Personal Finance

College students are in the crosshairs of a new financial fraud

Key Points
  • The Federal Trade Commission issued a consumer alert about an emerging type of fraud known as a "car wrap" scam.
  • It's a new version of a long-running fraud known as a "fake check" scam, occurrences of which are on the rise in the U.S.
  • This fraud most frequently targets young people, who may be looking for a quick way to make extra cash.
Alys Tomilson | Getty Images

College students apparently have more to worry about these days than their grades and where to head for the weekend's best party.

A new form of financial fraud is exploiting college kids who own cars and are looking to make some extra cash, according to the Federal Trade Commission. Scammers swindle unsuspecting victims by posing as a company willing to pay roughly $250-$350 a week to drive around with company advertisements plastered on the outside of the student's car.

Such "car wrap" scams work this way: Fraudsters send checks to college students to deposit into their bank accounts, and then request the student send back some of the money so a "specialist" can put the ads on the car. Here's the catch: That check the scammer sent is a fake. That means the crook has the victim's cash and the victim must repay the bank for the sum of the counterfeit check.

The FTC issued a consumer alert Thursday about car wrap scams aimed at college students, "a group known to look for ways to make a few extra bucks," according to the agency.

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The fraud is a new version of the common "fake-check" scam, according to Susan Grant, the director of consumer protection and privacy at the Consumer Federation of America.

"It's an example of how scams morph," she said. "Crooks are very creative."

Fake-check ploys are on the rise. Complaints about such swindles to government agencies and consumer advocacy organizations doubled over the 2014-2017 period, according to the Better Business Bureau, which says millions of fake checks with billions of dollars in face value circulate every year.

Fake-check scams represent the second-most common type of consumer complaint, according to the National Consumers League.

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The Bureau, which analyzed FTC consumer complaint data, found that young people between ages 20 and 29 are the most frequent victims of fake-check fraud. That age group represented 21% of the 42,390 total complaints about fake-check scams received between 2015 and 2017.

Fake-check scams come in a variety of guises, such as employment scams and prize and sweepstakes fraud, yet work in the same basic way: Victims will deposit a check and send some of the money back to crooks for a seemingly sound reason.

Initially, the fake check may seem legitimate, since deposited funds appear in the consumer's account. But that's a function of banking law, which requires financial institutions to make deposited funds available quickly, typically within a day or two. Once the counterfeit check bounces, the account holder — not the scammer — is on the hook when the bank seeks to recover the money.

"I've always said fake-check scams are the perfect crime," Grant said. "Most frauds are dependent on your ability to pay.

"In this case, they're stealing money from your financial institution and leaving you holding the bag."

There's an easy way for consumers to identify if they're the target, Grant said.

"There's just no scenario, period, where someone would offer to give you money for something and then ask you to send that money someplace else," she said. "That is the red flag of fraud and under no circumstances should people do it."