Overpayment Scams Explained

Imagine receiving a large order—a big win for your small business, right? But then the payment arrives, and it's for more than the agreed amount. The customer quickly reaches out, apologizing for the "mistake" and asking for a refund of the overpaid portion. You issue the refund, thinking it's a simple fix, only to discover later that the original payment was fraudulent. Now, you're out the refund money, plus any banking fees and your business's reputation may take a hit.

This is a common overpayment scam that targets small businesses, especially online vendors and sellers. The effects can be immediate, resulting in financial loss, unexpected fees, and potential reputational damage.

How Overpayment Scams Work

Overpayment scams follow a predictable pattern:

A scammer pretends to be a buyer, placing an order and deliberately paying more than the agreed amount.
They contact you, apologizing for the "mistake" and requesting a refund for the overpaid portion.
The payment is made using a stolen credit card, counterfeit check, or another fraudulent method.
When the original payment is flagged as unauthorized and reversed, you're left covering the refund out of your own pocket—often losing both the money and the product or service provided.

Here's how the scam evolves in different regions and industries, according to Bitdefender's insights:

Global Trade Variations: Scammers often target small businesses unfamiliar with international banking systems or foreign transactions.
APAC Region: Small and medium enterprises (SMEs) are targeted, particularly those new to cross-border payments.
Australia: Service providers, such as freelancers or IT consultants, are frequent victims, often with high-value transactions.

Real-Life Example: In 2020, an Australian SME fell victim to an overpayment scam, losing $15,000. The scammer claimed to have overpaid for services and persuaded the business owner to refund the difference. The initial payment turned out to be fake, leaving the SME to cover the loss.

Why Overpayment Scams Work

Overpayment scams are effective because they exploit basic human tendencies and assumptions.

Sense of Urgency: Scammers pressure you to act quickly, using polite yet insistent language to make their request seem both reasonable and time-sensitive. This rush can cloud your judgment.
Assumed Trust in Payment Systems: Many small business owners believe that once a payment appears in their account, it's legitimate. This trust can lead to hasty decisions, especially when issuing refunds.
Low Awareness: Overpayment scams don't get as much attention as other types of fraud, leaving many business owners unprepared to recognize the warning signs.

4 Common Red Flags to Watch For

Scammers use a variety of tactics to trick businesses, but many share common warning signs.

1. Untraceable Payment Methods

Scammers often request payment through methods that are difficult to track or reverse, such as wire transfers, gift cards, reloadable cards, or payment apps. These methods make recovering lost money nearly impossible.

2. Pressure Through Intimidation or Fear

Scammers may try to intimidate you by claiming something terrible will happen if you don't act quickly. They use fear to rush you into making payments or decisions without verifying their claims. Stay calm and verify the situation before taking any action.

3. Impersonating Trusted Contacts

A common scam tactic involves pretending to be someone you know or trust, such as a government agency, supplier, or even a familiar company.

4. Creating a False Sense of Urgency

Scammers often create artificial deadlines to push you into making hasty decisions. Whether it's a payment request or a supposed "mistake" they need you to fix, take the time to verify all details before proceeding.

What to Do If a Client Overpays

Don't rush to issue a refund. Scammers often create a sense of urgency to pressure you into making a quick decision. Take a moment to evaluate the situation.
Verify the Payment. Check the payment method to confirm its legitimacy. If the payment came by check, wait for it to clear fully—this can take several days. For online payments, contact your payment processor to verify the transaction. Let the client know that you've noticed the overpayment. Explain that you'll need to verify the transaction with your payment provider before processing any refunds. A legitimate client will understand.
Cancel the Transaction if Necessary. If you suspect fraud or cannot confirm the payment's validity, cancel the order and refund the full amount via the original payment method.
Report Suspicious Activity. If the payment turns out to be fraudulent, report the incident to your payment processor, bank, and local authorities. This can help protect other businesses from falling victim to the same scam.

How to Protect Your Business from Overpayment Scams

Stick to payment systems that offer fraud detection and tracking. Avoid accepting payments through wire transfers, gift cards, or other untraceable methods.
Always cross-check invoices against your records before making payments. Set up internal procedures to approve expenditures and monitor for any inconsistencies.
Before working with a new client or vendor, conduct a thorough background check. Search their name online alongside terms like "scam" and review customer feedback.
Regularly review your account statements and transaction records to spot unusual activity early. If anything looks suspicious, report it immediately to your payment provider or bank.
Implement a policy that prohibits issuing refunds for overpayments. Clearly communicate this policy to your team and customers to avoid misunderstandings.
Educate your team about the warning signs of overpayment scams. Encourage open communication so employees can report suspicious transactions without fear.

How Bitdefender Ultimate Small Business Security Can Help

Scammers are always finding new ways to target businesses, but you don't have to face these threats alone. Bitdefender Ultimate Small Business Security provides tools like Scam Copilot to help you identify fraud in real time. With advanced phishing and email protection, you can block scams before they even reach your inbox.

Bitdefender Ultimate Small Business Security is designed to provide exceptional protection against all digital threats for you and your employees.

Here's what it offers:

Scam Detection: The Scam Copilot monitors emails, texts, and chats for signs of fraud. It alerts you and your team to potential scams and offers real-time guidance on how to handle them.
Digital Identity Monitoring: Keeps an eye on your business's online presence, alerting you to data leaks, unauthorized use of your business name, or exposure of sensitive information—even on the dark web and breaches.
Email Protection: Automatically scans and blocks phishing emails, suspicious links, and fake invoices, preventing employees from clicking on malicious content.
Password Management: Simplify security with Password Manager, which generates strong, complex passwords that align with best practices.
Secured Remote Work: A built-in VPN ensures your team is protected from unsafe public Wi-Fi networks, like those in coffee shops or airports. It guarantees secure communication between remote employees and your business systems.
Device Protection: Provides real-time detection and blocking of malware, including viruses, ransomware, and spyware, across all your team's laptops and smartphones

Check out the plans here.

FAQs

How can I tell if an overpayment is a scam?
Look for signs like urgency from the customer, requests to refund the excess amount via untraceable methods (e.g., wire transfers or gift cards), or payments made through unusual channels like fake checks. Always verify the payment with your bank or payment processor before issuing a refund.

What should I do if I’ve already refunded an overpayment?
If you suspect you’ve been scammed, immediately contact your bank or payment provider to report the transaction. Provide them with all details, including the customer’s information and any communication records. You should also report the incident to local authorities and organizations like the Federal Trade Commission (FTC) to help prevent similar scams.

How can I protect my business from overpayment scams?
Set clear payment policies, such as refusing to process refunds for overpayments. Train your employees to recognize scam tactics, verify all payments before issuing refunds, and avoid accepting untraceable payment methods like wire transfers. Additionally, regularly monitor your financial accounts for any unusual activity.