Telemarketing Danger

TELEPHONE FRAUD DEVELOPS A DANGEROUS NEW TWIST
A few months ago we alerted you to telemarketers who were conning people out of money for vacations, (or cas, or furs, or stereo systems or other big ticket items) by getting people's credit card numbers over the phone and then putting charges through against their accounts.

Most initial contact is by a post card received through the mail telling you that you are a "guaranteed winner of one of the four items below". An 800 or 900 number is then listed for you to call and find out what you have "won".

The person on the other end of the telephone when you called would assure you that you were indeed a winner. They would then obtain a credit card number and immediately put through a charge against your account for "taxes and handling".

Of course there was no prize.

A subsequent call to the same 800 or 900 number would reveal that it had been disconnected. Your credit card account was charged. And a hassle began with your credit card company regarding an unauthorized payment.

The credit card companies went after the telemarketers. Both Visa and MasterCard are suing fraudulent telemarketers.

New Twist
Now a new twist has been added that is causing considerable problems to the banking industry.

Instead of asking for the credit card number, the victim (possibly your customer!) is asked for the numbers off the bottom of the their check. A draft (that looks exactly like a check) is then created using the victim's transit code and account number and is deposited in the telemarketers account in another bank.

This "check" goes through the work and is posted against the customer's account. Your customer may not even know about it until they get their statement with a charge of $50.00,-or $119.00, or $129.50, or $199.50 or $398.50-depending on what they "bought".

In some cases it overdraws the account and checks get bounced, charged for, etc. Now you have an overdraft created by an unsigned, unauthorized item that has been paid against the account. Your financial institution is liable not only for refunding all the charges against the account, but also for the amount of the item that has been paid with no signature. You may also have to go to the expense of writing apology letters to the payees on the "bounced" checks.

There is no easy answer to this problem. The Federal Bureau of Investigation and several state attorney generals are working on it.

But there are some ways the financial institution can help protect itself.

Tellers
First, make sure the tellers know about this scam. They should look for:

Numerous deposits that come in to be credited to an account-all drafts,
All the drafts are for the same amount,
All are similar items in appearance-but drawn on many different financial institutions,
All are deposited into an account that has been opened fairly recently.

There is a possibility that the teller is servicing a telemarketers account. Be aware that the drafts are frequently deposited in large numbers just before closing time when bank employees are most anxious to finish up quickly. Further checking by a supervisor is certainly in order-especially if there are wire transfer arrangements on the account.

Bookkeeping
If you hand file checks, alert your bookkeepers of this scam. They are the ones most able to spot these items and return them on a timely basis. It's too late to return them timely after the customer gets them in the statement. The best you can do then is to return them "without entry" with a request for reimbursement.

New Accounts
Make sure the employees responsible for opening new accounts know about this fraud. When opening accounts, ask what kind of deposits the customer expects to be making. One telemarketer in New England told the new accounts clerk that she would be depositing drafts and money orders from all over the United States, but none of them would be over $119.00!

When you consider that one institution in Oregon lost $300,000 from a single telemarketing account you begin to realize the importance of that new account opening. Under the requirements of Regulation CC, the deposited funds will be available quickly and may be wired out before the return of the drafts from the institutions on which they are drawn. A few questions are certainly in order.

We will keep you updated on developments. In the meantime if you have had activity of this sort, please contact the HOTLINE office and let us know.

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 6, 7/91