Protecting Yourself from the Latest Cyber Scams

August 30, 2023 — Sam H. Fawaz

Technology is ever-changing, and so are cybercriminals’ strategies.

What can you do to help prevent yourself from falling victim to new and trending scams? Read on to stay up-to-date on the latest cyber threats and ways to avoid them. 

1. Vishing and Voice Clone scams

Vishing, known as “voice phishing,” is a tactic where scammers leverage automated, computer-generated voice messages to call people and build trust in an attempt to obtain personal information. 

Vishing attacks are becoming more sophisticated as emerging artificial intelligence (AI) tools allow scammers to create audio content that can clone the voices of friends and family members.

If an alleged friend or family member calls frantically asking for money, hang up and call the person directly. You could also create a “safe word” that only you and your close family know. Should you ever receive a desperate call, you can quickly verify the validity with the safe word.

2. Phone scams: Smishing, SIM Swapping and OTP Bots, Contest or Crypto scams

We rely on our smartphones for almost everything. Unfortunately, there are more than a few ways scammers can reach unsuspecting victims through their smartphones. 

Cybercriminals are always looking for new ways to go “phishing” for your personal information. When tried and true methods grow tired and easy to spot, they’ll often shift their approach. Their latest tactics? Text message and social media scams.

Smishing: Smishing, or SMS phishing, is when a scammer sends a text pretending to be from a legitimate company (i.e. USPS, FedEX, etc.) in order to get sensitive information like your credit card or social security number. The text also often has a link asking you to confirm information. If there are typos in the message or if you’re suspicious, never click on the link. 

Fast Fact: Smishing is on the rise, costing victims a significant amount of money. In 2021, consumers lost an estimated $131 million because of SMS phishing attacks.

You may be aware of the security risks involved with phishing scams and clicking unknown URLs in emails, but the dangers are less well known when it comes to texts. Don’t be inclined to trust a text message any more than you do an email. Unfortunately, it’s just the latest trick.

You also need to watch out for job hoaxes, deposit scams and tax fraud.

SIM swapping: Another way hackers can use your phone is by “SIM swapping”. It’s actually similar to the process of getting a new phone and SIM card from your provider. From there, the scammer can get access to multiple accounts by inputting a verification code or starting an account password reset.

Reach out to your mobile phone provider and ask about additional security measures to protect yourself from SIM swapping. 

One Time Password (OTP) bots: Another tactic scammers use is OTP bots, which trick people into sharing authentication codes received by text or email. You might receive a robocall or text from someone posing as a legit company like your bank. 

Remember, no legitimate company will contact you to ask for your username, password or full card number over the phone.

3. Student Loan Payment scams

Scammers can take advantage of those who owe student loans by posing as federal loan servicers or seemingly legitimate businesses. They call and email to offer solutions such as loan consolidation or lower monthly payments. 

As part of the application form to qualify for these services, they might ask for sensitive information like your Social Security number or banking information.

If you receive an unexpected phone call or email from someone who says they’re with your loan servicer, hang up and contact your servicer instead. 

With federal student loan payments resuming in October, student loan payment scams are on the rise. Therefore, I will have a more detailed write-up on student loan payment scams coming in September.

4. Social Media scams

Popular movies and streaming services often depict shocking social media schemes where cybercriminals scam millions from unsuspecting victims. These scams may seem obvious when viewing them on screen — giving you a feeling of immunity against these attacks. But, social media scams can be subtle and difficult to detect, despite becoming increasingly common.

Be extremely wary when people you’re connected to on social networks ask for money through instant message (IM) or email. Fraudsters have been known to hack social networks and assume the identity of real users, then send messages to their contacts stating the person has been robbed or is stranded somewhere and needs you to wire money in order to get home.

If you receive one of these requests, contact the person by phone and verify the request is real.

5. Investment, Contest or Crypto scams

Illegitimate contests, prizes and early investment opportunities are often at the center of crypto scams. They often target people who have already fallen for a crypto scam, so don’t let yourself be a repeat victim. They may offer you a refund if you pay an upfront fee or for access to your crypto wallet. 

If you hear about an investment opportunity that sounds too good to be true, it’s wise to think twice.

