What Are the Types of Fraud in Law?

Every day people around the country get robocalls claiming to do everything from lowering their debt, giving them a better interest rate on their mortgage, or extending the warranty of their car that they say is about to expire. The different types of schemes criminals come up with every year seem endless. So what are the types of fraud in law?

Fraud occurs when a person or business takes money or some other property from another in a deceptive, unfair, or misleading way with the intention of achieving a personal gain. There are many types of fraud, but some of the most common involve mortgage scams, credit card fraud, fake charities, identity theft, and debt collection services.

A Detailed Look at the Common Types of Fraud

Mortgage Scams

If you own your home, it is a good thing to familiarize yourself with these types of scams so you don’t fall prey to fraudsters trying to take your money. These types of criminals, usually real estate and mortgage professionals, target stressed homeowners who appear to need financial help. Their goal is to obtain a more considerable loan amount than would have been typical had the consumer gone to an honest broker.

There are three types of mortgage fraud that people commit.

Straw Buying in Regards to Mortgage

Straw buying is when a person makes a home purchase on behalf of someone else who would not have been able to make the purchase on their own because of poor credit. The person who makes the purchase is the straw buyer, and the original buyer has no idea a straw buyer is involved. They typically take advantage of the buyer by adding an early payment default to the contract or by charging exorbitant interest rates.

Air Loans

Air loan mortgage fraud attempts to make a profit off of the lender. A mortgage broker will make up a story about a property and borrower that do not really exist in order to earn false profits on the loan. Eventually, the loan will go into default because there really isn’t anybody paying the mortgage, and the lending bank will lose everything because there is no real property for collateral upon foreclosure.

Air loans are considered fictitious transactions.

Double Selling

A couple of schemes involve double selling, but one such scheme involves a homeowner selling the same property twice. The homeowner will collect money from two different buyers and will schedule the closings around the same time, so neither the buyer nor the lender is aware the home is being sold twice. Here both lenders will be left with competing claims against a single property.

Credit Card Fraud

Credit card fraud is a common type of fraud whereby someone steals or finds your credit card or manages to obtain the information necessary to purchase items, withdraw cash, or use it in some other fraudulent manner. There are signs to look out for if you think you may be the recipient of credit card fraud.

You see charges on your statement that you don’t recognize.
You notice several small dollar amount charges. This could mean someone is testing your card to see if it will work for a larger purchase.
You see an unfamiliar company attached to a charge on your card. This can be difficult, though, because a lot of businesses use a different company for handling payments.
You notice a large drop in the remaining balance.
You get phone calls asking for your credit card information from unexpected companies.

Identity Theft

When someone steals your personal information, such as your social security number, driver’s license number, or bank and credit card numbers, it’s identity theft. The goal of the stealer is to take your personal information and use it to take all your money and open up new credit cards in your name. They may even take out loans and make large purchases or pay off their medical bills. If you don’t catch it in time, they could even claim your tax refund.

Below are the typical ways thieves steal your identity:

Phishing

Fraudsters use phishing emails to trick you into giving them your personal information. They may disguise the email to look exactly like it came from your bank or your utility company to get you to click on a link or download an attachment.

Smishing

This is done through text messages with the same intent as phishing.

Vishing

Scammers try to hook you in through phone calls. They may make promises such as offering you a prize for giving them information, or they may lie to you and say you are at risk of not receiving your refund if you don’t complete the demands of the call, which is usually giving them certain information.

Fake Websites

These websites will look exactly like the trusted websites you are used to visiting. They may even have the logo of the business you are really trying to reach. Once you enter your personal information or make a purchase, they will have all of your information and most likely will have infected your computer with malware.

Data Breaches

A data breach can come from a cyberattack or from improper disposal of documents like throwing bank statements in the garbage unshredded. The theft of one’s username and password are also data breaches, and fraudsters can then use them to get into your other accounts with the same screen name and password.

