In the past few months, state attorneys general and Better Business Bureaus have issued warnings for organizations to keep an eye out for what would appear to be a typical invoice scam. But what’s atypical about this phony is its simplistic nature coupled with its nationwide success. In nearly every case reported, the invoice appears in the format below:
At first glance, it looks like any other invoice. Would it surprise you that this invoice has duped organizations in at least 13 different states, earning thousands of complaints to consumer protection offices and state agencies? In this case study breakdown, we’re going to explore variables that may have led to the scam’s success by taking a retrospective look at the nature and locations of the scams reported.
Complaints began surfacing at least a year ago in September and have been filed against a California-based company called U.S. Telecom. The invoiced services are $425 worth of maintenance charges on telecom system equipment. Although the invoices appear to be bills for purchased services or warranties, they are actually solicitations, which permit their classification as barely legal. However, USPS regulations state that invoice-like solicitations must feature one of the following notices:
1. “THIS IS NOT A BILL. THIS IS A SOLICITATION. YOU ARE UNDER NO OBLIGATION TO PAY THE AMOUNT STATED ABOVE UNLESS YOU ACCEPT THIS OFFER.”
2. “THIS IS A SOLICITATION FOR AN ORDER OF GOODS OR SERVICES, OR BOTH, AND NOT A BILL, INVOICE OR STATEMENT OF ACCOUNT DUE. YOU ARE UNDER NO OBLIGATION TO MAKE ANY PAYMENTS ON ACCOUNT OF THIS OFFER UNLESS YOU ACCEPT THIS OFFER.”
U.S. Telecom did not cooperate when it was asked to reformat the invoice and include a disclosure statement on the mailer to avoid confusion.
Considering the widespread nature of the scam, it is difficult to determine if one company is behind the phony billing scheme or if it’s a band of copy cats. We have seen reports of cease and desist orders to UST Development, Inc. and resident complaints about invoices from UST or US Telecom. Regardless, complaints are growing for the US Telecom-related scams and in many states, the company has a BBB rating of “F.”
One reason for the scam’s pervasive success is the prototypical nature of the invoice. As we have previously mentioned, invoice scams are generally for smaller dollar amounts to avoid suspicion and the need for cross-departmental approval. Although a $425 charge for an untraceable service seems a bit pricey, it is relatively low in comparison to other daily invoiced charges at companies of any size. Furthermore, logic suggests that the invoice counts on the fact that companies oftentimes don’t remember signing up for warranty or preventative maintenance services, yet readily pay those bills to offset future charges.
It is also difficult to determine what size of business the scam targets. If we had to guess, it would be small to mid-sized companies with small accounts payable departments. Without the man power to thoroughly scour each invoice that comes through the door, it is easy to let phonies slip through the cracks.
The way to combat this type of scam is to stay informed and pass on valuable information to business contacts when scams of this nature are uncovered. Follow your local BBB online to see when scams in your area are detected, and remain proactive if your organization happens to receive a phony. Too often, scams go undetected because organizations are desensitized by their volume. Help us keep a current database of known scammers by reporting phonies to us at firstname.lastname@example.org.