Be Aware of the “Overpayment Scam”

We’ve noticed a resurgence in the popularity for the Overpayment Scam, and if your business advertises its products or services online, be aware, that you could be a target. Also referred to as a Cash Forwarding, or Cash Advance Scam, the con involves fraudsters paying for a purchase with a stolen credit card, then requesting that you either forward some of the funds to another third party or refund the purchase to a different form of payment.

How the Overpayment Scam works, fraudsters will contact a business, usually using text or email, and inquire about making a large purchase. The large purchase is designed to entice the business to overlook any potential red flags so the fraudster can pay using a stolen credit card. After the business processes the transaction, the fraudster will call cancel and ask for a full or partial refund.

The catch here, and the key to this scam, is they will ask to have the refund sent to a different credit card or issued as a check. In this example, the original purchase was paid for with a stolen card. A chargeback will likely be filed leaving the business out of the initially refunded money to the fraudster, as well as the money they will have to pay back to the owner of the stolen credit card by way of the chargeback.

Below are some of the best practices to help you avoid being deceived:

  • Be wary of customers who offer to pay more than you’re asking. Customers typically want to pay less, so if a customer is offering to pay more than you’re asking, it should be considered a red flag.
  • Don’t forward money to a third party. If a customer asks you to forward part of their payment to a third party because they overpaid for a purchase, it’s best to decline the whole transaction and refund the money directly to the customer using the same payment method and details as the original transaction.
  • Refuse any Overpayments you receive, only process credit card payments for the correct purchase amount. If a customer makes the payment using a check, only deposit it if it’s for the correct amount.
  • Only refund purchases onto the original card used. If a customer pays for a purchase using a credit card, the refund should only be returned to the original card used for the transaction.
  • Avoid the temptation to rush through a large purchase. Don’t overlook red flags or rush through processing a payment just because a purchase is significantly larger than your usual transactions.

Knowing how to identify potentially troublesome transactions can help you spot red flags faster, saving your business time and money. When in doubt, it’s best to fall back to the general rule that if a purchase or transaction seems too good to be true, it probably is.