3 Big Cost of Living Scams and How to Avoid Them

Increasing financial pressure may leave households across the UK more vulnerable to cost of living scams as they look for ways to ease the strain on their finances. We investigate three scams to watch out for.

Brean Horne Last updated on 13 December 2022.
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3 Big Cost of Living Scams and How to Avoid Them

The Take 5 to Stop Fraud campaign is urging households to stay vigilant against scammers, after its cost of living survey found that 56% of people were likely to look for ways to earn extra money during the cost of living crisis. Further to this, 16% of people surveyed for banking industry body UK Finance’s campaign, said they were more likely to respond to an unprompted investment opportunity or loan offer.

Meanwhile, figures from the Office for National Statistics (ONS) in September 2022, revealed a 25% increase in fraud offences compared with the year ending March 2020. And according to Take Five, over £600 million was lost to fraud and scams in the first half of 2022 alone.

"Financial pressure and stress can play a considerable role in the way we operate and how we respond to different situations and, with the current situation pulling tightly on our purse strings, it is likely that the anxiety this causes could make us more vulnerable to scams,” says Louise Cockburn, information security awareness and culture manager at wealth management firm Quilter.

So if you’re worried about being duped by a fraudster, read on to find out about three of the latest cost of living scams and how to avoid them.

Energy rebate scams

Fraudsters are exploiting concerns about rising energy bills by posing as legitimate organisations, such as the government or energy regulator Ofgem, offering fake tax rebates through the government’s Energy Bills Support Scheme. There were more than 1,500 reports of energy scams made to the National Fraud Intelligence Bureau, which is responsible for investigating fraud reports, in the two weeks leading up to 6 September 2022 alone.

According to Action Fraud, the national reporting centre for fraud and cybercrime, scammers are contacting people through ‘phishing’ texts or emails with subject headers such as ‘Claim your bill rebate now’ to entice them to open it. They often use credible Ofgem logos to make the emails seem authentic too. These emails can include links to malicious websites that are designed to steal personal and financial information.

The legitimate Energy Bills Support Scheme gave all eligible households in England, Scotland and Wales a £400 discount on their energy bills over winter 2022 to 2023 (homes in Northern Ireland received the £400 discount through the Northern Ireland Energy Bills Support Scheme). There is no application process for this and you do not need to contact your energy supplier, so if you receive any emails or text messages asking for bank details or prompting you to apply for the energy rebate, it’s likely to be a scam.

Investment influencer scams

The City of London police recently issued a warning about how scammers are evolving in the way they present bogus investment schemes, with a growing number using social media to target people. In some cases, influencers advertise fraudulent investment opportunities on social media and entice their followers to make a bank transfer or share personal details.

Other social media investment scams use adverts featuring images of celebrities or financial influencers to endorse their scheme and make it seem legitimate.

Investment scams can involve criminals cold-calling victims and persuading them to move their money into a fake fund or pay for a fictitious investment, using the promise of high returns. Once the transfer is complete, the scammers will disappear leaving calls unanswered and their victims devastated.

Around 14% of people in the Take Five survey said they may consider looking for new investment opportunities in the coming months as the cost of living rises. This means that more consumers could be susceptible to this type of scam.

Gift card and voucher scams

With the cost of everyday essentials on the rise, scammers are targeting shoppers looking for cheap deals. The research also found that 42% of people would look for cheap deals online if the cost of living continues to rise.

Online forum Mumsnet recently reported fraudsters using phishing emails and social media to offer fake shopping gift cards. This usually involves the promise of free or heavily discounted items to lure people into giving away their money or personal information.

“During periods of heightened emotions such as the current crisis, scammers often exploit ‘hope’ tactics by creating scams that feature fake refunds, deals or goods, which turn out to be ploys to obtain personal details or gain access to our personal accounts,” Cockburn explains.

How to spot a scammer

Several telltale signs can alert you to a potential scam. A good indicator that a fraudster has approached you is if they put pressure on you to make a purchase or share personal details.

Cockburn continues “Often there will be a sense of urgency around such scams, with messaging designed to make you feel you must rush into action. If this is the case, it is a sure sign that you need to stop and assess the situation, as this is a clear red flag.”

Another giveaway sign of a scam can be the incorrect spelling of website URLs.

“Fraudulent websites or social media profiles are also frequently used to impersonate legitimate qualified experts or businesses,” adds Cockburn. “When shopping online, it can often be easy to miss the signs of a scam website. Misspelt URLs and ambiguous or similar looking (sometimes using alternative-alphabet/homoglyph characters), or otherwise deceptive URLs are one of the most common tactics cybercriminals use to trick people into visiting their malicious websites.”

If you think you’ve fallen for a scam, it’s important to act quickly. Contact your payment provider as soon as possible so that it can investigate the transaction and check whether it’s possible to recover your money. If you believe your bank or payment provider could have done more to prevent the scam or recover your money, you can contact the Financial Ombudsman Service for free help with your complaint.

Katy Worobec, managing director of economic crime at UK Finance, advises: “Always be cautious of any messages or calls you receive out of the blue, and stop and think before sharing your personal or financial information. Avoid clicking on links in unsolicited emails or text messages.”

It’s also vital to report the scam to Action Fraud if you live in England, Wales and Northern Ireland, or to call Police Scotland on 101 in Scotland. If you have been involved in scams including investments, pensions, loans or consumer credit, you can report it to the Financial Conduct Authority (FCA) to help identify and prevent similar fraud cases in the future.

Image source: Getty Images

About the author:

Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more

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