What Is a Refund Scam?

FT Contributor  | 

Refund scams — also known as recovery scams or return fraud — occur when a scammer tries to convince an unsuspecting user that they are entitled to a refund, rebate, or reimbursement from a company. Like many other scams, refund scams often target the elderly, using high-pressure tactics and deception to trick their victims into handing over money or personal information. 

Most often, these scammers claim to work for a trusted institution, like your bank, local government office, or a well-known company such as Microsoft or Apple. Scammers will reach out to you via phone, email, and sometimes even text message to inform you of the money that you are owed. It may seem like a simple process to claim that money, but that’s not the case. Instead, you’re being scammed.

If you have been scammed in the past, you could be at risk of a refund scam. For example, a refund scammer might call you, claiming to offer a refund for services that you received from a tech support scammer in the past. In reality, neither of these people are legitimate.

Types of Refund Scams

As with any scam, there are a few different ways that scammers will go about seeking their victims. The three types include phone calls, emails, and social media.

  • Phone calls: Scammers will contact you over the phone under the guise that they work for a reputable company or government agency, informing you of money you are owed.
  • Emails: You receive an email from an address that looks like it could be legitimate, but upon closer examination, the email is being deceptive about its source. For example, using a zero instead of an O. So instead of Support@Orion.com it might come from Support@0rion.com.
  • Social media: While it is rare, scammers will use social media as a method of contact. To do so, they would need to create a profile that resembles legitimate organizations, which requires a lot of effort. As such, refund scams are rare on social media, but that doesn’t mean they don’t happen.

How Do Refund Scams Work?

Every scam has a start and an endpoint. In order to correctly identify and avoid refund scams, it’s important to first understand how they work. Below is a timeline of a typical refund scam:

  1. If you have lost money to scams in the past, your information may be passed around to other scammers who pay a fee it.
  2. You receive a call for a bogus promotion, charity, or fraudulent business opportunity. These scammers often claim they are a government authority so as to establish trust.
  3. The scammer makes false promises to you. Typically, the scammer will ask for a donation to a charity.
  4. In exchange for your donation, the scammer offers you a refund for the money you lost previously. In some cases, you may be offered other types of compensation, like prizes.
  5. You make the donation, but never receive what was promised.

It is rare that a government agency will help you get back the money you have lost. In the case that they do, they will not charge a fee or make any guarantee on your refund.

Refund Scam Warnings

There are certain factors that should raise red flags if you are in a refund scam scenario. A rule of thumb is if you aren’t expecting a sum of money from anybody, you should be apprehensive when you’re told otherwise. Aside from that, these are some other red flags to be aware of:

  • The scammer has a peculiar title for such a well-known, established company.
  • The call came unsolicited.
  • The amount of the refund is substantial (often a few thousand dollars).
  • The representative claims they work for the government.
  • To claim the refund you’re “owed,” you have to pay a fee through a specific method, such as a wire transfer or a prepaid card.
  • They ask for your personal information, such as bank account numbers and Social Security numbers.
  • You are urged to keep the call confidential.
  • There are threats of government repercussions if you do not take the offer.
  • There is a sense of urgency or aggression in the caller’s voice.
  • The refund sounds too good to be true.

Many refund scams follow a single script, which goes like this:

Someone calls you, claiming to offer a refund. In order to give you this refund, they will ask for remote access to your computer and your bank account. Either by manipulating the code on your bank account web page or by moving money between your accounts, they will make it appear as though they have deposited way too much money as a part of your “refund.” For example, $4,000 instead of $400.

The scammer will then feign despair, claiming that they will lose their job unless you, the victim, are able to return this money to them. Of course, since they never actually gave you $4,000, you end up paying them back with your own funds, at which point they disappear and you may never see your money again.

How to Avoid Refund Scams

While refund scams aren’t all that common, it’s important to be vigilant. There are certain steps you can take to avoid refund scams:

  • Be suspicious of callers from unknown numbers, especially if they start to make claims that sound too good to be true.
  • Research the company the person claims to be involved with. These scammers will often have pretty good replicas of email addresses and company logos, but with enough research, you’ll be able to spot a fraudulent one.
  • Don’t let your emotions decide. Many of these scammers resort to making you feel guilty or as though you’re going to miss out on something.
  • Never share your personal information over the phone or via text or email. This includes bank account and Social Security numbers.
  • Be wary of what you post on social media. This information is accessible to anyone, making it easy for scammers to find out the best way to contact you with a refund you would find believable.
  • If you are ever in doubt, ask for a support ticket number and offer to call the company back at a legitimate phone number listed on their official website. Any legitimate company will be happy to do this, but scammers will urge you to stay on the line.

Unfortunately, scams are everywhere, but if you’re smart and tactical, they can be avoided. If you are a victim of a refund scam, you should report it to the police, and then to your financial institution, right away.


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