What Are Unemployment Scams?

What Are Unemployment Scams?

Also called claim hijacking, unemployment scams are when a fraudster uses your personal information to collect unemployment benefits in your name.

In contrast to other types of financial fraud, unemployment scams can be difficult to detect. If you're the victim of credit card fraud, for instance, there are typically easily detectable signs. But in the case of unemployment fraud, you may not notice anything amiss until you try to file a legitimate unemployment claim yourself.

How Do Unemployment Scams Happen?

Scammers use a variety of phishing tactics to get access to sensitive information, or they may buy stolen data on the dark web. Then, they use the stolen data to commit identity theft, file a bogus unemployment claim and deposit the stolen money into their own bank account.

Criminals may also use money mules to pull off unemployment scams. The mule may be a willing participant in laundering the stolen money. Or, they may be the unknowing victims of a scam (such as a work-from-home scam).

Learn more >> How to Avoid Financial Scams

Signs of Unemployment Scams

If you haven't filed for unemployment, these are signs that you may be the target of an unemployment scam:

• You receive a notice from your former employer or state unemployment office about an application for benefits that you didn't file.
• You receive a Form 1099-G indicating unemployment benefits you never received or didn't file for. The 1099-G could even be from a state you've never worked in.
• You receive an unexpected direct deposit from your state's unemployment office.

If you have filed for unemployment, here are some signs your benefits may have been hijacked:

• You were approved for unemployment but haven't received your benefits.
• Your application for benefits gets rejected because the unemployment office already has a claim in your name.

How to Protect Yourself From Unemployment Scams

The best way to defend yourself against unemployment scams is to safeguard your information and quickly respond to signs that your data has been compromised.

• Don't fall for imposters. Scammers often impersonate government agencies and use scare tactics, pressuring victims to send money to "correct an overpayment" of benefits or provide sensitive information. Unexpected contact claiming to be from an unemployment agency could be a scam. State unemployment agencies typically won't send you unsolicited text messages or emails. When in doubt, reach out to your state's unemployment agency directly.
• Look out for fake websites. Scammers use websites impersonating government agencies to phish information from victims. Never click on links sent to you out of the blue via text or email, and carefully check a website's URL before interacting with the site.
• Run a dark web scan. Criminals buy Social Security numbers and other sensitive data on the dark web, then use it to commit fraud. You can find out if your Social Security number, email or phone number appears on the dark web with a one-time free dark web scan from Experian.
• Check your credit. You can sign up for free credit monitoring from Experian to receive ongoing alerts to new credit activity. If you notice an inaccuracy on your credit report, you have the right to dispute it for free.

Learn more >> How to Protect Yourself From Identity Theft

What to Do if You're a Victim of an Unemployment Scam

If you find that someone has filed for unemployment in your name, or if you fall victim to unemployment phishing, take these steps right away to report the crime and up your defenses:

• Report the fraud. If someone is collecting unemployment benefits in your name, you should report the scam to both your former employer and your state's unemployment agency.
• Create a recovery plan. You can also report the scam to the Federal Trade Commission (FTC) by navigating to IdentityTheft.gov. After you provide details about the scam, you'll get a recovery plan detailing steps you should take next, such as removing fraudulent charges from your bank account or reporting a misused Social Security number.
• Place a fraud alert on your credit reports. If your Social Security number was compromised, you have the right to add a fraud alert to your credit reports, which can add a layer of security against credit fraud. A fraud alert instructs creditors to confirm your identity before processing applications for credit in your name.

Learn more >> How to Report Identity Theft

Can Unemployment Scams Hurt Your Credit?

Unemployment scams can't directly impact your credit because unemployment benefits aren't linked to your credit. Collecting unemployment benefits doesn't appear on your credit reports, and filing for unemployment doesn't impact your credit score.

That said, there are a couple of ways that unemployment scams could indirectly hurt your credit:

• Increased risk of credit fraud: The same personal data that scammers use to commit unemployment fraud can be used to commit other types of identity theft and fraud. If you become the victim of credit fraud, your credit could be damaged. That said, you have the right to dispute what you believe to be fraudulent activity on your credit report, which could help you recover.
• Could complicate your unemployment claim process: If someone fraudulently collects unemployment in your name, it could be more difficult to collect benefits if you need them. You should eventually receive your benefits, but if you're unable to pay your bills in the meantime, missing payments will hurt your credit.

Learn more >> Surprising Ways Identity Theft Can Hurt You

The Bottom Line

Unemployment scams typically occur after your data has been compromised, which can happen after a phishing attempt. Training yourself to quickly identify phishing red flags can help you avoid giving sensitive information away to fraudsters. If someone contacts you claiming to be from a government agency, avoid engaging and instead navigate to the agency's web page directly.