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What Is Fraud?

What’s the first thing you think of when someone says the word fraud? Is it Bernie Madoff? Or is it a corporate scheme like the ones at Enron or WorldCom? Either way, people and companies who make money by lying are enough to make you lose faith in humanity.

But don’t lose hope. The more you know about fraud, the easier it is to protect yourself.

  1. What Is Fraud?
  2. Impact of Fraud
  3. Examples of Fraud
  4. How to Protect Yourself



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1. What Is Fraud?

Let’s start with an easy fraud definition. Fraud is anything a person or company does to intentionally deceive someone else for financial gain. It’s nasty business, and our justice system takes it seriously. All convicted fraudsters are subject to serious fines and jail time.

2. Impact of Fraud

The financial and emotional consequences of fraud in the U.S. are staggering.

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The Federal Trade Commission reported 2.8 million fraud cases in 2021.1 Think about how much work—and money—goes into investigating, tracking, convicting and imprisoning just one fraudster. And don’t forget to factor in all the money spent on educating consumers about how to protect themselves. Then there are the costs of programs to help fraud victims recover. Add it all up, and it’s a huge amount of money.

Now for the emotional toll. It’s mostly regular people who are on the receiving end of fraudulent activity (aka scams). No one ever feels good about being taken advantage of, but fraud victims often feel ashamed and alone—afraid to tell anyone what’s happened to them. Most fraud schemes aren’t even reported to authorities.

3. Examples of Fraud

Now that we’ve talked about what fraud is and how much damage it does, let’s look at some examples of how it works.

Most of us have heard of scams like elder abuse, identity theft, debit card fraud, tax fraudemployment fraudwire fraud and mail fraud. But those familiar scams are only a small percentage of the cons out there. Here are a couple examples of some lesser-known scams that can cause just as much (or even more) damage as the big ones.

Paycheck Protection Program (PPP) Fraud

Even though the program ended in May 2021, people are still getting in trouble for PPP fraud (using fake info on an application for a PPP loan). Originally, the Paycheck Protection Program was created to help companies stay in business during the coronavirus pandemic by handing out “forgivable” loans (but—surprise!—lots of those loans were never forgiven).2

Sadly, the program became an easy target for thieves to make a quick buck. On March 28, 2022, a California man was convicted of a widespread PPP scam involving eight companies, four banks and 27 PPP loan applications.3

Mortgage Fraud

Mortgage fraud usually affects people more closely than PPP fraud.

The most common type of mortgage fraud is called fraud for profit. Fraud for profit is typically committed by people who work in the mortgage industry and understand the ins and outs of the lending process.

Here’s an example. Let’s say you’re a dishonest mortgage broker, and one of your clients is a homeowner in financial trouble—they’re applying for a new loan hoping to lower their monthly mortgage payment. You convince the homeowner to temporarily transfer the property to you and say you’ll make the payments until they get back on their feet. But instead of doing what you promised, you sell the property out from under them and disappear with the profits. Yeah—it really does happen.

If you want to read about more fraud examples, check out these common types of fraud.

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4. How to Protect Yourself

It may sound paranoid, but to really protect yourself from fraud, you pretty much have to assume there’s a fraud risk lurking around every corner. But that doesn’t mean you have to go off the grid. Just add a few extra precautions into your everyday habits:

  1. Get security software. Guard your online information with up-to-date security software and never use your personal information on a public computer.
  2. Get ID theft protection. Make it a habit to protect your identity—it’s one of the best ways you can keep your online profile safe.
  3. Monitor your financial accounts. Keep an eye on your balances and watch out for unfamiliar transactions.
  4. Read financial emails. Check any emails—as long as they’re from a trusted source—that mention a change of financial information.
  5. Shred sensitive documents. Chop up those banking records, ATM receipts and deposit slips.
  6. Check your credit reports regularly to check for suspicious activity. Learn how to read your credit reports so you can identify red flags.
  7. Share your info carefully. Think twice before sharing your information, even with a trusted and verified source.
  8. Beware spam. Filter spam phone calls by only answering calls from contacts or phone numbers you know. Same goes for emails.

All these steps might sound like a lot of work at first, but it’s worth it to avoid the troubles that come with fraud.

Don’t Wait Until It’s Too Late

Staying safe online is basically a full-time job. The best way to stay on top of all of the fraud schemes out there is to work with an expert who knows how to keep your data protected from fraudsters.

We recommend RamseyTrusted partner Zander Insurance for fraud protection. They’ll do all the hard work for you and keep an eye on your information, so you don’t have to worry.

Get comprehensive fraud protection today!


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Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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