avoid sending or accepting money from anybody you don’t know or trust. If you are targeted by a scam, you can use the six steps we’ve listed here to report it and potentially get your money back.
Do you want to put your money with a financial institution that’s got your back and will protect your money? Addition Financial can help! Click here to read about the benefits of membership and join today.