6. Digital Payment App scams

Third-party payment apps are convenient but beware of scammers when using them. While you can usually contest an illegitimate payment with your bank, it’s much more difficult to get a refund from a payment app.

Some common scenarios include accidentally overpaying, fake fraud alerts as well as phishing emails or texts. If you get a message that looks like it’s from a payment app, verify it by logging into your account through the app or website.

While it may be convenient, you should think twice before using payment apps while you’re connected to public Wi-Fi. These networks often have low security and may leave your personal information vulnerable to hackers and scammers. When you’re on the go, turn off both automatic Wi-Fi and Bluetooth connectivity on your phone to avoid automatically connecting to public Wi-Fi. 

7. Online Marketplace scams

Watch out for similar scams when selling or buying items through sites like Craigslist, Facebook Marketplace or eBay.

When you’re the seller, you might receive a fake payment receipt. Scammers may also overpay for an item you’re selling and then ask for a refund on that amount. When you send it, you may realize you never received their initial payment. Never ship the item until you have confirmation from your bank that payment has been received.

As a buyer, beware of bootlegs or broken items. If a deal seems too good to be true, it usually is. 

8. Work-from-Home scams

These typically start as an ad saying you can make big money working from home. Or maybe after posting your resume on a job search website, you’re contacted by an employer, who wants your driver’s license and bank account numbers before they even interview you.

What happens next? When you inquire about the job, the potential employer might ask for your sensitive personal information and subsequently swipe your identity and/or money.

9. Romance scams

In a romance scam, an unsuspecting person is tricked into believing they’re in a relationship with someone they met online — but in reality, it’s a con artist who often claims, conveniently, they can’t meet up IRL (in real life).

They’ll ask you to wire money for things like plane tickets, surgery or gambling debts. Their hope is that they can rely on the personal relationship they’ve built with you, though fraudulent, to guilt you into helping them in their time of need. 

If you’ve never met someone in real life, you should always view requests for payment and loans as potential red flags.

10. Suspicious “spoofing” Websites

Criminals create fake websites that look like real company websites in order to steal your personal information. Be cautious of links sent to you in emails. Phishing emails and smishing texts include links to these fake sites.

The best way to know that you are going to the real website is to type the URL directly in your browser or use favorites/bookmarks to access the website.

As a rule of thumb, look at the website address to be sure it starts with “https:” before entering personal information on a site. A green security status bar and padlock icon next to the web address are additional visual indicators that confirm you are on a secure site.

For additional protection, activate the additional web protection features of your anti-malware software such as Norton Cybersecurity.

Stay Active, Stay Safe

In addition to these scams, would-be cybercriminals also have more traditional tricks up their sleeves. Help keep yourself protected by remaining vigilant and remembering that if something sounds too good to be true, it usually is. By playing an active role in your safety and cybersecurity, you can stay ahead of even the craftiest of cybercriminals.

Also, don’t hesitate to report a suspected scam: 

  • If you suspect fraud, you can file a complaint with the Federal Trade Commission at reportfraud.ftc.gov.
  • To report suspected identity fraud, report it to identitytheft.gov and the social security administration at 800-269-0271.
  • For Online crime or cyber scams, you can report it to the Internet Crime Complaint Center (IC3) at ic3.gov or the Cybersecurity and Infrastructure Security Agency at cisa.gov/uscert/report. 
  • For Phishing scams, report it to the National Cybersecurity Communications and Integration Center (NCCIC) at us-cert.gov/report. 
  • For suspicious text messages, copy the message and forward it to 7726, a centralized spam reporting service among all wireless carriers. 

If you suspect fraud or your credentials are stolen or compromised, change your password(s) immediately. Changing your password regularly to a long and complicated password keeps you one step ahead of the cyber scammers.
 
Most of us become victims of cyber scams because of complacency or laziness. We don’t want to bother with a long or complicated password, we skip the privacy settings on social media sites, we fail to activate two-factor authentication, or we don’t double check our monthly statements and transactions.
 
Unfortunately, getting in the habit of doing all these things on a regular basis is the only way to protect ourselves from potentially expensive losses of money, time and sanity.

