Check Fraud Scams Target Millennials

Inside Subprime: Sept 19 2018

By Holly Kane

A study released by the Better Business Bureau revealed that check fraud is on the rise and affecting young people at a higher rate than other age groups, with scammers taking advantage of millennials’ lack of knowledge when it comes to traditional checks.

According to a September 2018 study by the Better Business Bureau, nationwide occurrences of this seemingly easy-to-spot scam have increased.

“Fake check fraud is a huge problem, with complaints to government agencies and consumer advocacy groups doubling over the last three years,” the study said. “Millions of fake checks worth billions of dollars circulate every year.”

While all demographics are at risk, fraud victims tend to be younger and more educated than is commonly thought, according to another BBB study.

“Far from the prevailing stereotypes,” the study, titled “Cracking the Invisibility Illusion,” said. “Several studies have found that those most likely to be exposed, targeted and ultimately victimized are the young, the middle-aged, and the better educated.”

Analysis of the FTC’s Consumer Sentinel complaint database reveals that 38 percent of fake check victims are between the ages of 20 and 39, and 21 percent – the largest chunk of those sampled – were between 20 and 29. (Millennials are also falling victim to the notorious payday loan debt trap.)

A Chicago woman lost $2,000 after responding to a phony job offer that asked her to cash what turned out to be fake checks and send back a portion of what turned out to be her own money. The checks looked legitimate, and the bank deposited them into her account. What the woman did not realize is that banks are legally required to make deposited funds available almost immediately, but the check may not clear until weeks later.

Like the woman in Chicago, some people don’t know that just because the bank has posted the funds and made them available, that doesn’t mean the check is legitimate.

“Federal banking rules require that when someone deposits a check into an account, the bank must make the funds available right away – within a day or two,” according to the BBB. “But the bank also has the right to recover the money from the account holder if the check is counterfeit. It is only when the check works its way back to the bank that supposedly issued the check that it is discovered to be counterfeit.”

Ultimately, the bank is off the hook, and the account holder is responsible for the drained funds.

An empty bank account is an experience all too familiar for millennials, who, according to a 2018 study by the Federal Reserve Bank of St. Louis, are saddled with student loan debt and have no assets like homes or stocks. Pew Research Center officially defined millennial birth years as between 1981 to 1996. This age group’s defining characteristics – an acute adeptness at digital communications and social media and an economic crippling due to the 2008 recession – combine to put millennials at risk.

They fall for scams because, in short, they’re broke.

The median income for millennials in Illinois is $23,000, compared with $37,500 across all demographics, according to Business Insider. A 2017 GoDaddy survey found that half of millennials have a “side hustle,” a gig making extra money apart from their main job, to supplement their income. Scammers take to social media and other online platforms to take advantage of millennials’ inconsistent job prospects and their propensity to take on odd jobs for extra cash.

The best way to avoid check fraud, according to the BBB, is education. Consumers should not deposit checks from unknown sources, and should keep in mind that posted funds are not necessarily cleared.

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