PhotoThe government grant scam has been around so long you might think everyone would know about it by now. But the Federal Trade Commission (FTC) says it remains a highly effective way to steal money from consumers.

It works like this: you get call from someone who says you are being awarded a government grant. It's a lot of money and you can pretty much use it any way you choose.

The caller may say he is calling from Washington, DC, and sure enough, your caller ID says that's where it's coming from.

However, victims never receive any money and instead pay the scammer hundreds of dollars in alleged fees and taxes, always using a prepaid money card that is untraceable.

A victim from South Carolina

At ConsumerAffairs, we recently heard from a victim, Phyllis, from South Carolina, who said she was a retired federal worker. She says when she got the call she thought it sounded a little fishy but politely listened to what the caller had to say.

"I then got a call from a well-spoken woman from a Washington number, saying that she had my name and it was definitely a grant and she was referring the processing to someone in Carolina," Phyllis told ConsumerAffairs. "Someone then called me from a North Carolina number and I was told that a Fed Ex delivery was going to be made. A check was never delivered."

But Phyllis was asked to pay a number of fees and taxes, especially after other people got into the act, calling her and claiming to be from the IRS and other government agencies.

Asked to pay with an iTunes card

"I was getting a number of calls from this same number, relative to how I would receive a check and was asked to pay insurance fee with iTunes card and also some tax," Phyllis said.

Phyllis said she paid several hundred dollars before she figured out she was being taken for a ride. The scammers employed numerous tricks to make her less skeptical, including spoofing the telephone numbers and making the calls appear to come from Washington DC and North Carolina.

The government grant scam can be avoided if you remember one thing: you cannot receive a grant if you didn't apply for it. By the same token, you can't win a sweepstakes if you didn't enter it.

Anyone who tells you that you did is running a scam and you need to immediately hang up the phone.

Phyllis hopes authorities will track down the scammers who stole money from her so no one else becomes a victim, but the sad fact is most of these people operate outside the U.S. and beyond the reach of the law.

But every once in a while justice prevails. In 2013, the FTC obtained $1.7 million in refunds for more than 23,000 consumers who were victimized by a government grant scam.


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