If you would like to review your current investment portfolio or discuss any other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client, an initial consultation is complimentary and there is never any pressure or hidden sales pitch. We start with a specific assessment of your personal situation. There is no rush and no cookie-cutter approach. Each client is different, and so are your financial plan and investment objectives.

Sources: FTC.gov, Ally Bank, consumerfinance.gov

Posted in Consumer Alert, Elder Care, Financial Planning, General, Identity Theft. Leave a Comment »

Protecting Yourself From Identity Theft

January 16, 2015 — Sam H. Fawaz

We’re hearing a lot more about identity theft these days—from hackers stealing credit card numbers from big banks and retail stores to individuals opening up credit card or bank accounts in your name, which they can use to write bad checks or make expensive purchases.  Criminal identity thieves may also take out a loan in your name for a car or even a house, and some have managed to receive Social Security benefits or tax refunds that rightfully belong to others.

In some cases, when arrested for some other crime, hackers have helpfully provided a victim’s name to the arresting officers, showing the police a falsified driver’s license with that person’s number and their picture.  They post bail and skip town.  When their victim doesn’t show up for a court date he was never informed of, he could be arrested.

How do you protect yourself?

According to the National Crime Prevention Council, the biggest threats are coming from places that might surprise you.  A study by Javelin Strategy and Research found that most identity thefts were taking place offline, where someone managed to steal your credit cards, or found social security information or credit card information in a dumpster, or filed bogus change of address forms to divert a victim’s mail to their address, where they can gather personal and financial data at their leisure.  Even more surprising, 43% of all identity thefts were committed by someone the victim knows.

An organization called IdentityTheft.net estimates that over 10 million people are victimized by identity theft each year, although that number may be boosted by the aforementioned mass hacking incidents.  The Council and IdentityTheft.net say that you do a reasonable job of protecting yourself by taking a few common sense steps that make it much harder for someone to make purchases in your name or withdraw funds from your accounts:

•    Never give out your Social Security number, and don’t carry your social security card, birth certificate or passport around with you.
•    Copy your credit cards and your driver’s license, and put the data in a safe place, to ensure you have the numbers if you need to call the companies.
•    When you use a credit card to buy something in a retail store, take the extra copy of the receipt with you and shred it.
•    Create complicated passwords for your online bank and investment accounts, and don’t write them down on hard copy paper.  Try not to use the same password for every website you access.  (Can’t remember 50 complicated passwords?  A free program called LastPass lets you save all your user names and passwords in an encrypted format, so you only have to remember a single strong pass phrase.  You can also store security questions and answers.)
•    Don’t let anyone look over your shoulder when you’re using an ATM machine.
•    Be skeptical of websites that offer prizes or giveaways.
•    Tell your children never to give out their address, telephone number, password, school name or any other personal information.
•    Make sure you have a virus and spyware protection program on your computer, and keep it updated.
•    Check your account balances regularly to make sure no unexplained transactions have occurred.

These simple precautions will keep you safe from many of the criminal efforts to hack into your life.  If you feel like you need additional protection, there are a variety of protection services on the marketplace, which basically all do the same thing: they regularly monitor your credit scores, looking for changes and odd debts that might be a clue that someone has stolen your identity, and check public record databases to see if your personal information is compromised.  Some will prevent pre-approved credit card offers from being sent to your mailbox, patrol the black market internet where thieves buy and sell credit card numbers, and the fancier services will provide lost wallet protection, identity theft insurance and keystroke encryption software.

Which are the best?  A research organization called NextAdvisor has recently evaluated and ranked eight of these services with costs ranging from $20 a month down to $7 a month.  The top rated was IdentityGuard (premium service price: $19.99 a month) which offers the most complete protection, including the aforementioned fancier services.  But seven of the protection systems, including TrustedID, AARP (a white-labeled version of TrustedID), LifeLock Ultimate, PrivacyGuard, IDFreeze and LegalShield all received good ratings; only Experian’s ProtectMyID was negatively reviewed for being expensive and only monitoring one credit reporting service.

