Consumers Should Be Aware Of Automatic Debit Scams


Telemarketing scam artists have now another way to rip-off your hard earned money, and its from your checking account. There have been many numerous consumer complaints about unauthorized withdrawals from their checking accounts.

Many people pay car notes or make mortgage payments using automatic debiting from their checking accounts, but the system is being abused by telemarketing scams. Therefore, you should follow the same warning that applies to the numbers associated with your credit card if a telemarketer request your checking account numbers or other information that is printed on your check. Don't give out checking account information over the telephone unless you agree to pay for something and are familiar with the company. Remember, if you give your checking account number out over the phone to a stranger for "computer purposes" or some type of "verification", that individual could use it to steal your money from your checking account.

How This Scam Works

You may receive a postcard or get a phone call saying you can qualify for a major credit card or have won a free prize, regardless of past credit history. If you respond to the offer, the fraudulent telemarketer will often ask you right away, "Do you have a checking account?" If you tell them "yes", the telemarketer will then proceed to explain the offer. Many times the opportunity may sound too enticing to pass up.

Close to the end of telephone conversation, the fraudulent telemarketer may ask you to get out one of your checks and to read off the numbers at the bottom. Some deceptive and fraudulent telemarketers may not explain to you why the bank account information is required. Other deceptive and fraudulent telemarketers may tell you that the checking account information will help to make sure that you will qualify for the offer. Sometimes, a honest and legitimate telemarketer will explain to you that this information will allow them to debit your checking account.

A "demand draft" is put on your checking account once a telemarketer has your checking account information, A "demand draft" is processed almost the same way as a check. The draft has your account number, your name, and the amount of the transaction. However, the draft does not require your signature like a written check would require. When your bank receives the draft, it pays the telemarketer's bank by taking the amount on the draft directly from your checking account. You may not know until you receive your bank statement, that your bank has paid the draft.

What You Can Do To Protect Yourself

A automatic debit scam may be difficult to detect before you suffer financial losses. If you do not know who you're talking to, follow these suggestions to help you avoid becoming a victim:

1) If someone says they are recording your phone conversation, you should not be afraid to ask questions and make sure to ask them why.

2) Unless you understand why the information is necessary and you know the business or company, do not ever give out your checking account number over the telephone.

3) Businesses do not ask for your bank account information unless you have expressly agreed to this method of payment.

You Should Know: Since December 31, 1995, the law requires a telemarketer or seller to obtain your verifiable authorization to withdraw a payment from your bank account. This means that anyone who takes your bank account information over the telephone must have your express permission to debit your account, and must use one of three ways to get it. The person must tell you that the funds will be withdrawn from your bank account. If you authorize a payment from your bank account, they must then get your written authorization, tape record your authorization, or send you a written confirmation before debiting your bank account. You must receive and they must disclose, the following information if they tape record your authorization:

1) The date of the demand draft;

2) The draft(s) amount;

3) The payor's (who will receive the funds) name;

4) The number of draft payments (if more than one);

5) A phone number that you can call during normal business hours; and

6) The date that you are giving your oral authorization.

When a telemarketer or seller uses a written confirmation to verify your authorization, the telemarketer or seller must give you all the required information for a tape recorded authorization and tell you in the confirmation notice the procedure you must follow to receive a refund because you dispute the accuracy of the confirmation.

What To Do If You Are A Victim

If fraudulent telemarketers cause money to be withdrawn from your bank account without your authorization or knowledge, they have violated the law. If you receive a confirmation notice in writing that does not accurately represent your understanding of the sale, request a refund of your money by following the refund procedures that should have been enclosed. If you do not receive a refund, it's against the law. If you believe that you became a victim of fraud, contact your bank right away. Tell the bank that you did not authorize the withdrawal and that you want to prevent further debiting. You should also contact the Attorney General in your state. Depending on the timing and the circumstances, you may be able to get your money back.

For more information on checking account scams please visit the website of the Federal Trade Commission.

Although all information is written in good faith and has been reviewed, please email us at [email protected] to report any inaccuracies.