Credit Muling

What Is Credit Muling?

Credit muling is a type of credit fraud that involves acquiring or delivering items that were obtained using credit. 

A common example of credit muling involves the resale of cell phones that were obtained for discounted rates as part of a multi-year contract with a telecommunications provider.

How Credit Muling Works

Just as a drug mule transports illegal drugs, a credit mule transports items that were purchased using credit. The phenomenon is difficult to detect because the credit mules themselves are often unaware that they are participating in a fraudulent enterprise. Instead, they are often victims of organized crime who are made to believe that they are working as an independent contractor of a legitimate organization, such as a secret shopper business.

Oftentimes, the perpetrators of credit muling schemes will deliberately target young, naïve, or desperate people as potential mules. These mules will use their good credit to borrow the product in question, such as by obtaining a phone on multi-year service contracts, in which the payment for the phone itself is incorporated into the monthly cost of the plan. By reselling the phone to the organizer of the scheme, the mule can obtain a short-term profit for their “work”, only to discover later on that they have participated in a crime and negatively affected their own credit rating.

Because credit mules use their real identities when securing the item in question, it is very difficult for merchants to identify them ahead of time. After all, these credit mules are often unaware that what they are doing is illegal; therefore they will likely appear entirely sincere. In many cases, merchants will simply write off the losses from these schemes, as it can be very difficult to identify the criminal who organized it. To help mitigate against this risk, individuals who suspect or who have become victims of credit muling should notify their local police departments, as well as the Federal Trade Commission (FTC).

Real World Example of Credit Muling

To illustrate, consider the case of cell phones, which are a popular target for credit muling schemes. A criminal might approach unknowing consumers and propose to them that they purchase a new phone from a carrier on a multi-year contract. Once the consumer has obtained the phone, the criminal will purchase it from them at a price higher than the consumer initially paid — therefore offering the consumer a short-term “profit” or “fee” for the service.

Of course, in many cases the consumer would not know that they are being implicated in a crime. The criminal in question might present themselves as a legitimate resale business, and might mislead the consumer into believing that they will be able to cancel the cell phone contract without any negative repercussions. In reality, the criminal’s intention is to simply resell the phone on the black market at an even higher price, leaving the unwitting consumer to deal with the monthly service charges, termination fees, and adverse effect on their credit score that will inevitably follow.