An unfortunate fact of life is that it isn’t hard to find opportunists, con men, and scammers all over the place. It gets worse: during times that are already difficult enough—marked by recession and similar crises—rip-offs seem to pop up with more frequency, not less.
When economic disasters strike, it is often those who most affected that are also the most-targeted for scams. It’s not that they are more vulnerable; it’s that they are more willing to hope for and seek out solutions to their problems.
But those hurt most by economic downturns aren’t the only ones that need to be mindful of scams. Fraudulent activity can—and often does—affect nearly everyone at one time or another.
Fortunately, most scams have notable identifiers to watch out for and avoid. Education is a vital first step to get ahead of them. Below, we survey the most common scams that you may encounter during an economic downturn, be it a recession or otherwise.
Scam No. 1: “Contact from the Government”
When all is working well and problems are low, the “best” government is the one people never think about; after all, when things are good, most people have what they need. But when economic disaster strikes, like the financial crisis in 2008 and during the 2020 coronavirus shutdown, all eyes turn toward the government to see how it will provide support.
In 2008 as banks crashed, the economy froze, and unemployment rose. Similarly in 2020, as millions of people lost their jobs and hundreds of millions were forced into stay-at-home orders, the U.S. government issued stimulus checks.
When such a huge undertaking like mailing checks to a vast portion of citizens is underway, there’s room for miscommunication and confusion on who is getting what, when, and for how much.
With this potential for confusion comes susceptibility to scam attacks. The IRS even went so far as to issue this warning: “[Be] on the lookout for a surge of calls and email phishing attempts about the coronavirus, or COVID-19. These contacts can lead to tax-related fraud and identity theft.”
The problem, as has been reported by CNBC, is that scammers use emails, text messages, websites, and social media to spread malicious hyperlinks claiming to be how people can collect their stimulus checks. These links “can be used to remotely install malware to ‘potentially harvest credentials, install key-loggers, or lock down the system with ransomware.’” That’s according to the U.S. Secret Service, via CNBC’s reporting.
The IRS’ warning covers this and other similar attacks. IRS Commissioner Chuck Rettig said:
“We urge people to take extra care during this period. The IRS isn’t going to call you asking to verify or provide your financial information so you can get an economic impact payment or your refund faster. That also applies to surprise emails that appear to be coming from the IRS. Remember, don’t open them or click on attachments or links. Go to IRS.gov for the most up-to-date information.”
That is the best advice anyone can give, and it applies to any other government agency as well—not just the IRS. Reach out directly to any agencies if you need to get in touch with them. The Treasury Department, Center for Disease Control, Department of Education, and any other agency you can think of don’t call citizens to ask they verify their financial information.
Government agencies certainly don’t send unprompted texts, emails, or messages to you on social media; any attempts to do so while claiming to be from the government are likely scams.
Scam No. 2: “Miracle Cures” for Health Problems
Probably one of the oldest scams in history is the health con. These are the snake oil salespeople peddling cures you read about in stories, although they extend through to real life as well.
That term “snake oil” became the phrase most associated with false cures. But historical and modern “snake oil” stories are actually rooted in fact.
As NPR dug up a handful of years ago, the term came from authentic snake oil liniments brought over from China by the influx of railroad worker immigrants in the 1800s. Con men, fascinated by the real healing properties of Chinese water snakes (containing high levels of omega-3 acids), started using rattlesnakes, which weren’t effective.
Today, similar miracle health cures are rooted in fact. For the coronavirus, for instance, claims of immune system boosters have begun making the rounds. As WebMD reports, claims of zinc and vitamin C shortening COVID-19 infection or curing it altogether are all over social media and online.
In fact, there is currently no cure or product you can simply order online to reduce risk, shorten infection, or outright cure COVID-19. As has been stated everywhere lately, the only actions that can help prevent the spread or survive it is through social distancing, hand washing, and keeping healthy in general through diet and exercise.
The best way to avoid this particular kind of scam is to check health information with reputable sources like the CDC and the FDA. If such a solution were out there and proven, those sources would be vocal about it.
The same goes for similar scams concerning products like home test kits. When available, reputable sources—like major government agencies—will have information on them.
Scam No. 3: “Safe” or “Guaranteed” Investments
This third type of scam is common even when the economy isn’t suffering—but it sure is a lot more effective when something like a recession is looming or in progress.
Safe or guaranteed investments are never something that can be promised. The closest thing to a guaranteed investment is an FDIC-insured bank account, but those often don’t offer much in terms of returns.
But you might see claims of 7% or 10% annual returns, guaranteed. Information on high-yielding investments isn’t always a scam, but if you specifically come across one that promises or guarantees high returns, you should run in the opposite direction.
During periods when markets plunge, these kinds of scams become more frequent. As the Federal Deposit Insurance Corporation itself recently noted in a press release, “The FDIC does not send unsolicited correspondence asking for money or sensitive personal information,” and “Since 1933, no depositor has ever lost a penny of FDIC-insured funds.” So, unless the investment “opportunity” is in an FDIC-backed account, chances are it isn’t guaranteed.
The greatest way to avoid this particular scam is to immediately question or even dismiss any promised returns. Opportunities of high returns are one thing. But guarantees are another.
Secondly, do your due diligence, as always. Dig into the source of the opportunity. Find out more about its credentials and track record. Search the internet and read reviews.
Certainly, high-profile Ponzi schemes are possible. One only has to recall the name of Bernie Madoff. Checking into the validity of the company behind a claim of return is a great first step.
Scam No. 4: Miscellaneous Online Attacks to Steal Identity
These days, most scammers are digital. “Snake oil salespeople” are not likely to roll through your town in a horse and buggy. But you could easily come across malicious actors online.
As noted above, false government actors are one common scam, especially in economic downturns. But those aren’t the only attacks to watch out for online.
Most people can now point out a lot of the spam they get via email these days although the problem messages are not always easy to identify. In other places, especially on social media, you might see links for things that might not necessarily strike you as spammy. These can be extraordinarily malicious because you can end up inadvertently sharing personal information.
Take the example of fake COVID-19 dashboards. Links purportedly to maps to help you track the spread of coronavirus have popped up online in recent weeks. Some who clicked on these bad links have had their devices infected with malware. Other people have received messages that asked for personal information in order to “authenticate” their accounts; upon giving this information, it became clear that there was no meaningful inquiry behind the request.
As with other scams, the best way to avoid this one is to keep a skeptical eye on information that doesn’t comes from reputable sources. That can seem difficult at times. But if you aren’t familiar with a URL, your best bet might be to avoid it altogether.
Scams are nothing new. But when the economy slumps, and times get tough, they seem to gain strength. Now, more than ever, we need to remain vigilant against these cons.
The shortest and easiest solution to almost all scams you come across is to steer clear if you suspect anything amiss, and follow the best practices outlined above. Short of that, as there are times they cannot be avoided, do your due diligence and check up on the group or source behind it.
Don’t click links to unfamiliar sites. Don’t ever give out personal information without verifying everything else first. And remain aware of scams in the news. Cons often change shape, and so keeping abreast of potential dangers is always a good idea.