In the age of online selling on websites like Kijiji, Craigslist and eBay, fraudsters have turned to the Internet to find their scam victims. The overpayment scam tricks sellers into sending back some of the extra money the scammer “accidentally” sent in exchange for their purchase.
How the scam works
This is how an overpayment scam typically unfolds:
- The seller will place an online ad for a high-priced item, such as furniture, a car or piece of electronic equipment.
- The seller will receive an offer for the item, usually by email.
- The “buyer”/scammer will send a cheque or money order for the item, but for an amount much larger than the asking price. For example, you’re selling your item for $1500 but the buyer/scammer sends you a cheque for $3000.
- The scammer will claim the extra money is to cover the costs of shipping or customs fees and should be sent to a third party.
- The seller will deposit the cheque or money order into their account and then withdraw the appropriate funds and send it to the specified third party account.
- Later, once the cheque or money order is processed, the seller will discover that it was fraudulent. The seller won’t get any of the funds promised by the buyer and, worse, they have handed over some of their own money right back to the scammer.
- In other cases, the buyer might claim he or she may have sent a larger cheque by accident. However the outcome is the same; once the seller sends back the “extra” funds, they’ll discover the cheque was fake.
How can you protect yourself?
In addition to receiving a fraudulent cheque or money order, the seller may have already sent the scammer the item that was for sale. Add this to the funds the seller may have sent back in “overpaid” fees, and this scam could prove to be very costly. Here are a few tips to help ensure you don’t become a victim of this scam:
- Beware of buyers who send more money than you’re asking for.
- Instead of a cheque or money order, request a certified cheque, or better yet, an electronic payment such as an email money transfer. This way, the funds are deposited into your account and are guaranteed right away and you don't have to wait for a cheque or money order to go through the clearing system to learn it is fraudulent.
- If you receive a cheque or money order that is more than the agreed amount of money, refuse the payment and send it back to the buyer.
- Know the details of your buyer, including their full name, telephone number and address.
- Remember to treat a money order like a cheque; these funds are not the same as cash and must be cleared and settled the same way that a cheque clears and settles.
- To find out more about recognizing fraudulent cheques and money orders, click here.
A cheque or money order is a payment agreement made between a buyer and seller. The bank processes the payment but they are not involved in the agreement. You are responsible for the items you deposit in your bank account. If the item is returned as fraudulent, you, as the depositor, are liable for the full amount. So if you're in doubt, or if the situation seems fishy in any way, request electronic payment, or even find another buyer. These payments happen right away and you don’t have to wait for a cheque to clear.