Do you really NEED these services?  Possibly not.  However, with the growing publicity around identity theft, these firms have become very aggressive in their marketing efforts.  What they don’t tell you is that you can do many of the things they do on your own.  Every quarter, you can review one of your credit bureau reports for free, or—and this is easier—simply look at your statements and balances every day.  The more sophisticated services are a fancy replacement for promptly notifying your bank when a credit card is lost or stolen, or when a strange charge shows up because Citibank or the Target department store was using weak security protocols.

In the near future, as more transactions take place using thumb prints or other biometric security data, we may look back on this period as the Wild West of data security, a strange unsettling time when people had to worry about their lives being hacked by strangers.  Your goal is to arrive safely, un-hacked, at that more secure period in our cultural evolution.

If you would like to discuss protecting your money and your identity, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.  If you are not a client yet, an initial consultation is complimentary and there is never any pressure or hidden sales pitch.

Sources:
http://www.ncpc.org/cms-upload/prevent/files/IDtheftrev.pdf
http://www.ncpc.org/topics/fraud-and-identity-theft/tips-to-prevent-identity-theft
http://www.identitytheft.net/
http://www.cracked.com/article_19973_the-8-creepiest-cases-identity-theft-all-time.html
http://www.nextadvisor.com/identity_theft_protection_services/index.php?a=2&kw=mididx2+identity%20theft%20prevention&mkwid=pK49zV76_pcrid_5328142234_pkw_identity%20theft%20prevention_pmt_be_pdv_c_

Posted in Consumer Alert, Financial Planning, retirement planning, Technololgy. Tags: , , . 2 Comments »

Rollover Rules

November 15, 2014 — Sam H. Fawaz

One of the oddest things about tax law is the fact that often the rules and regulations are decided by the many court cases that are brought by taxpayers who didn’t follow the rulebook. This happened once again in a recent tax court case, where the Tax Court decided that people can only do one IRA rollover in any one-year period, no matter how many other IRA accounts they happen to have. Never mind that the decision directly contradicted the IRS’s own guidance in its Publication 590 and a number of private-letter rulings issued by the IRS.

Since the so-called Bobrow decision (which may be appealed), a common way to move money from one IRA account to another now has to be monitored closely. The ruling affects situations where an IRA owner takes a distribution from an IRA and then rolls those same funds over to another IRA within 60 days. So long as the same amount of money is put back into an IRA account within that time period, no taxes have to be paid on the distribution of funds (and no 10% additional penalty, if the IRA owner is under age 59 1/2). But now you WILL have to pay taxes–and the penalty, if applicable–if you try to do this again with the same or other IRAs during the same 365-day period.

Fortunately, this rule doesn’t apply to direct transfers, which is the way most professionals prefer to move money between IRA accounts. A direct transfer is exactly what it sounds like: the trustee of one IRA moves the money directly from that account into the hands of a trustee for another IRA account; that is, the money flows directly from one account to the other without the taxpayer ever touching it or putting it into his or her own checking account. Under current rules, even with the Bobrow decision, these kinds of transfers can be done all day long, all year long.

It has always been good advice to use only direct transfers to move IRA funds from one IRA to another. Now it’s even more so.

Incidentally, this once-per-year IRA rollover rule doesn’t apply to rollovers from an IRA to a Roth IRA (commonly known as a Roth IRA conversion). But most advisors prefer to handle those on a trustee-to-trustee basis anyway, to avoid confusion and potential problems with the 60-day rule. Mistakes on transfers can be costly from a tax standpoint, and the way things stand, they can’t be fixed after the fact–unless you decide to take the case to court and hope to reverse the current rule of law, which is far more costly still.

If you’d like to know more about rollover rules or if you want to discuss other financial planning matters, please don’t hesitate to contact us or visit our website at http://www.ydfs.com. We are a fee-only fiduciary financial planning firm that always puts your interests first.

Source:
http://www.investmentnews.com/article/20140413/REG/304139996/irs-only-one-ira-rollover-per-year

Posted in Consumer Alert, Financial Planning, retirement planning, tax planning, Taxes. Tags: , , , , . Leave a Comment »

Don’t Be a Victim of Corrupt or Unscrupulous Financial Planners/Advisors

December 2, 2010 — Sam H. Fawaz

A late night news story on a Metro Detroit television station last night tells the tale of a couple (and others) robbed of their retirement by their financial adviser-here’s a link: http://bit.ly/eXgpO0

Some of you may have seen this video last night, got up, checked your online accounts, and wondered how you can avoid being an unwitting victim of an unscrupulous financial adviser or planner. Everyone would do well to heed the advice given at the end of the video.

