Fraud Alert: Work-for-Hire Scams

Contract work relies on trust from both the homeowner or property owner and the contractor. While many scams involve homeowners as targets, scammers also use check fraud and other methods to target contractors. If you’re involved in work-for-hire or gig jobs, learn about fraud tactics and how to protect yourself.

Scammers Targeting Contractors

Contractors eager to find work become vulnerable to fake job postings and fraudulent payments. The most common scams targeting contractors include:

• Fraudulent check scams. In these scams, someone posing as an out-of-state property owner contacts a contractor by email or text. These contractors typically offer yard work, remodeling, or repair work. After discussing the scope of the project, the scammer mails a check to the contractor, and the check appears to deposit successfully. When the contractor arrives for the scheduled job, it is either abandoned or listed for sale. Since no work can be done, the scammer asks for the money to be returned by a wire transfer or banking app. Meanwhile, the check paid to the contractor bounces and is marked as fraudulent, causing the contractor to lose these funds and pay other banking fees. It also places the business at risk of having their account closed due to fraudulent activity.
• Overpayment scams. In this fraudulent check scam, a scammer writes a check for more than the agreed amount and instructs the victim to wire the additional funds to a materials supplier or to cover a delivery fee. Another variation of this scam involves the scammer instructing the contractor to use these funds to pay other workers on the site. These additional contractors are often working with the scammer. Once the check is fraudulent, the contractor loses the excess paid and along with their own loss of income.
• Fake job postings. The property owner offering a job asks the contractor to perform a background check before work starts. The contractor provides personal details including their Social Security Number and bank details, then falls victim to identity theft for a job that never existed.
• Supplier fraud. Scammers posing as legitimate materials suppliers offer deep discounts. After the contractor pays for a bulk order, it never arrives or contains damaged, inferior, or stolen goods.
• Threat of nonpayment or bad review. The property owner might claim that the contractor did not fulfill the contract to their satisfaction to avoid paying for the completed work. They may threaten to withhold payment, leave a negative review, or damage the contractor’s reputation, hoping the contractor will avoid the time and expense of pursuing payment through small claims court.
• Insurance agent or inspector impersonations. A scammer claims to be an agent from the contractor’s insurance company and requests bank details to verify a payment or claim. In a similar scam, they impersonate a city inspector demanding unexpected fees to avoid a stop-work order in the middle of the job.

10 Tips to Avoid Fraud

Contractors can protect themselves by following these tips:

1. 1. Only agree to work with written contracts, not verbal agreements, especially if the job contains requests that seem unusual.
   2. Be wary of urgent and unusual requests, like paying other contractors out of your own pocket.
   3. Verify the contact information. If phone calls go straight to voicemail, the email doesn’t match the business domain, or there’s no physical address, it’s likely a scam.
   4. Use electronic payment systems to avoid fraudulent checks.
   5. Don’t accept overpayments or agree to returning excess funds.
   6. Wait to make sure the payment clears, which can take 7 to 10 business days. Check with the bank issuing the payment if needed to confirm that the funds have cleared.
   7. Ask for a video call and scope out the property before accepting the job.
   8. Don’t provide personal information or pay to “get verified” for a job.
   9. Only buy materials from trusted, established suppliers.
   10. When buying supplies, pay by methods that offer dispute protection and avoid wire transfers to unfamiliar suppliers.

If you’ve been a victim of fraud, report it to the Federal Trade Commission at ReportFraud.ftc.gov. If you haven’t been paid for contracted work, consult an attorney for legal advice on filing a small claims case.

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