Consumer Protection Law

How To Prevent Automatic Withdrawal Scams

Key Takeaways

  • Companies need your consent to make automatic withdrawals from your bank for recurring charges.
  • Scammers use tricks to get your bank account information to make unauthorized automatic withdrawals.
  • Use security measures and set up banking alerts to avoid automatic withdrawal scams.

Automatic payments can be a convenient way to pay regular bills every month. Many people set up automatic withdrawals to pay for their phone bills, gym membership, or other recurring charges. However, scammers can use your financial information to make automatic withdrawals without your consent. If you don’t check your checking account regularly, you can lose thousands of dollars to automatic withdrawal fraud.

Understanding how thieves get your information can help you prevent automatic withdrawal scams. If you have questions about automatic debit fraud, talk to a consumer protection lawyer.

Understanding Automatic Withdrawal Scams

Companies can make automatic debit withdrawals from your bank with your bank account information. Electronic money transfers happen between the Automated Clearing House (ACH). ACH transfers can transfer money between different banks, financial institutions, and credit unions. Most people have ACH withdrawals set up for direct paycheck deposits and recurring payments.

To set up automatic withdrawals, the company needs your bank account number and routing number. You can also use your debit card information for ACH transfers. The company must get your permission to make electronic withdrawals. They can’t make any withdrawals without first getting your authorization.

With your name and account information, companies can do a demand draft to the bank. A demand draft is like a check, but it doesn’t require your signature.

Common Tactics Used by Scammers

Scammers can use different types of fraud to get your banking information. Most scams involve impersonating your bank or another company to get you to give your account information. Common types of impersonation scams include:

  • Telemarketers offering a sweepstakes prize or free gift with a processing fee
  • Phishing scams from someone claiming to be your bank to get you to download malware on your phone or computer
  • Credit card company telling you your account was hacked and you need to confirm your account number
  • An unknown family member in trouble who needs money
  • A text message with a free trial offer for a fake service
  • Advance fee scams from fake job recruiters
  • Social media alert with a link to a fake website that looks like a bank login page

Data breaches and identity theft are other ways to get your bank information. With your personal information, hackers can open new bank accounts and credit cards in your name. They can make fraudulent transactions, and you may not find out about them until weeks or months later. Identity theft can ruin your credit and take a long time to clear up.

Safeguard Your Bank Accounts

Don’t give your bank account information to anyone you don’t trust. Don’t share this information via text message, phone, or social media. Verify the company before you set up automatic withdrawals. Make sure you know your bank’s overdraft fees so automatic withdrawals don’t overdraw your account.

Regularly review your bank statements for suspicious activity. You can also set up security alerts to get notifications anytime your bank account has a withdrawal. Set up security measures on your credit card, debit card, and other credit accounts.

Use strong passwords on your bank accounts and change your password regularly. Set up multi-factor identification to prevent unauthorized transactions. Use secure websites and virtual private networks (VPNs) for more secure online access. Keep your security and anti-virus software up to date.

Verify Legitimate Transactions

If you see an automatic withdrawal you don’t recognize, contact your bank immediately. Find out who made the withdrawal, the date, the withdrawal amount, and the transaction ID. Ask your bank to trace the demand draft. If you didn’t authorize the transaction, stop payment and report it to your bank.

You also have the right to stop automatic withdrawals at any time. However, don’t rely on the company to stop them. You should contact the company and your bank to stop automatic payments. Contact the company and tell them you are revoking automatic withdrawals. Follow up with a letter to the company informing them in writing.

Then, contact your bank or credit union and tell them you’re revoking authorization for ACH withdrawals by that company. Also, notify them in writing or with an online form from your bank. After revoking permission, monitor your bank account and stop payment on any continuing withdrawal claims.

What To Do If You Fall Victim to a Bank Withdrawal Scam

If you notice an unauthorized withdrawal from your bank account, contact your bank immediately. Your bank may be able to stop payment on any ACH withdrawals. Contact your bank’s fraud prevention department to alert them someone has unauthorized access to your account.

If you think someone has your Social Security number or other sensitive information, put a freeze on your credit report. A credit freeze will limit any new credit accounts opening in your name. Get a copy of your credit report and monitor the report for any suspicious activity.

Report ACH withdrawal fraud to the FBI’s Internet Crime Complaint Center (IC3). You can also contact your state attorney general’s office. For legal advice about how to prevent automatic withdrawal scams, contact a consumer protection lawyer.

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