A BoatUS member shares his boat-selling scam story, and we show you how to look for the red flags.
For as long as there's been commerce, there have always been people trying to part the unsuspecting from their money. Two hundred years ago, it was both easier and harder for con artists to cheat people out of their hard-earned money than it is today. Easier because a swindler could wander unknown into town, prey on someone's sympathy, abscond with money or jewels, and repeat the process from town to town, cloaked inanonymity. But harder because they could only swindle one person at a time. These days, scammers can use online methods to prey on hundreds or thousands of people at a time, across the globe. To make their scams work, scammers depend upon trust and gullibility. Not long ago, BoatUS Consumer Affairs received a call from Bob Bramble, a BoatUS member from Fairfax, Virginia, that started like this: "I'm selling my boat online, and I've got a funny feeling that something's not right, but I don't see how I can get hoodwinked."
Bramble owned a well-kept 13-foot sailboat that he'd listed for sale on Craigslist for $2,200. He was happy at the response, especially from one potential buyer who, the man said, was ready to buy now. Mr. Jones, as we'll call him, was from Utah. But despite the distance, Bramble figured a buyer is a buyer. Jones said via email that he'd pay full price, and in fact would send an extra $1,800 to cover the shipping to Utah. All Bramble had to do was deposit Jones' cashier's check, then send the shipper an $1,800 instant payment MoneyGram, at which point the shipper would pick up the boat and bring it back to Utah. The whole thing would be quick and easy, the buyer said, and Bramble would really be doing the buyer a big favor by helping out with the shipping payment.
Bramble was a little wary, but agreed, and waited for the check. Sure enough, a $4,000 cashier's check arrived, drawn on PNC Bank from a company in Texas. Bramble took the check to his Wells Fargo Bank and asked them if it looked suspicious. They said it looked "good as gold" and his money would be available in no more than eight days. Satisfied, he contacted the shipper by phone to arrange pickup. A man with a thick foreign accent answered and seemed confused, which made Bramble nervous. But he had his money and the buyer had just provided his cellphone number, so he texted him and told him about the spacey shipper. No problem, said the buyer via text, just send him the money quickly and the boat would be picked up right away.
Bramble, wanting to be cautious, waited eight days and called his bank, who said the check had cleared. Everything appeared in order. But something still didn't seem quite right. The buyer kept texting him, asking him if he'd sent the money, the shipper wouldn't answer his phone anymore, and Bramble realized that the buyer never asked about the boat's paperwork and, in fact, he didn't even have the buyer's last name.
Yet the bank said Bramble's money was available. It was at this point that Bramble called BoatUS Consumer Affairs.
After reviewing his story, we looked for red flags in this deal. In the meantime, Bramble agreed that dragging his feet for a few more days wasn't going to hurt anything, so he stalled. Good thing, because the test results were pegging our red-flag filters at 100 percent fishy (see more on red flags below). The brightest, reddest flags were due to the buyer sending extra money for shipping, the buyer's indifference to ownership paperwork and marine surveys, and more interest in getting the shipping fees than in getting the boat. After a few days of pestering by Bramble, the "buyer" stopped responding to texts and phone calls went to voice mail. The check was obviously a phony, and the scammers moved on, no doubt scanning Craigslist for more victims. Still, Bramble wondered, how did the scammers almost fool him, as well as his bank? And how can he be assured of an honest transaction when the next buyer contacts him?
Scammers have gotten very good at seeming legitimate — they portray themselves as simply eager buyers with money, anxiously awaiting their new toys. But that plays on a seller's desire for a quick, painless cash transaction.
But another convincing part of the scheme is using banks to facilitate the scam. To many people, it seems implausible that a bank can be fooled so easily by a phony check and release funds that don't exist. But the scammers play on something called the Federal Reserve Board's Expedited Funds Availability Act (see sidebar below), which requires that certain deposits be quickly made available. Combine that with desktop software and color printers that produce realistic-looking checks that can get by a wary teller, and you can begin to see how even a savvy seller can be taken advantage of. It might have taken a month, but the bank eventually would have bounced that check and pulled the money back out of your account; in this case, $4,000 would have been debited from Bramble's account, leaving him holding the bag for the $1,800 of his own money that he'd sent to the "shipping company."