Public Wifi and USB Charging Stations

Places with public wifi that require no password make it easy for hackers to gather a user’s private information. Also, public places such as airports and train stations that have charging stations infect the USB ports with malware. This scam is known as juice jacking. Once your device is infected with malware, the scammers have access to all of your devices, even potentially locking you out.

Stolen Wallet or Mail

The old-fashioned way to have your identity stolen is by having a criminal go through your garbage can. Because of this scam, paper shredders became popular, and it is considered a good practice to shred all documents that might contain any of your personal information.

Skimming of Credit Card Machines

We most often hear of skimming at gas stations, but it can also happen at grocery stores that have a self-serve lane. The electronic card reader is fixed so that it captures the data entered, or a scammer places a recording device over the reader. Scammers can sometimes recruit sales staff to help out.

Fake Charities

Fake Charities can be hard to spot because they will use the same methods to collect donations as real charities. So before you donate, pay attention to the signs below, and if you feel the charity may not be genuine, do not give them your money.

You are pressured to give and to give right at that moment.
They will only accept cash, gift cards, or wire transfers.
You receive a letter thanking you for a donation you didn’t make. What they are really doing is trying to trick you into thinking you already support them.
The name is very similar to another well-known charity. This is to trick you into thinking you are donating to the original charity.
The person contacting you about the charity cannot provide you with any detailed information.
If they tell you your name will be entered into a sweepstake, and you can only enter if you make a donation.

Fraud Since the Pandemic

COVID-19 Scams

With the pandemic, scammers are playing off of people’s fear and finding opportunities to take advantage of them. Some things they are doing are:

Calling people to say they have a new cure, vaccine, or treatment for COVID-19, and they are the only ones who are offering it to the public
A robocall says they can speed up the process of your stimulus check
You are told there is a new in-home COVID test that is inexpensive
Someone fakes representation of the World Health Organization (WHO) or Centers for Disease Control (CDC), trying to sell a specific treatment, service, or provide you with unique information.

Online Shopping Fraud

Again, with the pandemic and people quarantining the past couple of years, more people have resorted to online shopping. The FTC received more than 350,000 reports in 2020 concerning people who lost more than $245 million from online orders they placed that were never delivered.

The Biggest COVID-19 Fraud in History

According to prosecutors, the looting of the Covid relief plan, Payment Protection Program (PPP), was the largest fraud in history. Hundreds of billions of taxpayer dollars that were supposed to provide relief for those who suffered business loss during the pandemic were acquired fraudulently and used to purchase Lamborghinis, private jet flights, and mansions.

The people who participated in this scheme stole as much as $80 billion that was handed out for Covid relief. And most of the losses were unrecoverable.

Millions of people who borrowed money exaggerated their number of employees or created companies. And in 2020, when people were hardest hit, lenders did very little to verify the applications due to guidelines set by Congress to serve the people’s interest by getting the money out fast. Though the Government Accountability Office gave a warning of the risk of fraud, the notice seemed to be ignored.

Basically, this scheme was done very easily. People went to the state website and submitted applications based on existing businesses or registered new fake ones.

Final Thoughts

If you become a victim of fraud, you need to take the necessary measures to get your life back in order. Make sure to notify the appropriate businesses right away. Then file a complaint with the Federal Trade Commission and complete, sign, and keep a copy of your Identity Theft Affidavit.

After you have done this, go to your local police station, file a police report, and bring as much evidence as you can. And finally, contact your creditors and ask to have all your accounts closed, change your account numbers, and put a fraud alert on your credit files.

It can take a while for everyone to investigate the crime, so you will have to be patient and let everyone do their job. If they find the person who committed the fraudulent act, you can file a civil suit and hopefully recover some of what you lost.

Alexandra Christensen

Alexandra Christensen is a freelance writer and editor. When she is not working on an assignment, she can be found hanging around with other writers on Medium.com/@alexandra_creates where she writes mostly about raising foster and adopted kids and those with invisible disabilities.