Top five worst readers' scams!

Think you're far too savvy to get caught out by a scam? It's easier to fall into the trap than you might realise.

The fraudsters are out to get you - or more precisely your money. Scams come in all manner of guises - some truly sophisticated, others so thoroughly unconvincing they wouldn't fool an eight-year old. But no matter how clever, or otherwise, a scam may be, there's a chance you could fall for it - especially if you've never heard of it before. With that in mind, I've picked five common scams lovemoney.com readers have told us about. Let's see if we can learn something from their bad luck.

1. The stolen cheque scam

To kick us off listen up to this reader's story:

ckm4328 posts: "I listed my car for sale on Autotrader and got an email from an interested buyer. They said they wanted to buy the car but couldn't travel so they would forward the price plus extra to forward to shipping company. There was no need for me to send the car until cheque/banker's draft had cleared.

I was suspicious but wanted to see what arrived. Yesterday I received what was obviously a stolen cheque from a Centrica rights issue. I've looked into the scam and apparently they provide you with a stolen cheque that will clear but won't be given value. Several weeks later it will be deducted from your account."

Fortunately for ckm4328 this stolen cheque was easy to spot, but that doesn't mean necessarily this type of fraud will always be obvious. So, how can you protect yourself when it's difficult to insist on a cash payment?

Thankfully, in November 2007 banking rules were introduced - known as 2-4-6 - which means once you have paid a cheque or banker's draft into your current account you can be certain the money is yours at the end of six working days - even if it bounces later on (and you're not a knowing party to a fraud).

If you're accepting a cheque or banker's draft in payment for an item, make sure you wait for the minimum six working day period to pass before you release the goods to the buyer. You can ensure you've waited long enough using this cheque checker.

Finally, don't be put off using Autotrader because of this scam. It is a reputable site and had no knowledge of the scam or that its user was a scammer. If you ever come across this scam after using Autotrader (or any other car sales website), follow these instructions to report it.

ckm4328 posted about his scam using our Q&A tool - if you've been a victim of a scam, why not follow his example and use Q&A to get advice from the lovemoney.com community?

2. Recurring payments scam

Recurring payments are normally regular payments which you set up using your debit or credit card. But they're totally different to direct debits and standing orders for one key reason: direct debits and standing orders are set up via your bank and so can be cancelled by you at any time, but regular payments can only be cancelled by the company you're making the payments to.

So the company you're paying is in control, not you.

Recurring payments are legal, so aren't technically speaking a scam - although personally I believe they should be banned. In the meantime, you need to be very careful you don't get caught out by unscrupulous companies like this reader:

Q&A user shadden writes: "If you have been caught up in an online scam regarding a debit card how do you escape? The bank says they won't stop paying the company. It's a teeth whitening scam but I don't know the website and the "free" trial had no paperwork. I have now had two lots of £52 deducted. From what I've read since it seems it could be a life time repeat delivery - help!"

Unfortunately, shadden isn't the only person to be caught out like this. Anecdotal evidence suggests that by accepting a "free" trial, like this you're actually signing up to a monthly subscription which is buried in the terms and conditions and often missed. Once the recurring payments have started they're almost impossible to stop unless you make a formal complaint or go through legal channels.  

So, don't whatever you do pay for anything using a recurring payment. Most reputable companies won't ask you to. Take the direct debit option whenever you can, giving you control of your own money. You can read more about recurring payments in Avoid this devious credit card sting!

Read shadden's full thread on Q&A here.

3. Recurring payments from closed accounts

But there's more to the recurring payments story than that. Unbelievably, payments can continue to be taken from a credit card account which is closed! Just take a look at this email that was sent to the lovemoney.com editorial team (via email address uknews@lovemoney.com) from 66-year-old reader Neil D.:

"I had an Alliance & Leicester card up until August last year. I closed the account. All seemed OK until I received a statement in February stating that £93 had been paid to the AA. Apparently I had a yearly subscription. As I'm 66 years of age I don't drive anymore and don't need AA coverage. When I contacted Visa I was told I would be wise to pay it even though they agreed the account was closed.

How can they can pay a subscription from a closed account and then demand the money from me?"

The fact is, even shutting the account down doesn't stop a recurring payment. Luckily for Neil D., once he explained the situation to the AA, it refunded him his cash. A less reputable company might not be so forthcoming. Find out what to do if you fall victim to this problem here.

4. Advance fee fraud

Scam number four seems to happen with alarming regularity. lovemoney.com reader Karen M. emailed us to tell us about a phonecall she'd received, apparently from the head office of her bank: "They said they owed me £300 in overpaid bank charges. After a lengthy dialogue, they then told me a private company was handling it, which would charge me £59.99 to get my money back. Isn't that the equivalent to paying a burglar to get your stolen stuff back?"

This immediately sets the alarms bells ringing - not only because it sounds highly dubious - but also because it has 'advance fee fraud' written all over it. This involves being offered a large sum of money which you can only get in return for a small fee. Often victims are told they're lottery winners and must pay a charge in order to collect their winnings - although bizarrely no lottery ticket was ever actually purchased.

If you're not entirely sure whether an offer is genuine or not, call the company back on an official telephone number and get proper verification before you pay anything. And remember the old saying, if it sounds too good to be true, it probably is.

5. Claims management scam

Our final scam to watch out for concerns claims management firms who say they can win compensation for you for a range of financial wrongdoing, such as unfair bank charges and the mis-selling of payment protection insurance. There's nothing illegal about this type of service in itself, but if they ask you to pay an upfront fee, watch out - as lovemoney.com reader Hayley G explains:

"I've been offered a service whereby the outstanding amount on all my loans and credit cards can be cleared if they were taken out before April 2007. Apparently this is possible due to the credit cards and loans being miss-sold and therefore unenforceable. The company set themselves up in July this year, solely for this purpose it seems, and they are charging £495 per application. Sounds too good to be true if you ask me."

Hayley is right to steer well clear. Regardless of whether a claims management firm is legitimate or not, you don't need to use one. Find out how you can deal with financial grievances yourself, without handing over a penny, in Got a complaint? Avoid this rip-off.

Please note reader's words have been edited slightly to keep it brief, but their meaning remains the same.

Get help from lovemoney.com

If you need help to protect yourself from fraud, or you've fallen victim to a scam, why not ask a question on Q&A where lovemoney.com members can give you advice on what worked best for them.

Or watch our videos: The biggest financial rip-offs and Watch out for this debt rip-off to find out more about scams and swindles to avoid.

Finally, if you know of any scams yourself, please share them using the comments box below. That way, other lovemoney.com readers can benefit from the knowledge you share.

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