Last year, I sent out a message on how you can avoid being Madoff’ed (see below), a reference to the New York investment adviser who bilked his clients, charities and investors of billions of their hard earned money. Bernie Madoff is currently spending a 150 year sentence in a Federal prison and his possessions are being auctioned off to repay a mere fraction of his victims’ losses.  I also sent out a message with Five Tips to Avoid Potential Investment Fraud (link below).

So what do we do at YDream Financial Services to help you sleep better and know that you’ll never become a victim of financial fraud? In cooperation with our custodian, TD Ameritrade Institutional, we have processes and procedures in place to ensure that you never become a victim to the extent that it is within our control.  In fact, I’ve written two short articles on this blog over the past couple of years that will help you rest easier knowing that your money is safe, sound and well protected:

How Consumers Can Avoid Being “Madoff’ed” https://themoneygeek.com/2009/03/24/how-consumers-can-avoid-being-madoffed/

Five Tips to Avoid Potential Investment Fraud https://themoneygeek.com/2009/04/13/five-tips-to-avoid-potential-investment-fraud/

I urge you to review these short two articles whether you are a client or not and protect what you’ve worked so hard to save and invest. If you have any question or concerns, please don’t hesitate to call or e-mail me (visit my website at http://www.ydfs.com). I will explain further how we take extreme measures to not only protect your money, but your personal and confidential information as well. Your trust in me is the most valuable asset I hold; I will work extremely hard to protect it.

Posted in Consumer Alert, Consumers, investing. Tags: , . Leave a Comment »

Beware of Gotchas in Growth & Guaranteed Annuities

June 7, 2010 — Sam H. Fawaz

I’ve had several prospects ask about growth and guaranteed annuities being promoted by many in the brokerage and insurance industry.  If there’s one thing you can count on in the financial industry, it’s that the industry will always come up with products that capitalize on fear amongst investors or the frenzy in a particular market segment.  Today, many investors and pre-retirees are discouraged by increased market volatility and low or negative rates of return of late.  The financial and insurance companies respond with products to try and address these concerns and they certainly do sound attractive.

I’ve analyzed and read more annuity prospectuses in my career than I care to admit, and I have yet to find one that delivers on its promise without numerous “gotchas.”  As with any financial product, there is never a free lunch. From hidden and high fees, low guaranteed returns, vague and complicated guarantees and draconian penalty and surrender provisions, the majority of annuities, variable and otherwise, simply don’t make much financial sense.  Annuity and life insurance salesmen, brokers and “financial advisors” always tout the great benefits their products have, but rarely delve into the details of the contract or the downsides.

Remember, when you sign up for any insurance or annuity product that has a penalty or surrender charge, after the right of rescission period has passed (usually three days after signing), the penalty or surrender charge you sign up for is 100% payable whether you keep the product for the requisite term (via higher expenses over 7-17 years) or pay it outright and get out of the contract early.  So waiting until the penalty or surrender period ends does not save you from paying the penalty or surrender charges.  In fact, you’ll lose more by waiting since most contracts have sub-par investment choices with higher annual expenses.

If you’re considering an annuity, keep the following points in mind:

