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Identity thieves are exploiting the COVID-19 pandemic in a new way: by collecting unemployment benefits meant for others. Con artists have always exploited crises, offering "help" as an excuse to trick victims into giving up cash or personal information. Fraudsters started capitalizing on the COVID-19 pandemic in this way almost as soon as the health crisis began.
More recently, amid pandemic-related work slowdowns and layoffs, fraudsters have taken a new criminal tack, submitting bogus unemployment benefit claims and collecting payments intended to help Americans who found themselves without work in the wake of the crisis.
No matter whether you're one of the 13.6 million nationwide out of work as of August, or you're still employed and hoping to stay in a job, identity thieves could be attempting to claim unemployment benefits in your name, using personal information they've tricked you into revealing or that they've gotten through other means.
This Identity Theft Method Can Be Difficult to Detect
Collecting unemployment benefits by impersonating workers is a new spin on the crime of identity theft. Historically, ID thieves have used personal information (names, addresses, Social Security numbers and more) to take out loans or open new credit card accounts in victims' names. These bogus loans and credit accounts appear on your credit report and can be spotted relatively quickly using credit monitoring services. Unemployment scams, on the other hand, are harder to detect. According to the FBI, many victims discover them only after one of the following events occurs:
- They apply for unemployment and learn there's already an open claim in their name.
- They receive a form 1099-G listing unemployment income that's subject to federal income tax.
- They receive notice from their state unemployment office confirming that a claim has been filed.
- They receive notice from their employer that someone has filed for unemployment in their name.
Unemployment scammers typically arrange for benefits payments to be deposited into bank accounts they've set up. If they do so, unless you file for unemployment yourself and uncover the conflict, it can be extremely difficult to detect the activity.
More rarely, claims filed by scammers result in you receiving an unexpected benefits check, direct deposit or debit card (whichever payment method is preferred in your state). In that scenario, the scammer may contact you by phone or email, posing as your state labor department and instructing you to "correct the error" by transferring funds to them. Do not respond to any inbound requests to correct surprise unemployment payments; instead, call your state's unemployment office to report the incorrect payment. Follow their instructions for making any repayments and make sure they look into the possibility of unauthorized filing activity in your name.
If you've experienced unemployment benefit fraud, it could mean your personal information has been exposed and is being used in other ways. Consider checking for other forms of identity theft as well.
How Fraudsters Exploit the Rise in Unemployment
The credentials used by unemployment scammers are basically the same ones cybercriminals target through a host of tried-and-true techniques aimed at fooling victims into giving up their personal information. Data obtained through social manipulation, theft or from another fraudster can be used to file unemployment claims, but the FBI reports that thieves have also come up with some fresh approaches that exploit the rise in unemployment, such as:
- Email or phone solicitations concerning your unemployment forms when you haven't applied for unemployment benefits. Once you've filed an unemployment claim, it's possible you'll receive follow-up questions about information you've submitted, but if you receive a "follow-up" when you haven't filed, there are two potential problems:
- The follow-up is from a legitimate government agency, responding to a claim someone else has filed a claim in your name; or
- The inquiry is from a scammer trying to get you to give up information they'd need to file a bogus unemployment claim.
- Services that purport to help you file for unemployment. Filing for unemployment benefits is something you must do individually, and if you need assistance doing so, you should contact your local unemployment office. Companies that claim to help with the process and possibly charge fees to do so are simply after your money and/or your personal information. They won't do anything for you that you couldn't do yourself for free.
- Bogus websites or social media accounts that resemble those of unemployment agencies. Links to these bogus outlets may be shared via legitimate-looking emails or in the form of official-looking memes or image files. Double-check all URLs for appropriate ".gov" extensions. If you do wish to contact a specific agency, directly visit your state or municipality's main government homepage, rather than clicking stray links.
- Unauthorized transactions on your bank or credit card statements attributed to unemployment agencies, services or benefits.
What to Do if You're a Victim of Unemployment Fraud
If you discover that a bogus unemployment claim has been filed in your name, do the following immediately:
- Notify your local unemployment agency. If the fraud comes to light as you apply for unemployment, the agency will already be notified. If your employer notifies you of a bogus claim, enlist your human resources department to assist with pursuing the false claim—but make sure you also notify the unemployment agency yourself.
- Inform the IRS by filing an Identity Theft Affidavit (IRS Form 14039) with the IRS or through the Federal Trade Commission's identity theft website, IdentityTheft.gov, where you can also find information on cleaning up the damage identity theft can cause.
- If you suspect unemployment fraud is connected to email or bogus websites or social media accounts, file a report at the FBI Internet Crime Complaint Center.
Can an Unemployment Scam Affect Your Credit?
Neither your income nor its source—including unemployment benefits issued to you or those collected by criminals in your name—appear on your credit reports, so it cannot influence your credit score.
There's a major way an unemployment benefits scam can affect your credit indirectly, however: If you apply for unemployment and criminals have already filed a claim in your name, there will likely be a delay in your ability to collect your benefits. (Staff at your local unemployment office—likely overworked with the high volume of COVID-19-related claims—will need to investigate, close the bogus account, and so on.) You'll eventually get the benefits to which you're entitled, but if you miss any debt payments before that happens, that could have a significant negative effect on your credit score.
Also note that criminals who have enough of your personal information to file a false unemployment claim likely have the credentials they'd need to open new credit accounts in the future. It's therefore critical to continue checking your credit reports for unexplained activity (reports of credit inquiries you can't identify, new accounts you didn't open, and so on). It's also worth considering using a credit monitoring service (such as the one Experian offers for free) and taking other steps such as placing a fraud alert on your credit report. A fraud alert will ask creditors to confirm your identity before processing loan applications made in your name.
The Bottom Line
The uptick in fraud associated with COVID-19 and the related surge in unemployment compounds an already stressful and difficult situation. Just as the pandemic will run its course, so, too, will this economic downturn and the spate of crime it has encouraged. If criminals have meddled with your unemployment claims, know that those issues will be resolved in time. In the meantime, apply as needed for payment relief from your creditors, keep a close eye on your credit reports, and when you get the benefits you deserve, use them to bridge the gap to better times.