Dec 10, 2024
Written By: Shannon Abnal, Group Services Director, NACM Commercial Services
NACM Commercial Services administers over 50 industry credit groups. [Visit our Industry Groups page for more information if you are not familiar with credit groups.] I have the privilege of hosting several of these groups myself and am always impressed with the bonds formed between members and the generous sharing of information. Group members genuinely care about helping each other succeed and are willing to share their experiences to help other members. In recent months, I have heard numerous members share stories with their credit groups of fraudsters posing as legitimate businesses in an effort to secure goods. These members are eager to warn others and hear how other members are coping with fraud. One fraud case unfolded at a group meeting that showcased the rising problem of fraudulent credit applications and the power of credit groups.
At the meeting, a member shared that she had unfortunately been scammed by a bad actor posing as a prestigious university. The scammer submitted a credit application via the member’s online application form. The credit manager conducted her normal credit review and was able to approve a small first order on terms. They shipped, the debtor paid, and it was off her mind. The second order came in and was larger. It was released without much thought and went past due. The past dues on such a new customer warranted a deeper look. As often happens with hindsight, the red flags began to appear. The customer had changed the ship to address on the second order. A second look at the original credit application showed items she wished she had noticed initially, such as the email listed on the credit app being one character off the standard email addresses of the university – a tiny difference and so easy to miss. She made phone calls to the university. They had never heard of the person on the credit application. She quickly realized she had been taken. She felt horrible. And her firm was out the money.
After hearing the details, another member at the meeting quickly realized they might share a similar story and began investigating. They also had recently opened an account for the same university. The two members compared details on their respective credit applications. The applications contained the same falsified information. The scenario was similar as well. The first order was small and promptly paid. Order two was larger, a change of address, and went past due. The fraudster even ordered the same product from both members. The second member had a third pending order in-house. The credit manager literally ran out of the meeting room to call her team. Thankfully, they were able to put a stop on the pending order before it was shipped.
Upon return to the office after the meeting, a third member realized they had also been a victim! All three had been taken by the same fraudster.
Thank goodness for the power of networking and sharing at these industry credit group meetings! If the first member had not been part of the group and generous enough to tell her story, the other two members would likely have been taken for more. And other group members might have also been pulled into the scam. The sharing that happens at credit group meetings isn’t always as dramatic as this story, but it is routinely responsible for saving members money. Credit managers leave group meetings armed with info that leads them to better credit decisions, which results in reduced risk and lower losses for their firms.
This story is a good reminder to all of us to remain diligent. These fraudsters are only getting smarter and faster with the aid of AI. Below are links to articles on helping credit managers avoid fraud.
If you believe your firm may have been a victim of fraud, you can notify the FTC (ReportFraud.ftc.gov) and the FBI (Electronic Tip Form | FBI).
Rising fraud risks in B2B trade – NACM News
How to Catch a Fraudulent Order – NACM Commercial Services
7 Ways to Reduce Your Risk of B2B Ship-To Fraud – NACM Commercial Services