  1. Ask yourself what you intend to use the annuity payout for and when you think you’ll need it.  It is rare that you can’t find an investment that more effectively meets your needs. If you want secure or risk-free retirement income, look at the annuity distribution options and income stream.  In most cases, you would be better off putting your money in bank certificates of deposit and simply liquidate principal as needed.  This way, your heirs get the remaining principal at death rather than the insurance company.
  2. Many people are swayed by the guaranteed current rates on deferred annuities until they realize that the guaranteed rate changes annually, is usually lower than market rates and that the annuity has a 7-17 year unavoidable surrender charge or penalties.
  3. If the guarantee is really important to you, keep in mind that the guarantor is an insurance company much like AIG. How thoroughly have you researched the financial health of the underwriter?
  4. If you are intent on buying an annuity, focus on a fixed and immediate annuity.  Find the best one with the lowest internal expenses, shortest surrender term, and best guarantees.  A fee-only planner can help you choose the best one that has no commissions or hidden compensation to sway his recommendation.
  5. Focus on how relevant the annuity is to your financial goals and whether it is the best solution to the issue you are trying to address.  This helps you move the focus from the product and toward a focus on your personal financial goals, which is what it’s all about.
  6. Remember that an annuity is not an all or nothing decision. You can commit just a portion (10-50%) of your portfolio to an annuity to hedge and diversify your holdings.

I hope this update helps you understand a little more of what goes on with growth and guaranteed income annuities.   My thanks to fellow NAPFA member Bedda D’Angelo for her tips on keeping annuities in perspective.  If you have any questions or comments, please don’t hesitate to post them here.  If you or someone in your family or circle of friends is considering hiring a financial planner, please visit our website or consider a complimentary financial roadmap.

Posted in Consumer Alert, investing, retirement. Tags: , , , , . Leave a Comment »

Learning from mistakes: Buying a New Car

April 30, 2010 — Sam H. Fawaz

The red flags in this story point to a few lessons to heed when buying a new car. (©iStockphoto.com) The red flags in this story point to a few lessons to heed when buying a new car. (©iStockphoto.com)

By Sam H. Fawaz

Anyone who has bought a new car is familiar with the hassles of going to the dealer, finding the right car with the right options, negotiating the deal, and pushing back on all the extras the dealer tries to sell. The last thing you would expect to find out, months after you bought the new car, is that the new car you bought was really a used car.

A family member told me a tale of woe that can serve as a warning for others buying a new car from a dealer. This story began when he stopped at a local Cadillac dealer with a specific request for a 2009 Cadillac CTS with certain options. Though the dealer did not have the car he wanted on-site, they told him that they had located one at a dealer in a neighboring state. While negotiating the deal, he told the salesman that he is a savvy buyer and would not pay the dealer’s document preparation charges or marketing surcharge, which were customary for this dealer to charge. The dealer agreed and the deal was signed. The car would be at the dealer’s lot in a day or two.

When the car arrived, the car buyer went to the dealer to inspect and pick up the car. While inspecting the car and test driving it, he noted that it already had 425 miles logged on the odometer. This seemed odd to the buyer, so he asked the salesperson about this. The salesperson told him that these miles were incurred to transport the car to the dealership and that this was pretty normal.

This was the first red flag for the buyer, though the car was almost exactly as he wanted it and was consistent with the deal he signed. Normally, new cars have less than ten miles registered on the odometer, but driving it from an out-of-state dealer seemed to be a reasonable basis for the number of miles (though elevated) logged on this vehicle.

Back at the dealer, and ready to sign the prepared paperwork, the buyer noted that both the document preparation and marketing charges were added to the purchase price. In addition, a dealer added undercoating treatment had been added to the invoice that was not previously disclosed.

This was red flag number two in the transaction. The salesman explained that all buyers pay these amounts and that they were customary charges. In addition, the dealer option was unknown at the time of negotiation and that they could not delete it. The buyer explained that he told the salesman that he would not pay such charges when he negotiated the deal, and if the dealer didn’t remove them and honor the original deal, he would walk out without the car. The salesman pled with the buyer and told him that they brought the car from out-of state for him and that it wouldn’t be fair if he walked away. The buyer stuck to his guns and walked out. Of course the salesman followed him out the door and told him that those charges would be removed. They were indeed removed.

Signing the final paperwork while the car was being prepped for delivery, the buyer was happy to be getting the car he wanted at the price he had negotiated. As is customary with new car purchases (when you don’t transfer a license plate), he received a temporary license plate for the car and was told that he could pick up the permanent one within a month. The dealer would call him when it was ready.

A month or so went by and the dealer hadn’t called him to pick up his permanent license plate, so the buyer called the dealer. He was told that there were some issues with the paperwork and to come by and pick up a 30-day temporary plate. The buyer did so.

