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By Better Business Bureau

$1400 average loss

Advance fee loans take top spot in riskiest scams

Mar 1, 2021 | 1:28 PM

Despite the significant spike in online scams, including online purchases and pet-related scams, advance fee loans were the most devastating, taking the top spot on Better Business Bureau’s (BBB) Top 10 riskiest scams for 2020. Online purchases followed at number two, with home improvement scams closing out the top three.

Last year, Canadians lost an average of $1,400 per person to what the BBB calls a “silent killer,” which was the highest median dollar loss when compared to the other scams on the list. Based on the BBB Risk Index (which examines exposure, susceptibility and monetary loss), advance fee loan scams also had a 71 per cent susceptibility rate, indicating a concerning increase in the risk of someone being victimized if they are exposed.

“The pandemic has created an environment that is ripe for financial scams,” explained Simone Lis, President & CEO of BBB Serving Mainland BC. “Last year, many Canadians lost their jobs, were furloughed for several months and have been strapped for cash because they did not have the financial reserves. As a result, many were forced to seek emergency loans to pay their bills, oftentimes stumbling into scams where they paid upfront charges for a loan that never materializes.”

Locally, BBB received over 46,000 consumer inquiries about loans in 2020, making it among the top five services of interest to the public.

“As individuals try to find loans, they should keep in mind that requiring fees in advance of a loan is illegal in Canada,” advised Lis. “If you are asked to pay fees upfront, or they offer guaranteed approval without credit checks, just walk away.”

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While fake invoice, employment and cryptocurrency scams maintained a spot on the top 10 list from 2019, tech support, romance and travel scams were noticeably absent, with the latter in particular, being a result of changes spurred by the pandemic. Sweepstake and lottery scams also made a surprising comeback, with victims sharing that the financial strain caused by the pandemic compelled them to believe they had won a well-needed cash prize.

Online purchase scams are still the most common scams with the largest level of exposure, resulting in the highest susceptibility rate at 75 per cent. The riskiest type of online purchase scam was pet and pet supply scams. Online purchase scams related to pets had a median loss of $750, with 70 per cent of people losing money when targeted.

Other key findings in the Scam Tracker Canadian Risk Report include:

• The percentage of consumers who lost money when exposed to a scam, was at an all-time high, with nearly 1 in 2 reports noting financial loss.
• Canadian men reported a higher susceptibility rate at 48 per cent, when compared to women, and Canadians ages 25 – 34 have the highest susceptibility rate at 54 per cent.
• Scams found online and through social media apps were the riskiest scam type for Canadians.
• While credit cards were the top method of payment resulting in a loss, scams using online payment systems like PayPal spiked to over 31 per cent.
• Amazon impersonations rose sharply in 2020 to take the number two spot of most impersonated businesses and brands behind Service Canada. Other brands targeted by scammers included Apple, Microsoft, PayPal and Walmart.

This year’s report is based on data supplied by consumers to BBB Scam Tracker and uses the BBB Risk Index, a unique algorithm that calculates exposure, susceptibility, and monetary loss to offer a more accurate assessment of scam risk.

Using the BBB Risk Index formula, the Top 10 Riskiest Scams for 2020:

1. Advance Fee Loan
2. Online Purchase
3. Home Improvement
4. Cryptocurrency
5. Employment
6. Fake Invoices and Supplier Bills
7. Credit Cards
8. Phishing
9. Sweepstakes and Lotteries
10. Counterfeit Products

For the full report, go to BBB.org/RiskReport.