A costly new travel scam is operating nationwide in which consumers are being persuaded to reveal their checking account numbers, then money is automatically withdrawn from those accounts by scam operators.
In this scheme, consumers are contacted by telephone or via post card and enticed--with lures of low-priced trips or vacation prizes--into revealing their checking account and bank identification numbers. Armed with this information, the scam operators can then withdraw money from bank accounts through automatic debiting.
The reason given by scam operators, if any, for needing the check numbers is that this information is necessary to verify that the consumer has qualified for the travel offer. Or, the scam operator might offer to debit the consumer's checking account automatically "in easy monthly installments" for any extra charges related to travel arrangements not covered by the prize.
By the time consumers find out about the missing money via their monthly bank statements, the scam operators may have moved on to new locations and new victims.
Low-cost vacations to Hawaii, Florida, the Caribbean and Europe are among the hot items being used to obtain checking account and credit card numbers and other banking information from consumers. Among trips offered by scam artists: an eight-day package from Los Angeles to either London or Hawaii, including round-trip air fare and hotel rooms, for $349; one week in Hawaii, including air and hotel for two people, for $329, and a package for $328 that supposedly includes round-trip airline tickets to Manzanillo, Mexico, plus three nights in a top hotel.
Reports of unauthorized withdrawals from checking accounts began surfacing earlier this year in California, Oregon, Colorado, Texas, Virginia and Florida, according to the Alliance Against Fraud in Telemarketing, a Washington-based organization functioning under the aegis of the National Consumers League.
"It's still too early to estimate what losses are to consumers since this is such a new scam," said John Barker, a spokesman for the AAFT. "The point is that consumer losses are bound to increase unless they show more caution and the banking industry develops better methods to effectively stop fraudulent telemarketers."
Meanwhile, illicit telemarketers are still seeking credit card numbers from unwary consumers looking for travel bargains. "It's become harder for the fraudulent telemarketers since credit card companies have made it more difficult for them to operate," Barker said. "That's why these outfits have looked for alternative methods such as these checking account frauds."
Once scam operators have obtained the necessary checking account information, they can print an unauthorized "demand draft," a paper document that states the consumer's name, account number and amount of money to be withdrawn. Unlike a check, however, this draft doesn't require your signature. When the bank receives this draft, it withdraws the sum from the consumer's checking account and pays it to the telemarketer's bank.
Many consumers mistakenly assume that the bank handling their checking account requires verification before accepting demand drafts and other automatic debit instruments, Barker said.
However, banks tend to rely on the bank where the transaction is initiated for verification of authority to withdraw funds.
He added that some banks fail to verify who is producing the demand drafts, or rely on assurances of a fraudulent telemarketer that the telemarketer has obtained written authorization to write the draft. Since the fraud isn't discovered until victims receive and review their bank statements, the scam operators can wire the funds out of a local account into another out-of-state account long before the unauthorized transaction is discovered and reported.
According to the Alliance, fraudulent telemarketers are also gaining access to the Automated Clearing House System through a victim's checking account and bank ID numbers to make electronic withdrawals from the victim's accounts. The operators can have funds safely in their own accounts within days of initial telephone contact with the victim. The Automated Clearing House System is an electronic network used by banks and their customers to clear transactions electronically, without any paper involved.
"Banks are aware of these demand draft frauds and they're being more careful in monitoring drafts," Barker said. "In addition, some banks are alerting consumers not to give out their checking account numbers and bank identification numbers. But a lot more has to be done to protect consumers from people who have learned how to outwit the banking system."
"We're trying to alert consumers to this kind of scam and we are investigating some outfits," said Ann Guler, a spokeswoman for the U.S. Federal Trade Commission in Los Angeles.