In Overpayment Scam, Your Bank Could Be Thief’s Best Friend

An unidentifiable person wearing a hoodie and sitting in a dark room works on a laptop. — (Image credit: Getty Images)

If Southern California-based family nurse practitioner Joe Torres had read Fool Me Once by Kelly Richmond Pope, he and I would never have spoken. He also would not have lost thousands of dollars in an “overpayment” scam that began when his laptop screen froze while he was working with a patient.

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I’ll come back to Joe’s all-too-common story in a moment — that is an utter embarrassment for his bank and many others — but I would like to offer the suggestion of Fool Me Once as a gift for a high school or university graduate, or really anyone who wants to learn how to protect their money. That gift could be one of the most useful books they could ever own.

Fool Me Once provides keys to avoid being scammed by the con artists and thieves who roam the earth. Her book is so valuable, providing insight into how people like Bernie Madoff and corporations like Enron operate or how your trusted office assistant becomes an embezzler. The author shows you what to look for to prevent becoming a victim.

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Also, with elder financial abuse so prevalent, Fool Me Once highlights for my older readers and their children the signs that Mom or Dad aren’t OK.

From ‘You Need Antivirus Protection’ to No Fraud Protection

Now, back to Joe and his infuriating problem. “I was at work,” Joe wrote, “using my laptop, seeing patients, when suddenly my screen froze, and a message stated that it has a virus and to call a number to get it unfrozen. I did, and a man said he was with (my bank), and for $400 he can give me antivirus protection on my computer so I can use it. I sent the $400 using a credit card. Immediately, on my laptop screen, he showed my debit card number and said that I paid too much, and he will send $200 back to my bank account. Since I never use the card, I thought he was legitimately part of (my bank) as he had the card’s number.

“Somehow $44,200 was sent to my account! He instructed me to wire him the extra money, and if I do it right away, he would give me $70 and five years of antivirus protection. I was trying to be honest, and I wired $43,930 the same day. The next day, I realized this was a scam. So, I went to (my bank) and changed my debit card number.”

Joe’s Nightmare: No Safeguards From His Bank

At his bank branch, Joe was told that he owed the bank $44,200! “I never received an alert via text, email or mail about the movement of the money from my home equity line of credit to my bank account. I thought this was not right, especially since I had it for several years, but never used it. If I would have been alerted, I would have immediately canceled or not sent the wire.”

These overpayment scams have one thing in common: The victim is under pressure to “refund” money “mistakenly” placed in their account, but in reality, it isn't there.

It is important to understand that merely because an account shows an amount of money in it does not mean that the funds really exist. It could take days for deposits to actually clear and be fully credited. This is another aspect scammers use to convince the victim that an overpayment was made.

Joe filed a claim with the bank’s fraud division and was told, “Our investigation could take up to 90 days.” This comment, in my experience, is utter nonsense with no justification, as fraud requires immediate action. This was a slap in the face from one of the largest banks in America.

Upon receiving Joe’s letter, I contacted a high-ranking executive in the corporate offices of his bank, who, over the years, had always been helpful with consumer issues I brought to her attention. She promised to “escalate” Joe’s case.

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Despite my leaving several voicemails, that was the last thing I heard from her after I asked, “Doesn’t this bank have some safeguard in place to stop suspicious wires — sending money overseas from an account that never had activity — and explore the possibility of a scam with your customer?”

Despite repeatedly asking her that question, I am still waiting for a response.

Joe’s letter to me concluded, “They need to fix this problem. I want my money back. I feel I should not have to pay for their mistake.”

He gave me permission to use his real name, as “I want people to realize how easily they can be swindled, and you can’t trust your bank to prevent this known fraud from taking place.”

Bank Executives Silent When Asked, ‘Are You Aware of Safeguards?’

Can a financial institution prevent money from being wired? You bet it can. And while it is beyond the scope of this story, banks have an important role to prevent money laundering and must be alert to potential fraudulent transactions.

“When a wire transaction is so far outside of a customer’s profile, it should be stopped and the customer asked to come into the bank, if possible. That would appear to be the case here with Joe,” said “Banker X,” from a business bank in my town who asked that her name and the bank’s name not be used. “We have prevented similar scams from succeeding, as our systems are designed to look for and alert us to unusual customer transactions,” she said.

Interestingly, I ran these facts by press relations and bank officers at a number of banks across America, asking, “Are you aware of safeguards that would have stopped Joe’s wire from going through, giving time to investigate activity on an account that had never been used?”

Not one bank or bank officer would comment, and most didn’t return my calls.

Investment Firms Use Algorithms That Raise Red Flags

While bankers refused to comment, I also spoke with representatives of major investment houses. The common response was, “Yes, we have algorithms that are looking for the kind of thing that Joe was doing — suddenly wiring over $40,000 from an account he never used before. Everything comes to a halt, and we talk with our customer to see if all is legit, or if they are a scam victim.”

Finally, one fraud investigator told me, “These scams succeed due to a sense of trust, wanting to do the right thing and pressure to act immediately. Had Joe taken a step back and actually gone to his bank before wiring the money, the crooks would lose.”

So, what are Joe’s remedies? I ran this by several attorneys who sue banks, and all agreed that this is a non-starter. They recommended trying to find a tax deduction of some type.

Can a Private Business Ban Someone From Entering?

To protect yourself from bank fraud and other scams, visit the Consumer Financial Protection Bureau (CFPB) for information on what to look for. You can also read more about this topic and find more tips in the article Banking Scams: Beware Fraudsters Impersonating Your Bank.

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."