Another month went by and still there was no call from the dealer to pick up the permanent plate. Concerned, the buyer called the dealer and was told that they were still having issues with the registration and to pick up another temporary plate. The dealer could not give him any further information. This process repeated for a few more months, and the buyer continued to make payments on the car even though he still had not received a valid title for the vehicle.

This was red flag number three.

Suspicious that something was amiss here, the buyer made a phone call to the Secretary of State to find out why registration had been delayed. He was told that the vehicle identification number (VIN) of his car was not registered to him and that they therefore could not give him any information about the vehicle. Of the few facts he was able to garner from the representative was that the vehicle was still registered in the name of an out-of-state dealer and that the buyer would not, when a new title was issued, receive a new original vehicle title. In other words, the car had been previously registered to another buyer and he would therefore receive a used car title.

Apparently what had happened is that the out-of-state dealer had itself purchased the vehicle for another potential buyer from yet another out-of-state dealer, and, to bring the car across state lines, had to register the vehicle in the dealer’s name (normally, dealers are not required to title vehicles purchased for resale in their name). However, that deal had fallen through, so the dealer was stuck with this car and kept it in its new car inventory system. This explained why so many miles were already registered on this vehicle even though it was transported from an adjacent state less than 200 miles away. In any case, the buyer had essentially purchased a used car under the guise of a new car purchase.

Needless to say, the buyer was not happy about this. Since he wanted to know his rights, he consulted with an attorney who advised him, that even though he had driven the car for several months, he could essentially drive the car to the dealer, demand a refund of all monies paid (including the payments made to the dealer’s financier) and “walk away” from this purchase. Alternatively, he could demand restitution from the dealer for selling him a used car at a new car price.

The buyer called up the dealer and told them that he pretty much knew what was up with this car and let them know that unless they negotiated a settlement with him, he would turn in the keys and they would once again “own” this car. The dealer inquired about the number of miles on it (about 8,000) and asked the buyer to come down to the dealership to talk. In any case, they had finally procured the plate and he could pick that up as well.

The dealer, needless to say, did not want to have to take this car back into inventory and take a large loss on it. The buyer held most of the cards here, so he asked for a settlement of $8,000 cash to keep the car. The dealer of course, low-balled him an offer which the buyer flatly rejected and let the dealer know in no uncertain terms that they would not want the media to hear about his experience with this purchase if they didn’t deal with him in good faith. In the end, the buyer ended up negotiating a $6,000 cash payment plus a $1,800 bumper repair the car had needed. He walked out with a repaired car and a check that day.

This story obviously ended well for such a savvy buyer, but most people would either not know their rights in these circumstances or would not be aggressive enough to push the dealer to settle on their terms. The red flags in this story point to a few lessons to heed when buying a new car:

1) If the dealer adds new charges to an already negotiated deal at signing, walk away and find a more scrupulous dealer.

2) Always inspect, test drive the car and check the odometer before signing the final paperwork. If the mileage on the odometer is more than 10-20 miles, find out why and ask yourself whether this is indeed a new car. Always match up the VIN on the paperwork to the one on the vehicle itself.

3) If it takes more than six weeks to receive a title or license plate, start digging deeper to find out why. When you receive the title, inspect it closely to ensure that you are getting a new car title (original owner) rather than a used car title.

4) If you find out that a new car you have purchased was actually used, consult with an attorney with experience in this area to find out your rights in your circumstances.

I can’t say how many times this kind of story happens to buyers, but I imagine that many more people would not even be aware that this type of thing goes on. Even a savvy buyer as I have described didn’t quite catch on at the time of purchase, so I imagine less experienced buyers would never suspect anything either.

Hopefully, this tale will help you avoid being a victim of this kind of transaction and you’ll be able to assert your rights. While the majority of new car dealers are honest and straightforward, this demonstrates that some clearly can be somewhat shady, even those we think have a pristine reputation.

Sam H. Fawaz CPA, CFP® (a.k.a. TheMoneyGeek) is a fee-only personal financial planner and a registered member of the National Association of Personal Financial Advisors. He has been working in personal finance since 1980 and has been writing about it since 1999. Sam’s website is http://ydfs.com.

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