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Scam Artists, Banks, Team Up to Fleece Seniors

June 21, 2013
Managing Money
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Not only are seniors particularly easy prey for and telemarketers, we also come from a generation that intuitively honors bankers as pillars of the community. Quaint notions like that have come under increasing pressure as a result of the recent economic meltdown, and they’re also being tested by news that some banks have been enabling scam artists who take advantage of seniors and other credulous citizens.

According to a recent story in the New York Times, last November the First Bank of Delaware “reached a $15 million settlement with the Justice Department after the bank was accused of allowing merchants to illegally debit accounts more than two million times and siphon more than $100 million.”

More recently, a class-action suit pending in federal court in Pennsylvania alleges that from 2007 through 2009 the 140-year-old Zions First National Bank of Utah, “knew, or deliberately closed its eyes to what otherwise would have been obvious to it, namely that its telemarketers clients were engaged in fraudulent activity and that by providing payment processing and banking services to them, it was facilitating that unlawful conduct.” Other banks mentioned in the complaint include National Penn Bank, Harleysville National Bank, Wells Fargo Bank, N.A., and Wachovia Bank, N.A.

“The most common victims of fraudulent telemarketers,” claims the lawsuit, “are senior citizens.”

Here’s how these scams typically work:

  1. A telemarketer posing as a government agency or other trustworthy organization contacts a senior citizen or other victim by phone.
  2. The telemarketer tricks the victim into disclosing bank-account information. Reynaldo Reyes, the plaintiff in the recent Pennsylvania lawsuit, says he was told that he was eligible for a government grant that could be deposited directly into his account.
  3. The telemarketing firm forwards the victim’s information to a “payment processor,” which withdraws money from the victim’s account, takes a cut of the proceeds, and deposits the rest in an account at a cooperative bank.
  4. The cooperative bank periodically helps the telemarketing firm transfer funds out of the country to accounts in such places as Canada, India, and the Caribbean. This, of course, would raise most bankers’ suspicions.
  5. If a victim’s account is completely emptied, his bank charges overdraft fees. While lucrative for any bank involved, enough of such events would normally generate attention.
  6. When a victim realizes that his account has been hit by unauthorized withdrawals, he complains and has the transaction reversed. His bank complies after charging a comfortable fee, but many of such “returns” create a pattern that is easy to notice. Even though one payment processor named in the lawsuit had a return rate “exceeding 40%, twenty times the national average” for one month in 2007, the banks involved turned a blind eye.

There are many more outrageous details, ignored red flags, and violations of the law mentioned in the federal complaint, listed below under Sources. The pattern, however, is clear: hitherto respectable banks have been compromised by the immense volumes of money that can be extracted from seniors’ bank accounts – and some experts caution that we’ve seen only the tip of the iceberg.

It’s important to remember, however, that the none of the misdeeds discussed here involved someone with access to your bank account signing you up for some phony product or service without your participation – a process that’s often called “slamming,” In each of the cases mentioned above, seniors were talked into voluntarily giving up sensitive financial information. If you make it a rule never to provide financial details over the phone, this particular scam can’t touch you.

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