Growing your visibility online as a business comes with its benefits – more eyeballs, better marketing opportunities, and more customers. But what we have found is that increased visibility also makes it easy for fraudulent actors (aka, “fraudsters”) to identity and target honest business owners with innovative fraud schemes.

In 2014 alone, 13 million people were victim of identity theft, with fraudsters stealing a whopping $16 billion from them.

If you run a local business and sell your services and time to customers (i.e., photographers, dog trainers, contractors, fitness trainers, etc.), then take note – especially if you offer large ticket services of $1,000 or more.

The blueprint of this new fraud scheme is outlined below. If any of these points resonate with you as a business owner, take extra caution in dealing with “supposed” customers who follow this pattern.  

1. The Initial Contact

Snooping fraudsters will find your contact information listed online, and will always reach out to you – the business owner – via text message or email, posing as a warm lead. Fraudsters typically do not call you because they are either foreign, or are bad actors, or can’t think quickly on their feet if you ask them suspect questions. If you ask to chat on the phone, they will say they are either deaf, in the hospital, or out of town and cannot speak.

Let’s call this fraudster “Bob”. So Bob will send you a text message, posing as an interested client, asking about your services, and seeming eager to buy.

2. The Ask

Bob will be interested in purchasing a large ticket item and paying upfront (Why large ticket items specifically, discussed in #4 below). Bob will always push to pay upfront, tell you not to worry about anything, and will probably shoot for an amount around the $5,000 level (we have seen amounts range from $1,000 – 10,000).

3. The Payment Method

Bob will ask to use a credit or debit card for payment. He will need a “card not present” technology to make this payment to you. So he will ask you to send him an invoice via email or text message, to allow him to enter in the card details online for quick payment. The card Bob uses is a stolen card – you will not know this because Bob is entering in the card details on his end privately. Note that an additional flag would be if Bob asks you to break the large charge up into smaller invoice payments – he will use a few different stolen cards with lower limits to pay you with.

Once the card is charged, then Bob’s fraud work is done except for one final step.

4. The Partial Refund Request

As soon as the payment is made, you – the business owner – are probably feeling pretty good. You just sold $5,000 (let’s just say) worth of services, that payment is en route to your account, and this supposed client Bob is on your calendar for future services. What happens next is crucial to the fraud scheme. Bob will immediately ask for some sort of partial refund in cash (or maybe check). You will probably be thinking it’s somewhat bizarre, but the refund will be only to the tune of $1,000 (~20% of what you just got paid). So to you, it’s still a hefty net $4,000 in your pocket, and you’re making Bob happy by granting him this refund request. Note that sometimes Bob will actually ask for this partial refund prior to you sending him the invoice, and he won’t call it a refund – he’ll ask you to pay someone else (on his behalf) $1,000 out of the $5,000 he will be paying you.

The logistics of this “partial refund”(or the payment on his behalf) will be to mail the cash or to leave the cash/check in an envelope in the lobby of a building or doorstep of a home. Bob will give you the address details (most likely a P.O. Box) for said partial refund, then once you mail this $1,000 in cash he will thank you politely.

This is the last time you will hear from Bob.

5. End Game: The Dispute

Sometimes it’s 1 day after you mail that partial refund; sometimes it takes 10 days. But in a matter of days, the legitimate cardholder will dispute the $5,000 invoice payment. That is to say, whoever owned that stolen credit card that Bob used to pay you that $5,000 will open up their credit card statement, see a $5,000 charge, obviously not recognize this charge, and dispute it with their credit card company.

The payment processor you used to charge that card will then reverse the $5,000 payment from your bank account, leaving you out that $5,000 you thought you had made. Worse yet, maybe you already spent some of that $5,000. To make matters extra worse, you are also out-of-pocket the $1,000 cash refund you had mailed to Bob. So your total loss equates to $6,000 from this scheme.

The credit card company won’t care about your loss, the authorities will tell you to go to small claims court, and then small claims court will be practically impossible to win because you won’t be able to get in touch with “Bob”. The address you mailed the check to is probably a temporary P.O. Box, and the phone # he was texted you from is a Google Voice #. To everyone else Bob doesn’t exist, but to you, you just wasted a ton of time and are out-of-pocket $6,000.


How Else to Prevent Fraud?

It’s crucial for service businesses these days to adopt an invoicing and payment solution that can catch these fraud patterns early on, to save you money and time. Education is the first step, which is why business owners need to pay attention to the above 5-step patterns to prevent falling into these fraud traps.

The sad reality, however, is we are all human, and busy professionals don’t always have time to make sure all their payments are fraud proof. So make sure whatever payment solution you do use, will be pro-active in preventing fraud and notifying you personally when fraud could be occurring, so that you don’t have to add paranoia to the busy list of daily work times on top of all your client scheduling, invoicing, payment tracking, and more.