New scam targets utility customers

Duke Power recently emailed this fraud alert to residential and business electric customers to warn them of the ongoing scam.
Source: Duke Power

Fraudsters have developed a clever and all-too-successful ruse to steal money from homeowners and small businesses across the country.

All it takes is a phone call and a bunch of convincing lies.

These phone bandits claim to be from your local power company. They pretend they're calling to let your know your account is delinquent and that service will be disconnected unless you pay it right away. To add credibility to their con, they often use "spoofing technology" that makes your caller ID display the name and phone number of the local utility.

"It's a despicable scam," said North Carolina Attorney General Roy Cooper. "They're trying to scare you into giving them money by threatening to take away something that's critically important to you. And they know that if they do this enough, they'll get a few people who will do what they want."

Earlier this year, scammers got $890 from Randy's Pizza in Durham, N.C. The call came in the middle of lunch hour. The caller, who claimed to be with Duke Power, said the business would be shut down in 45 minutes if the bill wasn't paid.

"When you're in business and someone tells you they're going to shut off the power, you've got to do something," said co-owner David Kolenberg.

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Though he was sure the bill had been paid, he couldn't take a chance so did as he was instructed. He went to a nearby store, bought a Green Dot MoneyPak card (a prepaid debit card) and then called the scammers back and gave them the information to access the money.

"We were vulnerable," Kolenberg told me. "There wasn't a lot of time to think about it. We just responded to keep the lights on."

Duke Power received so many reports about these deceptive calls in its service territory (North and South Carolina, Ohio, Kentucky, Indiana and Florida) that it has launched a public awareness campaign. It included radio commercials, a message on billing statements, social media outreach, and a fraud-alert email sent to residential and small business customers.

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"We are never going to call and threaten immediate service disconnection," said Duke Power's Kristina Hill. "And we are never going to say go to the store, get a prepaid card and call us back."

It's happening all across the country

When a scam works, it spreads. And that's what's happening with this one.

"We're seeing some pretty active and pretty aggressive scamming right now," said Warren Bamford, head of security at National Grid, which provides electricity to customers in parts of Massachusetts, New York and Rhode Island.

"Everybody needs electricity, so if someone calls and threatens to shut it off, that certainly gets your attention," Bamford said.

And that's what these crooks have going for them. Many victims say they suspected something didn't sound right but were afraid of what might happen if they didn't pay. Homeowners have lost hundreds of dollars this way. Small business owners—especially those with big electric bills— have been taken for thousands.

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The utility swindlers took the owner of Love's Fish Market in Little Rock, Ark., for $850. A month later, they tried to con him out of more money. That's very common with this sort of scam: Crooks figure that if someone fell for it once, they may fall for it again.

"I think it's a crying shame that they're doing this to people," said Lee Scott, who works at Love's. "To take people's money like this, they're just the lowest of the lowest. They need some jail time."

But that's not likely to happen. In fact, since many of these scammers are calling from outside the country, there's very little chance they'll get caught. And that's why they like to use Green Dot and other prepaid debit cards.

"These cards are like cash," said Jim DePriest, deputy attorney general of Arkansas. "Once a crook has the information from that card, they can drain the money loaded on it anywhere in the world—remotely and anonymously."

Protect yourself

Fraud experts say this scam is going to be around for a while, so you need to be alert and know the warning signs. It's easy to spot once you understand how utility companies operate.

Your power company will never call you and threaten immediate service disconnection. A lengthy process takes place before the plug is pulled. Typically, multiple written notices are sent to the customer when the account is delinquent.

Your power company will never call and demand payment via a prepaid debit card. If you get a call like this, hang up. The caller might insist he is with your power company; the caller ID on your phone might display the name of your utility. But it is a scam—hang up.

If you're concerned about your account, call the utility using a number from an old bill, or look it up on the Web. Don't use the number on your caller ID.

Fall for this scam and you will never see your money again. So slow down, think and don't let some crook pressure you into handing over your hard-earned money.

—By CNBC contributor Herb Weisbaum. Follow him on Facebook and Twitter @TheConsumerman or visit The ConsumerMan website.