How to Prevent Automatic Withdrawal Scams

Every year many Americans become victims of automatic withdrawal scams. They may be offered a free item only to find that it was not in fact free, they may be charged recurring withdrawals which they did not expect or they may be otherwise taken advantage of and charged unexpected fees. While the situation is serious and troublesome, there are some steps that the government, the banks and the individual consumer can take to prevent these types of scams from succeeding.
The Government
The government has three critical roles to play in reducing the occurrence of automatic withdrawal scams. First, the government can educate people about the potential for automatic withdrawal scams in order to increase awareness and thereby decrease the occurrence of such scams. This can be accomplished through public service announcements, information on government websites and press releases. Second, the government may be able to prosecute companies that make unauthorized withdrawals since they are defrauding banks which are federally regulated. Third, the government can make sure that there are stringent laws in place which appropriately punish those who make unauthorized automatic withdrawals.
The Banks
When a consumer discovers that an unauthorized automatic withdrawal has been made, the consumer contacts his or her bank in order to report the unauthorized charge and to stop future withdrawals from occurring. The bank then investigates the allegation and should look at all information supporting the authorization for withdrawal. This puts banks in a unique position of knowing when a business is repeatedly making unauthorized withdrawals from customer accounts.   Banks can then refuse to let companies that repeatedly make unauthorized withdrawals from automatically withdrawing money from customer accounts.
Banks can also set policies that allow bank employees to thoroughly screen any businesses that would like to make automatic withdrawals from customer accounts. If they feel that a business is seeking to commit fraud or be dishonest with its customers then it could refuse to allow them to conduct automatic withdrawals and instead require them to present a signed check or point of sale receipt for each transaction.
The Individual Consumer
Consumers can also take proactive steps to avoid unauthorized withdrawals. Individuals should be careful to never give out their bank account information over the phone, especially if they do not regularly do business with the company. It is safer to provide credit card information over the phone if there really is a deal that is too good to pass up.   Consumer should also carefully review their banks statement each month and immediately report any unauthorized activity to the bank. Since many unauthorized withdrawals occur when telemarketers convince people to provide bank account information over the phone, consumers should be wary of any high pressure sales talk or refusal to provide information in writing.
The government, the banks and individual consumers can reduce the prevalence of automatic withdrawal scams in the United States by making it harder for would be scammers to succeed and less lucrative for the ones who do succeed. However, in order for a meaningful reduction in the occurrence of automatic withdrawal scams to take place, the government, the banks and the individual consumers must work together to prevent scams from occurring.

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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