Important Update: Changes in FDIC Deposit Insurance Coverage
The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.
Can You Spot a Scam? Test your knowledge of common frauds and their warning signs by taking our quiz
Con artists are very good at tricking consumers into parting with money or divulging personal information that can be used to steal funds or run up thousands of dollars in fraudulent credit card charges. How good are YOU at telling a scam from a legitimate offer or advertisement?
FDIC Consumer News frequently publishes articles about common frauds to avoid, but here we want to put your knowledge to the test.
1. You agree to sell your valuable collection of superhero comic books from the 1960s to a complete stranger who mails you a cashier's check. Because you want to be sure the check is "good" before you part with your prized possessions, you should:
(a) Confirm that the dollar amount and your name on the check are correct. Apart from that, cashier's checks are always safe to accept.
(b) Deposit the check into your bank account and wait at least two business days before letting go of the items.
(c) Contact the bank that issued the cashier's check to make sure the check is legitimate.
2. You agree to rent your vacation house to a far-away stranger who sends you a check as a deposit, but when the check arrives, it's for more money than you agreed upon. The person apologizes and asks you to deposit the check and wire back the difference. This is:
(a) Safe for you to do because you'll be depositing a check for more money than you expected anyway.
(b) Safe for you to do because, if there's a problem, money sent by wire is very easy to recover.
1(c) There's been explosive growth in all forms of counterfeit checks, including cashier's checks. Crooks also know that consumers trust cashier's checks, money orders and other official checks.
Although federal rules require that the funds from most deposited checks be available for withdrawal within two business days (unless the bank provides a written notice to the contrary), that does not mean there isn’t a problem. If you simply deposit the check into your account and a week later it is returned unpaid, your bank will deduct from your account the original deposit amount, even if you've already spent the money, and you could also be held responsible for any fees triggered by your reduced account balance. Not only that, you will no longer have your valuable collection of comic books.
So, when presented with a cashier's check by a stranger, "you need to confirm that the check is legitimate," said Michael Benardo, Chief of the FDIC's Cyber-Fraud and Financial Crimes Section. He says that your best strategy is to contact the bank the check is drawn on or take the check to your bank's branch manager (to contact the other bank on your behalf) to have the check authenticated. You can also ask how to safely proceed.
2(c) "Be suspicious any time you receive a check for more money than you are due," warned Benardo. "And be especially skeptical if you're asked to deposit the money and wire back some or all of it, because if you comply and the check is fraudulent, the scam artist will have your payment and you'll probably owe your bank the amount you took out of your account."
Benardo also explained that money sent by wire is very difficult, if not impossible, to get back. "Wired funds move instantaneously and the criminals can be waiting on the receiving end to make a quick cash withdrawal," he said. "Before you know it, the crooks and the cash will be long gone and they'll both be very hard to find."
3(d) Thieves prey on individuals who have lost their jobs or need extra cash by offering attractive, but bogus, opportunities to work at home. Their goals include tricking victims into divulging personal or financial information (such as bank account and Social Security numbers), sending money (perhaps for supplies that will not arrive) or wiring funds from their account (see Avoid Costly Scams Involving Fake Checks and Money Orders).
One variation on the work-at-home fraud is the "mystery shopper" scam. This involves fake part-time jobs evaluating retailers' products and/or money-transfer services. As a result, they require recruits to wire money from their own checking accounts.
Another is an offer to serve as a money transfer agent — someone who would collect electronic payments in his or her bank account and wire the money overseas after deducting a "commission." In many cases, the incoming payments are unauthorized electronic withdrawals from other peoples' bank accounts. If you participate in this activity, you could be suspected of being part of a crime ring and charged with a crime.
"Steer clear of any offer to work at home if it involves processing checks or electronic payments," cautioned David Nelson, an FDIC fraud specialist. "Some payment-processing scams involve realistic-looking employment applications, contracts, written procedures, and even Web sites with payment-tracking software."
4(a) Under the Electronic Fund Transfer Act (EFTA), if your debit card or ATM card is lost or stolen, your maximum liability is limited to $50 if you notify your bank within two business days of discovering that the card is missing. If you wait more than two business days but no more than 60 days after receiving a bank statement that includes an unauthorized transfer, you could be liable for losses up to $500. But if you wait longer than that, the law doesn’t require your bank to reimburse you for any unauthorized transfers made after the 60-day period, even if that would clean out your account. Note: After you report a lost or stolen card, under most circumstances you will limit your liability for unauthorized transactions from that point on.
However, to promote the worry-free use of debit cards and ATMs, some banks may voluntarily waive all liability for unauthorized transactions if the cardholder took reasonable care to avoid fraud or theft, but consumers must still report errors promptly.
A good rule of thumb is to review your checking account and credit card statements promptly and report unauthorized transactions to your bank as soon as possible. While you may have time under the law to report a suspicious transaction and limit your liability, you should always try to nip these problems in the bud. The sooner you act, the faster your bank and law enforcement authorities can help keep you and other consumers from being victims.
Even a very small unauthorized transaction should immediately be reported to your bank or credit card company. "A major fraud could begin with small purchases as a test," said Benardo. "If that small transaction goes through without being rejected by the bank's computer system, it may be followed by multiple transactions that can clean out a checking account."
In one recent case, the Federal Trade Commission (FTC) charged identity thieves with placing more than
$10 million in bogus charges on consumers' credit and debit cards in amounts ranging from 20 cents to $10. "Most consumers either didn't notice the charges on their bills or didn't seek chargebacks because of the small amounts," the FTC said.
5(d) Many homeowners having difficulty making their monthly mortgage payments are being targeted by criminals who falsely claim they can rescue a home from foreclosure, then charge large upfront fees and fail to deliver on their promises. In some of the worst cases, homeowners are tricked into signing away their ownership of a house.
If you're having trouble paying your mortgage, contact your lender or loan servicer immediately, perhaps with the help of a reputable housing counselor. If a company advises you to cut off communications with your lender or another advisor, that's another warning sign of a scam.
For information from the FTC on avoiding a variety of credit-related frauds, including foreclosure rescue scams, start at www.ftc.gov/credit. Credit-based scams on the Internet have grown so much that, for educational purposes, the FTC recently created a fake Web site at www.wemarket4u.net/esteemed for the fictional company Esteemed Lending Services. Anyone drawn in by the site’s attractive offers of “guaranteed” loans is soon warned, "If you responded to an offer like this one, You Could Have Been SCAMMED!"
6(b) Just because an e-mail or Web site looks like what you’d expect from a government agency, convincing copycats are out there. Remember that the FDIC or another government agency (not to mention your bank or credit card company) would never contact you asking for personal information such as account numbers and online passwords and usernames.
"Cyber criminals also have gotten even sneakier by sending e-mails that appear to be from businesses or government agencies but contain attachments which, if opened, load spyware onto your computer and record your keystrokes and collect confidential account numbers and passwords," said Nelson. "Once the criminals have that information, they may make changes to your account information and transfer money out of your account."
7(d) There are many good reasons to frequently review your credit reports, and one is to look for warning signs that an identity thief has been or is trying to obtain loans or commit other fraud in your name. "The most important warning sign of ID theft in a credit report is a credit card, loan or lease in your name that you know nothing about," said Benardo. "Any one of these may indicate that someone has learned enough information about you to be able to steal your identity and conduct business acting as you."
Also pay close attention to the "inquiries" section of the report that shows who has requested a copy of your credit history. That's because thieves sometimes falsely claim to represent a company with a legitimate right to obtain credit reports and then use the information to commit fraud.