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The Complete Guide to Recovering from a Financial Scam

Recovering from a financial scam

It’s a sad fact that financial scams happen every day. People like you who work hard for their money fall victim to a wide array of scams and frauds perpetrated by people who keep dreaming up new ways to steal from the innocent. Even those who are tech-savvy can sometimes click on the wrong thing or believe the wrong person.

Here at Leaders Credit Union, we care about your money and financial security, so we want to make sure you know what to do if you are the target of a financial scam. We’ve created this guide to explain how to recover from a scam. 

Definition and Examples of Financial Scams

A financial scam is any scheme devised to separate someone from their personal information with the goal of accessing and stealing their money. The information targeted may include personal details such as your full name, address, and Social Security Number, or financial details such as your account number or credit card number.

Financial scams and frauds can take many forms. Some of the most common financial scams include the following:

  • Phishing: sending a fraudulent text or email that looks like it comes from a trusted source.
  • Ponzi schemes: fraudulent investments that promise significant returns.
  • P2P payment frauds: messages or instructions designed to get people to send money from their Venmo, PayPal, or Zelle to a third party.
  • Charity scams: solicitations from a phony charity.
  • Loan modification scams: attempts to prey on homeowners who may be delinquent on their mortgage, usually charging up-front fees.

We’ll talk later about some of the things you can do to protect yourself and your money. There are many other potential scams out there, so it’s essential to stay on your toes.

What Happens if You Are a Victim of a Financial Scam?

If you are victimized by a financial scammer, it’s normal to be angry, sad, and scared. Some people may feel embarrassed or ashamed, but we’re here to tell you that even people who are smart and careful can be taken in by scammers who have fine-tuned their methods. They often use scare tactics to inspire a knee-jerk reaction and people provide their information—and by then, it’s too late.

The most important thing to do if you get scammed is to stay as calm as possible and take practical steps to protect yourself. There’s no point in beating yourself up. There are urgent actions you can take immediately and you should do them as quickly as possible.

Your first steps should be to do anything you can to avoid further losses. For example, most financial institutions have mobile apps that you can use to freeze your credit or debit card.

online banking quick start kit

How to Report a Financial Scam

There are several steps you should take as soon as you realize that you’ve been scammed or defrauded. 

Step #1 Contact Your Credit Union or Bank

The first step is to contact your financial institution(s). If the scam that targeted you involved giving information such as your bank account number, password, or PIN, your credit union or bank needs to be informed immediately. Many financial institutions have 24-hour fraud assistance. They’ll be able to put a fraud alert on your account, cancel your debit or credit card, and take other steps to protect you.

Step #2 Report the Fraud to the Three Main Credit Bureaus

Any financial scam has the potential to negatively impact your credit score, so the next step is to report the scam to the three main credit bureaus, Equifax, Experian, and TransUnion. Notifying them will put them on alert to the scam and also, allow you to take one of two steps:

  1. Put a credit freeze on your report. A credit freeze is free and will prevent anybody from accessing your credit. You’ll need to keep in mind that the freeze will also affect legitimate credit inquiries. If you have an online account with a credit bureau, it’s easy to toggle a freeze on and off as needed.
  2. Put a credit lock on your account. A credit lock is a paid product that provides you with the ability to lock and unlock your credit, alerts you to new activity, and may even provide identity theft protection.

You should take this opportunity to request copies of your credit reports, because you’ll need to review them in the next step.

Step #3 Identify Unauthorized Activity

After you obtain copies of your credit reports, you should review them and your bank account statements and identify any fraudulent or unauthorized activity. We recommend this step because the scam you identified may not be the only issue with your credit.

If you find anything that’s suspicious or inaccurate, notify the credit bureau and dispute the item. It may take a while to work through the process, but removing fraudulent activity is a crucial step in repairing your credit after a scam.

Step #4 Report the Scam to the Authorities

After you have identified all fraudulent activity, you should report the scam to the proper authorities. Depending on who scammed you, there are different steps to take.

If you have been a victim of identity theft, then you will need to report the theft to the Federal Trade Commission. You can do that by visiting and answering a few questions. In return, you’ll get a personalized recovery plan that will outline additional steps to take.

You may also want to file a report with your local police or the Federal Bureau of Investigation. With a local scam, the police are going to be in the best position to pursue the perpetrator. If you suspect that you’ve been the victim of a federal crime, you should report it to the FBI as well, which you can do here.

What Are the Steps You Should Take After Being Scammed?

People who want to avoid being scammed again can take some common-sense steps to protect themselves:

  • Enable two-factor authentication. Every financial institution and financial app has an option for two-factor authentication. This means that there is a secondary form of authentication in addition to your password. For example, you might have an option to set up a biometric scan of your fingerprint/FaceID or get a text with a confirmation number. The benefit of signing up is that even if your password is compromised, a thief won’t be able to access your account without the secondary authentication.
  • Change/upgrade your passwords. We know it can be a hassle to remember long, secure passwords. That said, you should never use the same password for multiple sites and all passwords should be at least eight characters long and include uppercase and lowercase letters, numbers, and special characters.
  • Set up push notifications. Push notifications are special notifications that alert you to suspicious or unusual activity on your accounts. If you’re not already getting alerts from your financial institution or credit card company, signing up can help you stay on top of account activity. 

Keep in mind that scammers sometimes send fraudulent texts that look like security alerts from a bank or credit union. Never click on an embedded link. Instead, open your bank or credit card app and check for the activity there.

Can You Recover Your Money After a Financial Scam?

Anybody who has lost money in a financial scam wants to get their money back. Whether that happens depends on how much was stolen and how it was stolen.

Let’s start with fraudulent credit card use. If someone steals your credit card information and uses the card to make purchases, you can dispute those purchases with your credit card company. Federal law limits a cardholder’s losses to $50 for fraudulent purchases made before the theft is reported and many credit card issuers offer zero fraud liability to their cardholders.

What if your debit card were compromised? The news is good here, too, but you’ll need to act quickly. Your losses will be limited to $50 provided that you report the fraud within two business days of discovering it. 

The recourse with some other forms of fraud may be limited. One type of fraud that’s on the rise is P2P payment fraud, where scammers convince people to send them money using a P2P payment app such as Venmo or CashApp. If you send money to a fraudster, there is likely no way to recover it unless you can identify the scammer. You should still report it, of course, but sending money using a P2P app is like sending a wire transfer, so there’s no way to undo the transaction. Since transactions on these apps aren't protected by federal law, there isn’t a limit on how much you can lose.

The takeaway here is that it’s essential to stay on top of your accounts and never send money to anybody without doing some research first. Using safe passwords and two-factor authentication provides some protection, but you’ll need to be wary if you want to keep your money safe.

Protect Your Money with Leaders Credit Union

Losing money in a financial scam is upsetting and infuriating, but the steps we’ve outlined here will help you report the scam and recover as quickly as possible. Going forward, our safety suggestions will keep you and your money safe.

Do you want to bank with a financial institution that offers mobile banking and cares as much about your financial security as you do? Check out our online banking quick start kit and start securely managing your money in the palm of your hand.

Report Scams to the FTC

If you were scammed or think you saw a scam, report it to the Federal Trade Commission.