A bust-out scheme involves establishing credit, using the maximum amount of the credit, and then not paying the bill. For example, a common practice for the credit department of a business is to grant small amounts of credit to newer customers, and then gradually build up the amount of credit allowed when there is a history by customers of paying on time. Someone can take advantage of this pattern by setting up a business, placing small orders, and paying the resulting bills within normal terms. At this point, the credit manager is more likely to allow credit for a much larger order. The perpetrator then accepts delivery, shuts down his business, and moves away – without paying the bill. The goods are then liquidated for cash.

A variation on the concept at the consumer level is for an individual to obtain a credit card, use a consistent payment history to justify a higher credit limit, use all of the credit limit, and then not pay the credit card bill.

The process can also work in reverse. The perpetrator sets up a company and begins offering goods at excellent prices, but only when payment is made in advance. Once customers become comfortable with the arrangement, the company offers exceptional pricing for a short period of time in order to attract even larger orders, takes the prepayment money, and walks away from the business.

Related Courses

Fraud Examination 
Fraud Schemes 
How to Audit for Fraud