Working The Banking System
The reason some scams seem legitimate despite a red flag or two is that your bank may give you access to the money that scammers send you. If you've got your money, what could go wrong? Plenty. Here's why: The Federal Reserve's Expedited Funds Availability Act requires banks to make many types of deposits available, up to the first $5,000, by the next business day. Typically included are cashier's, Treasury, Federal Reserve Bank, Federal Home Loan Bank, state or local government checks, and money orders. This gives scammers a head start, because while a bank is waiting to learn whether a check has been rejected, it must still provide "provisional" credit to you, often the next day after deposit. And some sophisticated scams use altered routing numbers to intentionally slow the clearing process. These regulations were written before the days of desktop printing and the Internet, before there was a significant risk of phony checks. Even if a bank says a check is good, it could easily take two weeks to a month for it to be returned, in which case the bank would cancel the deposit, leaving you with a hole in your bank account if you'd already spent the money. Regardless of what a bank may tell you, you are fully liable for any bogus checks.
Any one of these red flags should be enough to make you very cautious — more than one or two should be enough to make you slam on the brakes:
- An offer to send a cashier's check for more than the purchase price, and a request that you send the difference back to pay for shipping — almost always by instant electronic money transfer, such as Western Union, which can't be reversed once the money is picked up. Sometimes scammers will have imaginative reasons to need to have a return of excess money, such as they just got a settlement and they want to send you the check and ask you to return a portion. Ironically, this tends to foster confidence — surely you'd trust someone who trusts you enough to return some of their money. This is the brightest of red flags and always signals a scam. Never agree to send excess money back to a buyer.
- The buyer's lack of interest in inspecting the boat, verifying paperwork (often not even mentioning it), or negotiating price, even on expensive boats. Scammers are busy and usually have multiple scams going on. They don't have time to negotiate back and forth, and often forget which person they're dealing with. If a buyer isn't interested in title, registration, or a survey, and makes a full-price sight-unseen offer, stop.
- Buyers, banks, and shippers from multiple geographic areas. Bramble's buyer said he was from Utah, but his check was drawn on a bank in Texas, and the shipper was in Oklahoma. The check was a forgery. The Internet makes buying across the country easy, but scammers often work together in separate areas to better hide from authorities.
- Communication via odd-sounding email addresses. Scammers prefer emails, though many will now use text and even phone calls. Emails, especially those with foreign domains (such as .ru) make hiding identities easier. But now, scammers often buy "burners" — prepaid untraceable phones — for calls and texting. These phone are bought with cash and then tossed after a few scams.
- Demanding fast payment. Scammers may say that the shipping company will be in town soon, and you need to pay them right away or the deal's off. Ironically, some scammers will negotiate the amount for you to send back to them (anything they can get is a success), even if they won't negotiate the boat price. Their only goal is to get some of your money before you become suspicious. If you're not comfortable, it's OK to delay the sale. Dragging your feet might save you a bundle.
So how can you protect yourself from a phony check? First, if it's a relatively small amount and it's a local sale, ask for cash. A bank is a good place for a buyer to withdraw money and for a seller to sign over paperwork. If it's a long-distance transaction and you receive a cashier's check or money order, call the issuer it's drawn on to verify it. But don't call any numbers printed on the check — scammers can set up someone to answer that number to "verify" the check. Instead, look up the bank's number online. If the buyer insists on payment by cashier's check, you can also have them use a bank with a local branch, which can then ensure it's valid. For smaller amounts, U.S. Postal Service money orders are hard to beat. You can take it to a local post office or call the toll-free number (866 459-7822) to verify it's good, though because they're limited to $1,000 each, you may have to get several.