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Don’t Get Taken by Government Grant Scams

Aug. 1, 2017
Making Money, Personal Finance
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You may have heard of a phone scam in which someone pretending to be an Internal Revenue Service agent tries to scare you into paying off fake tax bills. But there’s another sham that takes a less threatening approach: The caller offers you free money from the government.

Of course, to get the money, you’ll have to pay a fee.

This is called a government grant scam. It’s part of a larger category known as impostor scams, in which a person pretends to be someone of authority in order to get an individual’s money.

“Everyone is a potential target,” says Christine Todaro, an attorney in the Federal Trade Commission’s Division of Marketing Practices within the Bureau of Consumer Protection. Impostor scam complaints overtook identity theft complaints in the FTC’s Consumer Sentinel Network Data Book in 2016. This was due to an uptick in complaints about government impostors.

It’s tempting to believe people who want to give you money, but don’t be fooled. Here’s what to expect from scammers.

A strange caller bearing gifts

Victims of these scammers report getting calls from phone numbers they don’t recognize, sometimes with a Washington, D.C., area code. The person on the other end pretends to be a government official, often from a fake agency, and says the consumer is eligible for a government grant. The amount is often between $8,000 and $11,000.

The impostor might say the reward is for being a good citizen — someone who pays taxes and has no criminal record. Potential victims are often asked to verify their name, where they live, employer and where they bank. Sometimes callers give consumers another phone number to call and a code to read to the person on the other end, in order to “verify” their information before the scammer deposits the money.

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But the caller won’t send a check or cash. Instead, the scammer asks for bank account information so the money can be delivered right away. The trap: There’s also a processing fee, around $250, which must be paid immediately.

The caller tells the consumer to head to the nearest drugstore to get a form of payment, such as a prepaid debit card or even iTunes gift cards. The unsuspecting victim then provides the scammer with the numbers from those cards, which allows the thief to redeem them. Alternately, the scammer may request a wire transfer from Western Union.

At that point, the victim’s money and information are in the hands of the criminal.

Message from a Facebook ‘friend’

Another scam targets small-business owners through Facebook, according to a warning from the FTC in March 2017. In this ruse, the imposter fakes the profile of a friend or family member and sends messages over the social network to the potential victim.

» More: How to make money at home and online

The con artist tells the business owner that he or she is eligible for a business grant from the government. The “friend” then asks the potential victim to send a text to a “government” phone number to accept the funds, or sends them to another Facebook profile for someone posing as a government official. The scammer may also ask for the person’s phone number, allegedly so a government official can contact him or her. With this information, the impostor can now call directly and use a script similar to the scam described above.

How to avoid a grant scam

Don’t fall for fake numbers or friends. It’s easy to create deceptive phone numbers and Facebook profiles. Don’t let a Washington, D.C., area code or a familiar name and face on social media earn your trust. Pay close attention to what is actually offered, and what is asked of you in return.

Beware of phone calls and Facebook messages. The U.S. government will never offer you a grant over the phone or through a social network, and never without an application. “If the only way to communicate with the person who’s offering you a grant is through social media or a text, that’s a red flag,” Todaro says.

Don’t pay in gift cards, debit cards or anything. You’ll never have to pay for government assistance with gift cards or prepaid debit cards, or at all. It’s illegal to require payment for application to a federal grant.

Check the agency’s name. There are no agencies with names like “Federal Grants Administration” or “Department of Federal Grants.” The U.S. Department of Health and Human Services says that all grants require an application through a government website such as

Share your experience

If someone attempts to scam you, report your experience, even if you avoid being victimized.

File a complaint with the FTC’s consumer complaint database online or by phone (1-877-FTC-HELP) to help track down these scammers. “Any information consumers can provide can help our law enforcement efforts,” Todaro says. The phone number, the name the caller gave you, the time and date you received the call and even details of the conversation can help.

Report the incident to the Better Business Bureau’s Scam Tracker so other consumers can see how these scammers operate. Others who have been targeted may be trying to determine if a call they got was legitimate.

Keep in mind that even if you didn’t fall for the scam, you may have helped the impostor by confirming your personal information. Visit and read up on how to protect yourself.

The government won’t just give money away over the phone, but you might be eligible for some assistance. Read our article on “free money” opportunities from the government to learn more.

More from NerdWallet about government assistance

Veronica Ramirez is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @veraudrey.