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Automatic Debit Scams
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Facts for Consumers from the Federal Trade Commission
Automatic Debit Scams -- October 1993
Fraudulent telemarketers have found yet another way to steal your
money, this time from your checking account. Consumers across the
country are complaining about unauthorized debits (withdrawals)
from their checking accounts.
While automatic debiting of your checking account can be a
legitimate payment method (many people pay mortgages or make car
payments this way), the system is being abused by some
telemarketers. Therefore, if a caller asks for your checking
account number or other information printed on your check, you
should follow the same warning that applies to your credit card
number _ do not give out checking account information over the
phone unless you initiate the call or are familiar with the
company. Remember, if you give your checking account number over
the phone to an unknown person for "verification" or "computer
purposes," that person may use it to improperly take money from
your checking account.
How the Scam Works
The new telemarketing scam usually works like this. You either
get a postcard or a telephone call saying you have won a free
prize or can qualify for a major credit card, regardless of past
credit problems. If you respond to the offer, the telemarketer
often asks you right away, "Do you have a checking account?" If
you say "yes," the telemarketer then goes on to explain the
offer, making it sound too good to pass up.
Near the end of the sales pitch, the telemarketer may ask you to
get one of your checks and to read off all of the numbers at the
bottom. Sometimes you may not be told why this information is
needed. Other times you may be told the account information will
help ensure that you qualify for the offer. And, in some cases,
the telemarketer may explain that this information will allow
them to debit your checking account and ship the prize or process
the fee for the credit card.
Once the telemarketer has your checking account information, it
is put on a "demand draft," which is processed much like a check.
The draft has your name, account number, and states an amount.
Unlike a check, however, the draft does not require your
signature. When your bank receives the draft, it takes the amount
on the draft from your checking account and pays the
telemarketer's bank. You may not know that your bank has paid the
draft until you receive your bank statement.
What You Can Do to Protect Yourself
Automatic debit scams involve a fraud that is hard to detect and
could expose you to large financial losses. However, the
following suggestions may help you avoid becoming a victim.
l Do not give your checking account number over the phone in
response to solicitations from people you do not know.
l If anyone asks for your checking account number, ask them why
they need this information.
l Beware of offers that sound too good to be true, especially
any offers that require your checking account number. Ask to
review the company's offer in writing before you agree to a
purchase.
What to Do if You are a Victim
If a telemarketer has issued a draft against your checking
account without your knowledge or permission, or the amount is
more than you authorized, contact your bank immediately.
Depending on the timing and the circumstances, you may be able to
get your money back. You also may want to contact your local
consumer protection agency, state Attorney General and the Better
Business Bureau to report the telemarketer.
You also may file a complaint with the FTC by writing to:
Correspondence Branch, Federal Trade Commission, Washington, DC
20580. Although the FTC generally does not intervene in
individual disputes, the information you provide may help to
indicate a pattern of possible law violation requiring action by
the Commission.
For More Information
The FTC has a series of Facts for Consumers that explain
fraudulent sales practices that often take place over the phone.
The brochures list precautions you can take to avoid becoming a
victim. Titles include:
"900" Numbers
Jobs Ads, Job Scams, and "900" Numbers
"Gold" and "Platinum" Cards
Fraud by Phone
Telemarketing Travel Fraud
Telephone Investment Fraud
Dirt-Pile Scams
Magazine Telephone Scams
Water Testing Scams
Art Fraud
Swindlers are Calling
If you want any of these free brochures, or a copy of our Best
Sellers _ a complete listing of all consumer and business
education publications from the FTC _ contact: Public Reference,
Federal Trade Commission, Washington, D.C. 20580; (202) 326-2222.
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