Fraud and Scam Awareness: Debit and Checking Accounts

Information related to these frauds is similar to the cautionary tales we provide against telemarketing and ID theft frauds. It’s hard to imagine life without the convenience of checking accounts and automated debit transactions. These services are a quick and safe way to conduct everyday transactions. The way to avoid being victimized by checking account fraud is simple. Destroy your deposit slips, void unused checks, and never give your deposit slips or account numbers to people you don’t know or trust. Never give your account numbers to telemarketers who call you. It’s a good idea to initiate checking and debit transactions (even ordering checkbooks) through a credit union representative.

Automatic debit scams
Fraudulent telemarketing operations have yet another trick to take people’s money: automated withdrawals from victims’ checking accounts. Even our credit union has helped a few members deal with unauthorized checking debits. These debits often turn out to have been unwittingly authorized by the victim of a scam.

The scam works through a variation of the following: false Internet sites, postcards for prize claims, credit card offers, phony telemarketing calls, or other "boiler room" operations.

For example, you might receive a postcard or a phone call, which claims you have won a free prize or you qualify for a major credit card (regardless of past credit problems). When you respond to the offer, the telemarketer asks, "Do you have a checking account?" The telemarketer then describes an offer too good to pass up.

After the sales pitch, the telemarketer asks you to read the numbers at the bottom of your checks. The telemarketer might not say why this information is needed, or she might claim it’s for "information only." The telemarketer may claim that the offer is available only to "quality people" who maintain checking accounts, and that the account number will help ensure that you qualify. In some cases, the con artist will say that a small, one-time debit will be taken from your account in order to ship your prize or process your new credit card.

With the information you’ve now provided, the scam artist is able to process "demand drafts" (just like checks) against your account. Unlike checks, demand drafts do not require a signature. When your bank or credit union receives the draft, they are required to honor the draft against your checking account. The victim only discovers this charge if he examines his statement. Most debit card scams are for small amounts (to avoid detection); however, these scams can lead to more debits and potentially large amounts of lost money.

Remember that setting up automatic debits from your checking account is a perfectly safe and convenient way to conduct business (from paying a car loan to making automatic savings deposits). This beneficial system is abused only by a few, fraudulent operators. Treat your checking account number (and other information printed on your checks) the same way you should handle any personal information: don’t give it away lightly. If you’re on the phone, give out checking account information only if you initiate the call or if you are certain of the company’s identity.

Prevent debit fraud
If a telemarketer or company debits your checking account without your knowledge or permission, or if the amount is more than you authorized, contact your financial institution immediately. Depending on timing and circumstances, you may be able to get your money back. You should also contact your local consumer protection agency, your state’s Attorney General, and/or the Better Business Bureau to report the company. Remember the following tips:

• Beware of offers that sound too good to be true
• Carefully consider whether you really need any service or purchase which requires the use of your account information
• Conduct business through your credit union when you set up automated transactions
• Don’t give your account numbers out over the phone when you respond to offers from businesses you don’t know
• If someone asks for your account number, ask why he wants this information
• Review any company's offer in writing before you make a purchase
• Review your checking statements as soon as you get them

Check cashing fraud
We can’t stress this tip enough: void, hide, and/or destroy, all documents which have your account information. Scam artists may go to quite a bit of trouble to forge or create phony checks; but all too often, their job is as easy as finding unused checks. Check forgers will hire homeless people, even children, to search through dumpsters, garbage cans and dumps for thrown-away checking documents.

Phony or stolen checks can be used at various business to purchase goods (which are later returned for cash). Many thieves pick on businesses with busy or new staff. Thieves can even take advantage of long lines at financial institutions and cash their forged checks for the full amount. Cashing bad checks is not always as easy as simply going to some check cashing facility. Often, the thieves will alter and forge stolen ID cards and set up temporary accounts. Invariably, thieves—even whole gangs of operators—will deposit forged checks into these accounts and cash them out within a short time.

Prevent check cashing fraud
The best way to avoid check thieves is to destroy all checks. Even voided checks may be "washed" and reused by forgery operations. Here are the best ways to avoid the hassle and pain of having your checks used against your knowledge:

• Ask your financial institution not to include used checks in your monthly statements—statements that include canceled checks can be stolen from mailboxes or found at the dump
• Check your account statements as soon as they arrive
• Don’t have checkbook reorders sent to your home unless you have a locking mailbox
• Don’t leave your check book or account information where anyone can easily find it (e.g., leaving a checkbook in the car, in open view, is an invitation for someone to break into your car)
• Keep a magic marker handy for blotting out the account number at the bottom of your canceled or voided checks
• Void all unused checks and deposit slips—consider using a paper shredder

Deposit slip fraud
Void, hide and/or destroy all documents which have your account information. People are often surprised to find that thieves take advantage of their unused deposit slips. Not only do thieves and forgers cash bad checks, but thieves use another common scam. Thieves will use a stolen deposit slip to "deposit" a large portion of stolen checks from other accounts. The thieves can then select "less cash" amounts that are less likely to draw careful scrutiny.

The owners of the stolen checks may have already closed their compromised accounts, but now the victimized owner of the lost deposit slip will have cash withdrawals made against her account. Far too few people realize that they shouldn’t throw away their unused deposit slips. Treat deposit slips like all personal documents: don’t just leave them for anyone to use. It is a good idea to void your unused deposit slips as soon as you finish a book of checks.