In 2008, after Hurricane Ike turned inland and unleashed 75-mile-per-hour winds on the midwest, 2.6 million homes in Ohio—including my own—were left without power.
Many people rallied together, offering up the use of generators, delivering food to affected households, and sharing supplies; some took the disaster as an opportunity to enrich themselves.
Flashlights, batteries, and car cell phone chargers quickly sold out at local stores, in part because profiteers recognized how desperate the public would be for these items. These profiteers bought as many of these necessary items as they could and sold them at higher prices.
While most people want to help each other weather difficult times, there may be individuals who selfishly see disasters as an opportunity to profit.
Here’s what you need to know about the most common types of scams during times of crisis, and what you can do to protect yourself.
The Scam: Price Gouging
Price gouging is a complex type of scam. It’s unlike other types of fraud on this list since there’s no specific legal definition for the practice.
This kind of scam is difficult to pin down in part because it follows the economic principle of supply and demand. Batteries and flashlights were needed items prior to the Ohio power outage. The demand for these items skyrocketed after millions of homes lost power. Those who bought up all the local stock of of these items, and sold them at a profit could claim they were simply being entrepreneurial and recognizing a market need. This is the very basis of entrepreneurship, even if these “entrepreneurs” are in ethically murky waters.
While some emergencies and disasters arrive with no warning, many can be at least somewhat predicted.
- Keep a reasonable supply of the items you use on a regular basis.
- Staying informed of everything from weather to health news can help you plan ahead to have the items you need.
The Scam: Fake Robocalls From Insurers
In the wake of Hurricane Harvey in 2017, many storm survivors received a robocall informing them that their insurance premium was past due, and that their flood insurance would be canceled if they did not immediately send money.
These calls are not from insurance companies but are an outright con. The scammers prey on desperation knowing that in times of high stress and emotion, people are less likely to ask questions and think rationally.
In times of large-scale emergency, robocalls can be even more confusing because federal, state, and local agencies may use automated calls to disseminate important information.
One way to tell the difference between a legitimate call and a scam is what it asks of you. Calls from a legitimate agency will only provide information.
If a robocall offers you free or discounted services, asks for credit card
information, or even directs you to press a number to be removed from
a call list, then it’s likely a scam, and you should hang up.
You should go straight to the source when it comes to information about your insurance policy or the availability of services. Contact your insurer or your local, state, or federal agency to get verified information about your situation.
The Scam: Government Imposters
Scammers pretending to be from the government is a common trick that is used no matter what is happening in the world. In one common scam, imposters will call or email you claiming to be from the IRS and demanding payment for past-due taxes. Alternatively, some scammers will claim to be from a government agency that is handing out federal lottery winnings and ask you to wire money to them in order to collect your prize.
This fraudulent activity can drastically increase during times of a national crisis, especially if there is federal relief on its way. In these cases, imposters may call or email you, claiming that you are eligible for a relief grant, but you’ll need to provide personal identification information, and/or you will need to pre-pay a processing fee.
If you receive such a scam message, be sure to report it to the
Better Business Bureau’s Scam Tracker, even if you haven’t lost money
to the imposter. Alerting the BBB will help protect others from falling
victim to the scam.
The Scam: Identity Theft
In the case of natural disasters, fraudsters will steal the identity of a real natural disaster survivor and then apply for relief funds under the assumed identity. According to The Washington Post, “From Katrina, more than 1,400 federal fraud prosecutions were launched, as well as untold numbers of state prosecutions.”
The secondary outcome of these post-disaster scams is that it slows down relief fund payments, as government agencies investigate claims to prevent payments to scammers.
Even when relief checks aren’t on the table, identity thieves can still wreak havoc during a crisis. Phishing scams send people fake emails claiming to be from trusted sources in the attempt to gather their credit card or Social Security number.
Double-checking the actual email address (rather than the display
name) can often reveal a phishing attempt, since the address will not
follow the legitimate format for the organization.
(For instance, something from a government agency will
end in .gov and not .com).
Even if you do believe an email is legitimate, always navigate to the organization yourself rather than clicking a link within the email.
Scam Health Products
Dishonest salespeople will try to sell unproven and fraudulent products to trusting buyers. From the snake oil salesmen of the 19th century to “miracle weight-loss cures” touted on social media, there is no shortage of products that promise more than they can deliver. Disasters can increase these kinds of fraudulent products as people become desperate to protect themselves and their loved ones.
According to the FDA, there are several proven strategies you can use to avoid scam products, whether a disaster or a personal issue is prompting you to search for it:
- Talk to a doctor or other medical professional.
- Research complaints about the product or company with the Better Business Bureau.
- Check with the health professional group associated with the product, such as the American Heart Association.
- Contact your local FDA office.
Many of the scams surrounding disasters victimize the survivors, charitable scams take advantage of the generosity of those who want to help in times of need.
The best way to donate money to help those affected by a crisis is to go
directly to the charity’s website. The Better Business Bureau keeps a list of charitable organizations that meet its 20 Standards for Charity Accountability.
The Scam: Contractors Asking for Upfront Payment
When a natural disaster damages your home, it’s understandable that you want to get it fixed as soon as possible. Shady contractors can take advantage of your natural preference for a fast resolution by getting you to agree to terms that aren’t in your best interest.
Some contractors will ask for all of your payment (or a large percentage) up front. While the request may sound perfectly reasonable — your contractor may claim that he or she needs upfront payment to cover the cost of supplies and equipment — the reality is that many contractors who make such a request may disappear with the money or do inadequate work.
This is why the Better Business Bureau recommends that homeowners
pay no more than one-third of the full cost of the job upfront. In
addition, you should make sure your contract spells out the payment
schedule so that you and the contractor both know what to expect.
Protect Yourself From Scams
It hardly seems fair that we need to beware of potential fraud during times of national crisis, but fending off scam artists is an almost inevitable part of the recovery. You can help keep yourself safe by taking some basic precautions.
Get the Correct Information
Misinformation is the common denominator in nearly all scams.
Make sure you are getting your information from credible sources, such as:
- your doctor
- insurance agency
- local government
- federal agencies
This will help you weed out the kinds of misinformation that can work to part you from your money. Your service providers and government agencies can help you understand what to expect and the next steps you need to take to get back to normal.
Bring a Healthy Level of Skepticism
Are unsolicited offer too good to be true?
Before you make any decisions, double-check on the following: company, policy, charity, salesperson, email, or any other offer or request that you receive.
The uncertainty we face when a disaster changes our lives and routines is hard enough without adding fraud into the mix. Making sure that you verify information and offers before making any major financial decisions will save you time, money, and a great deal of heartache.